Bread of Life Bookstore, Case Study Example

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Case Study

Introduction: Bread of Life is at an important crossroads in its history of serving Christ. Since 1930, we have fulfilled our primary mission of acting as a ministry for The Association of Evangelical Native Churches (AENC) through the distribution of Christian resources. We continue to fulfill this mission today, but strong competition, complicated by internal challenges, pose financial difficulties that must be addressed. The following strategic plan includes problem identification, analysis, options, and recommendations on how to learn from this challenging year and move forward with a more successful approach to how we continue to serve and promote our essential ministry.

Problem Identification: We are faced with a complex situation, but the biggest challenge we face can be summed up in one word: competition. It is true that we have faced competition over the years, such as online booksellers who would often undercut us on price and offer additional advantages, such as no sales tax on purchases. In addition, we have experienced competition from powerful retailers such as Wal-Mart, who began devoting more space in their stores for religious books and other products. Although this increased competition did have an effect, we have been able to sustain our business and also continue to submit our income and donations annually in support of our ministry.

In 2004, the competition was different and more extreme because it was much more direct. Blessings Christian Marketplace opened up in Western Sydney in June, 2003. In a span of less than 20 years, they have went from a single small, home based business to a company with 24 locations in 19 different cities. This new store advertises heavily, provides many in-store promotions and keeps longer store hours to offer added convenience to its customers.

In this day and age, it is not uncommon to be faced with additional competition, but it is essential that we respond to this change in our market and community. The fact that Blessings Christian Marketplace opened in mid-2003, and Bread of Life Bookstore suffered its first operational loss ever in 2004 is no coincidence. There are likely other factors that contributed to this loss, but the critical problem we are facing is how to address the increased competition we are experiencing from Blessings so we may continue to do God’s work by running a successful and financially secure ministry.

Analytics for Evaluation: In order to understand the impact of Blessings Christian Marketplace and, more importantly, succeed in improving the store’s performance, analysis of our situation has been conducted that will assist us in making decisions on how we can change our business strategy for the better. A SWOT analysis has been conducted which provides a summary of our strengths, opportunities, weaknesses and threats.

As far as strengths, we remain a bookstore and ministry with a well established reputation that has very strong ties to the local community. For over 70 years we have served Christ and the community of Sydney. Several generations of people from this town have known and shopped at our bookstore. We also have a strong mission identity, as we serve Christ through our ministry, faithfully providing for others through the AENC.

Like any organization, we also need to be aware of our weaknesses so we can address them. Communication and involvement practices from AENC members and the management committee of the Board of Directors may need to be increased in order to provide more support. In addition, we carry shorter hours than our competition, and the staff has not responded well to the added pressure of more competition, showing signs of lacking teamwork in recent months.

Opportunities are present to improve our situation, and for this analysis we reviewed information obtained from multiple sources. One source, a book by Dick Malone called Survival Guide for Evangelical Christian Retailers, stressed the importance of independent bookstores to differentiate beyond their traditional product line. The argument that is presented stresses the need to be different than your competition, and that adding products that appeal to a broader customer base will allow us to successfully continue your ministry. In a recent Christian Bookseller’s Association (CBA) conference, speaker Steve Adams reinforced the same message, stating differentiation is essential for independent Christian bookstores to maintain the perception of service and selection that is the most authentic when faced with new competition. Another opportunity may lie with other independent booksellers. Since many of us are facing the same kind of challenges and experiencing similar declines in performance, there may be ways to collaborate and work together for mutual benefit.

As far as threats to our business, we are aware of the impact that competition from Blessing’s Christian Marketplace has presented for us in 2004. New competition is a considerable threat, but we also need to stay aware of the other competition we have experienced previously. Online bookstores and megastores such as Wal-Mart will continue to present significant competition for us. We also need to stay aware of trends we are seeing throughout our industry, as we are aware that independent bookstores are losing market share to increased competition. Some believe larger companies are intentionally applying aggressive practices in an effort to put independent bookstores out of business.

A financial analysis of the store over the past five years provides many insights. The most notable change in 2004 as compared to 2003 was a revenue drop of over $200,000, which was also the main cause of our lack of profitability. We attribute this loss to the new competition posed by Blessings Christian Marketplace. In addition, the numbers also tell us that net income has been in decline since 2001, when we experienced our best profit over the five year period. A noticeable statistic for net income is that besides our main categories of book/magazine sales, church resource sales and music/video sales, all other product sales accounted for only $17,444 (2.6%) of income, which is a statistic that has remained relatively consistent over the five year period. As far as expenses, we note increases in advertising ($16,403 in 2004 vs. $11,281 in 2003) and salaries ($214,841 vs. $210,629), but these were the only significant cost increases.

To further assist, we reviewed our position in the marketplace as it relates to Porter’s five forces to further analyze industry and our ministry strategy. Through this analysis we wish to determine the bargaining power of suppliers and buyers, and the threat of potential substitute products as well as new entrants to our market.

We have determined that existing competition in Sydney consists of Bread of Life, Wal-Mart, online booksellers, and now Blessings Christian Marketplace. The threat of new competition was just realized when Blessings recently entered our market. This new entry has the possibility of drawing even more competition to Sydney if our town is seen as an area of growth, or it could also serve to keep new entrants away if they believe there is too much competition in Sydney already. Online bookselling is the best current example of how substitute products or services can present a challenge. As online services continue to evolve and different companies experiment with different approaches, we need to stay aware of anything that is offered that takes away from our unique position in the community. As far as buyers and their bargaining power, we feel that we must focus on providing on being unique, as our competition will likely be able to provide better prices. It is also important that we be the product experts, as we need to be able to inform our customers about our products in a way that is better than our competition. Lastly, the bargaining power of suppliers will likely favor our competition unless we differentiate. Competitors are larger and it is likely that they buy more product than we do, which provides them greater leverage. However, if we carry things they do not, we avoid their advantage with at least some items that we offer.

An additional tool we are using is a value chain analysis, which can assist in setting a strategy for our ministry. As far as support activities, firm infrastructure and human resource management are largely handled onsite. One need would be employee counseling and training, as recent behavior suggests that they need help adapting to new competition and to work better together as a team. Technological development occurred in 2003 with the launch of our website, and it is likely there are ways we can further develop our online store. Procurement is an important aspect of any business, and if we could partner with other independent bookstores we may be able to increase order quantities and reduce some of the costs of our goods and services.

Primary activities includes operations, logistics, marketing/sales and service. As these functions are also largely handled onsite at the bookstore, our financial analysis has shown the considerable investment that is being made for many of our operational activities. In light of new competition it is understandable why we have invested more in advertising and promotion, especially given the amount of promotional activity we have noticed that Blessings Christian Marketplace does. Staffing cost is a major concern as we will need to reduce this expense unless we can increase our total revenue. Customer service is another important part of our operation, which ties into the human resource need for training of our employees. This ensures that we are providing  better service than our competition, as this is another way we need to be unique.

Evaluation: We know that competition is the biggest problem we are facing, and financially we have determined that our $200,000 drop in revenue in 2004 was caused by  increased competition. Through our analysis it is clear that we need to differentiate from our competition if we wish to reverse our losses and improve performance. This differentiation can take many different forms, such as carrying different products to appeal to a broader audience, or providing a better shopping environment through our employees in a personal, friendly, informative and unique atmosphere. There are also ways we can improve operationally with more support from the management committee of the AENC, as well as creating strong partnerships with other independent bookstores.

Discussion of Alternatives: upon review of the information different analysis available to us, there are potential alternatives we should consider:

  1. Differentiation will provide benefit. We need to consider adding merchandise that may not fit within our current lines of Christian products. These new products may not be specifically Christian, but they provide benefits and support the Christian lifestyle. Categories such as inspirational readings, health and wellness, self help, and parenting would be very appropriate to support Christian ideals, even if the materials aren’t considered religious in nature.

Pros: We could reach a broader audience with a wider selection of merchandise, and also have a unique offering that makes us different than the competition. This could lead to higher revenue for our store.

Cons: We must be careful not to change or interfere with the Christian mission of our ministry, as it is the whole purpose as to why we exist.

  1. Adding miscellaneous products other than the tees, jewelry, and plaques we carry at present. Statistics provided by the CBA indicate that Christian retail sales are increasing, from $3 billion in 1997 to $4.2 billion in 2002. Of these sales, 19% are gift items, 2% are jewelry, 7% are cards, and 1% is software. Currently Bread of Life generates 2.6% of its sales from miscellaneous categories. This is a strong indication there is significant room for growth if we add a diverse range of items such as the ones mentioned.

Pros: Adding items not carried by our competition will add to our uniqueness. Also, these items will increase revenue, which will help our store and ministry. It could also appeal to a different type of customer and broaden our appeal.

Cons: Adding new products means we may have to look at reworking our sales floor, possibly eliminating products that may not generate the most sales, but customers expect us to carry. There will be cost involved too, such as purchasing new merchandise.

  1. Making efforts to create a unique shopping experience involves training of employees, and ensuring that they are friendly and helpful to customers. This will also add to Bread of Life’s unique identity in our community.

Pros: Ensuring our staff is knowledgeable and friendly will encourage repeat business and also create positive word of mouth. Our customers will relate to their friends what a great experience they had at our store, which could also lead to increased revenue.

Cons: We need to be aware of potential costs associated with training, and based on current issues with some employees it is possible that not all will make the adjustment. This would require us to replace them to ensure the proper shopping experience.

  1. In terms of how we operate the store, each member of the managing committee is invited to spend time in the store on a regular basis.

Pros: managing committee taking a more active role could motivate our employees while also giving them good information about our customers, problems, and successes.

Cons: They will need to be motivated to do it and be enthusiastic and play a leadership role, or they could make things worse instead of better.

  1. We could reach out to other independent bookstores to see how we can work together.

Pros: Partnering with independent bookstores to place orders could provide better economies of scale and reduce cost of goods. We could compare notes with other bookstores struggling with competition to determine best practices on how to compete.

Cons: It is important that we continue to map our own future as an independent. Our interests and those of other independent bookstores are not always going to match.

Recommendations and Implementation: Based on the analysis that was conducted, the following recommendations are made to the Board of Directors:

  1. Begin adding new and unique products that do not conflict with our ministry’s mission, but that are not specifically Christian products. These products will be beneficial to Christians and cover topics mentioned previously as alternatives, and focus will be placed on products such as gifts, cards, jewelry and software. We will also try to bring in items that are not carried by our competition to provide a unique shopping experience. Selection of items will be done by researching available items and seeking recommendations from our current suppliers, while also seeking out new suppliers to get their input. Once we have a list of the types of items that are available, we will make decisions on which items we plan to carry. In addition to the store shopping experience, we will also decide how we present these items on our website, As we will also try to increase online sales.
  2. With active involvement of the managing committee, create a training program for the employees and make sure they know of our new focus on providing a unique customer shopping experience that stresses friendly, informative, and extra helpful customer service. We will create materials that are carefully reviewed and approved by the managing committee that outlines how our customer service approach will work. Careful observation of some of our competitors may offer some help. Out main focus should look at industries such as hospitality for pointers. There are many good examples of how customer service can be improved, and plenty of books and research on this topic as well.
  3. Propose an association with other independent bookstores that provides partnership and advice to each of its members. We should start with informal meetings to determine how much interest exists, enlisting the CBA to help us through their contacts to get started. We should attempt to set up regular meetings to discuss ways to work together, and to share best practices to stay competitive.

These three initiatives can be implemented within one-year, as it is important that we carefully manage costs as we continue to improve the performance of our store. Therefore we will progress with each of these recommendations gradually throughout the year and report progress to the managing committee and Board of Directors as we progress.

Appendix: SWOT Analysis

Strengths:

  • Tradition/reputation: bookstore has existed since 1930 and has a well established reputation.
  • Strong community ties: Bread of Life has served the people of Sydney for generations.
  • A strong mission identity: serving Christ through the ministry of The Association of Evangelical Native Churches, we are a strong organization that does many great works for the love of Christ.

Weaknesses:

  • Lack of communication in management structure: the board provides guidance, but does not meet often or get involved in how the store is running. The vast majority of business decisions and the day to day operations are left in the hands of the store manager.
  • Staff challenges: the staff are showing signs of lack of teamwork, and there are too many conflicts between them.

Opportunities:

  • Differentiation: offering products, services, etc. to customers that competitors do not have.
  • Cooperation with other independents by avoiding pride, ego and territorial issues.

Threats:

  • Existing competition (Online booksellers, Wal-Mart, etc.)
  • New competition (Blessings Christian Marketplace)
  • A trend of declining independent bookstores as communicated through the Christian Booksellers’ Association (CBA) due to larger, better funded competitors.
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