Case study notes

Case study questions

At one level, this is simply getting students to contribute. At another level, it is asking them to think about how books appeal and what makes some more successful than others. It should also get them to think about what makes a book successful. The content is part of it but there are others things to consider. This may surprise some.

Clearly, the books appeal beyond their target market of children.

2. Explain how a new book has three aspects of a product (concept, package and process).

This refers to the need to view a product in slightly wider terms. The concept refers to the manuscript and the ideas of the author. The package refers to the cover and the merchandising of the book in store/supporting websites on the Internet. The process refers to the development and production process involving author, agent, publisher, retailer, buyer, etc.

This is an allegation that many writers and authors’ groups make. They believe that publishers are willing to support the bestsellers but not new authors. They argue that publishers do not invest in new talent and are very conservative. They also believe that new authors are treated very poorly and receive very little help or support – until of course they are successful when resources are thrown at them.

In this industry, there is no new science. Even e-books are applications of known technology to create a simple hand-held screen for viewing text.

As with so many innovations, this is where most of the technical effort takes place. In the publishing industry, there has been little change in book production for many years. Word processing and desktop publishing have helped lower costs. And this is the same for authors who can now write and make changes simply and easily.

In-store merchandising is part of the promotion of a book and, as with advertising, there are many options available. Developing the film rights for a book involves work by the agent who will need to contact film studios. Clearly, film studios also approach agents of authors for film rights to successful novels

In publishing, the main activity is in distribution and promotion. Printing books is a small part of publishing; the more difficult part is marketing and promotion. The case illustrates some innovative techniques used by some publishers.

Clearly, the development of a book rests largely with the author. There are, however, other key individuals involved. The agent working on behalf of the author can be extremely influential as was seen in this case with J.K. Rowling. The publisher can play an influential role, too.

Supermarkets rely on high-volume sales with relatively low margins. They have moved into the book market by relying on selling high volumes of a few book titles (bestsellers only). This is very different from the traditional bookshop, which has to carry a large stock. Hence, there has been an increase in sales of bestsellers and a decrease in the number of bookshops.

By being different, they can offer an improved service to authors and/or publish works that others refused. They need to be creative and identify small segments that they can target. It is possible to make comparisons between football teams investing in youth teams and so on to try to improve and move up the league tables.

Some critics argue that to be taken seriously a book needs to be published in hardback. This may sound slightly snobbish, but in some sections this view is taken seriously and it is certainly taken seriously by authors, all of whom it seems want to be seen in hardback. Few consumers may be aware of this but as a way of illustration almost all books being considered for the prestigious Booker Prize are published in hardback first. The other key reason was profits. Bestselling books are often published in hardback a few months before the paperback so that they can generate more profits – as the margins are bigger on hardbacks.

The future of publishing depends on new authors. To be innovative, publishers need to nurture and find new talent. This is effectively the research and development (R&D) of publishing. Publishers are reluctant to publish books that no one wants, but consumers do not always know whether they are going to enjoy a story until they have read it.

Case study notes

It is the unique structure of the industry and the patent system that is at the crux of the problem. Europe, the United States and Japan account for virtually all the profits of the pharmaceutical companies. In most other markets, profits are driven down by the power and price sensitivity of customers, but in pharmaceuticals, neither the patient who consumes the drugs nor the doctor who prescribes them is price sensitive. Customers for medicines are not price sensitive because they do not pay for them. In Europe, it is the taxpayer who foots the bill.

Competition is another key force that drives down prices in most industries. In electronics – an industry even more innovative than pharmaceuticals – excess profits from a new product soon disappear as competitors bring out copies. However, in the pharmaceutical business, it is the patent system that ensures high profits continue for an average of 10 years.

The industry’s justification for its high prices and patent monopolies is that it encourages innovation, but to what extent is this true? In most other industries, it is intense competition and a fight to survive and win market share that drives forward innovation. Without new and better products, companies such as Hewlett Packard and Canon know they cannot maintain growth and market share. As we have seen in Chapters 1, 2 and 3, innovation is dependent on a collection of factors and the patent system alone cannot stimulate innovation. It is necessary but not sufficient.

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