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E-Textbook as the new change in textbook industry. Professor Harry Lindsol has study the texbook business model and strategy. The case also analyzed the competitors and issues in E-textbook business. The
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Harry Lindsol’s Textbook Decision An E-book or a Traditional College Textbook
Members1.Nabduan D. : 55202120022.Phornpat R. : 55202120043.Omar N : 5520212005
Case Summary Harry Lindsol found that when
student indeed purchase textbook they prefer to go to bookstore
No shipping time Purchase all textbooks in one place Can resell to the store
He also found one significant trend most of student have they own device, can use as e-reader.
Traditional Business model In U.S the large-scale textbook publishing.
Important part of the textbook publisher business model was the use of acquisition edition editors who recruited professors to write textbooks for their publishing company.
Before internet came there are 2 main way to convince college
professors to use their book
The books themselves
Book representatives
Company relied on representative to make contact with professors and publicize
Heavy cost-intensive for publishing company since they have to pay salary, travel expenses and cost to entertaining professors.
Traditional Business model
Since the internet came publishers offer PDF version
Not popularCan’t
Can’t
The Platform
Publisher try to began to make their virtual book more attractive to both professor and student
The way to solve is using online platform or interactive online software that encourage people to use their product not competitors
Allow professor to choose from many options online homework
notes
Progress report
Quizzes
bring student to the topic that they don't understand
Can adopt to each individual student learning style and ability
Real time diagnose students progress and move to appropriate pace
The Platform
Competitors
Publisher only receive money when from initial sale
Used book become a big competitors because of when student sold their textbook at the end of the term
Rise of the internet provide more convince, student can search and find local store via internet
publishers could not complete effectively with the sellers of used textbooks because used books were priced at big discount
CompetitorUsed-Book
Usually it's a brand new and student were expect to keep them in excellent condition
Good in long run Reselling the book was often
less than rental price cyclical nature of textbook
editions (2-3 years)
CompetitorRental textbooks
New editions could come up with All-new or significantly modified chapters Chapter organization or might be the same just adjust minor change and
update typically an examples, common in history, calculation. some student can detect the book aren't significant difference from previous
version then they brought the old one for discounted prices online Rapidly evolving subject like computer science aren't too late for wait 2-3
year to public. This is opportunity of ebook, it’s more easier to update or modify the book.
CompetitorNew editions
16th Edition 17th Edition15th Edition 18th Edition 19th Edition14th Edition
Need to have international edition because it was too expensive for students outside the U.S
Student in U.S adopt and buy international editions so publisher began to making content significantly with international editions
CompetitorInternational Editions
Connect to Kindle store that has more than 1.3 million titles, and 1 million other title for free. The store allow user to read description, summary and user
reviews. and buy
CompetitorThe amazon Kindle
launched in year 2010 Offer same benefits as
Kindle but significant expansive than Kindle
Customer prefer High qualities
graphic and color full screen
Display near actual size
Had more use than reading
CompetitoriBooks
Student not prefer e-book for reasons Inabilities to take note/highlight Need internet and a computer to access to the book Inabilities to have a copy
Problems of e-book
Adoptable of e-book
Both iPad and Amazon offered the ability to highlight and take notes
Apple created Student card
A major issue facing of all publisher was how to balance the e-books and traditional books. traditional one require ink, paper, binding materials but e-book doesn't. so it's has room for more profit.
College textbooks are the most profitable section of the publishing business
Physical book Book retailers(on campus) generally pay publishers about half of the selling
price. authors typically get a 15% royalty Estimate cost to print a book about 10% of the selling price.
The economic of e-books
$25 $12.5(50%) $3.75(15%)$2.5(10%)
Ebook have prices set by the publisher, typically get about 70% of the selling price. typically authors get roughly 25% royalty.
$13 $9.1 (70%) $2.28 (25%)
Even though selling price of e-book are lower but e-book would gain more volume.
$3.75(15% from $25) $2.28 (25% from $13)>
The economic of e-books
In early 2012, Apple and several book publisher had lawsuit They conspired to fix the price of e-books.
The economic of e-books E-book pricing - Agency vs. Retail pricing
has a huge number of e-books almost monopoly ebook market
Set price very low $9.99, making loss to company but gain more market share
Apple was upset because of apple sale at regular price $15 where customer can buy at $9.99
Many publisher don't like it, they don't want customer to validation the book drop so low.
Under the normal pricing model, publisher provided a suggested retail price for the book
After retailer bought the book they had option to price it however they wished
The agency model publisher was able to set the final retail price of the book Amazon forced by publisher to accept new pricing model.
The economic of e-books E-book pricing - Agency vs. Retail pricing
publishers no longer had to wait the standard 2 years to update a textbook.
No shipping lead time No need to wait for printing
The benefits of E-books
publisher could update edition depend on them, McGraw-Hill called this model "evergreen edition" where information can update frequently or infrequently as possible
Completely bypass the used bookstore market In 2012 Ebook not become a standard in college class room
yet
The benefits of E-books
1) Pricing policy: predatory pricing vs agency model
2) old editions vs new editions3) international editions4) how to balance the production
of e-books and traditional books 5) Consumer perception of price
and quality
Other Problems
E-Textbook Now E-Textbook industry hasn't reach
full maturity as of yet There is still a lot of growth to
come according to Lindsol. because of the higher percentages authors received from E-textbook.
Lindsol believes he might be able to persuade professors to only use strictly ebook publishing company that he planned to start.
Lindsol believed that the ebook segment is the fastest growing product in the textbook industry and would soon overcome and overtake traditional books.
E-Textbooks5 Forces Analysis
McGraw HillSTP
o SegmentAll kinds of book publications
o Target GroupStudents and writers of all age groups
o PositioningBest books for education with quality information and best authors
Competitors
E-TextbooksSWOT Analysis
Strengths Great Background in printing
and publication since Leading education company
focus on digital learning & educational services
Strong financial position Excellent distribution of
books and digital content
Opportunities Commercial and business
printing Expanding more operations
in Europe and Asia Providing subsidies for
developing countries like Pearson
Weaknesses Core concentrate on
education sector Over dependence on US
market High prices which is an
obvious hurdle for developing countries
Threats Increase in online books and
supplement information Competition from other
global players Improved publications of
local players such as Uni-tech publications
Case AnalysisBusiness Model
Traditional Textbook The textbook Publishers business model
To acquire the editors who recruit professors who writes the textbooks to have broad appeal.
The Representative business model To relied on the representative to make contact with professors and publicize textbooks.
E-Textbook The Platform business model
The publisher use interactive online software to encourage professor to use the company’s product
The evergreen edition business model The publisher could update the content frequently as possible.
1. Human Resource
2. Operation
3. Marketing
4. Accounting
5. Finance
Functional Analysis
Functional AnalysisHuman Resources
• 4 cores employee concentration at McGraw hill– Purposeful– Collaborative– Results-driven– Passionate
• Support career development and growth inside and outside the workplace with training, programs and tuition reimbursement.
• Support diversification in organization
Functional AnalysisOperation Management
Traditional Textbook Estimated cost about 10% of the selling price.
$13 $9.1 (70%) $2.28 (25%)
E-Textbook Estimated cost about 10% of the selling price.
selling price of e-book are lower but e-book would gain more volume.
Functional AnalysisOperation Management
Allow professor to choose from many options online homework
notes
Progress report
Quizzes
bring student to the topic that they don't understand
Can adopt to each individual student learning style and ability
Real time diagnose students progress and move to appropriate pace
Focus on content student want to learn by preview, read, practice and recharge
Functional AnalysisMarketing
Marketing channels
Websites Direct SaleSocial Media
Marketing Mix (4Ps)
Product Physical book E-Book Online
platform
Price Depend on
subject Student
volume
Place Bookstore Online University
tuition fee
Promotion Discount Free
shipping
Functional AnalysisAccountingIn 2013 10% revenue
growth to $4.9 billion
19% adjusted net income growth to $931 million
Reproducing of the E-TextbookDirect Material : Reduced Direct Labor : ConstantOver Head : Tiny increased in Server expense
Functional AnalysisFinance
The year-end share price increased to $78.20 in 2013
The shareholder return five-year cumulative total return increase to $228 in 2013
The revenue increase to $4,875M in 2013
The dividend per share increase to $1.12 in 2013
These numbers reflect the good performance
Refer to performance of the company over a financial yearFormulaROAE = Net income / Average stockholders’ equity
E-Textbook Future More interactive with reader Devices compatibility Cheaper price of e-Book and e-reader New e-reader innovation More user volume
Credithttp://www.statista.com/statistics/280249/global-e-book-revenue-by-region/
The Global e-book revenue from 2009 t0 2016 tend to increased worldwide.
Thank You
References http://investor.mhfi.com/phoenix.zhtml?c=96562&p=irol-reportsannual http://www.mheducation.com/careers http://
www.mbaskool.com/brandguide/media-and-entertainment/5651-mcgraw-hill-companies.html