Better World Books Case Study
Better World Books (BWB) is a feel good story about a dream of college entrepreneurs who wanted to make a different in their community, impact the environment, and create a profitable company providing employment for hundreds of people. Their dream has been fulfilled and they are growing. BWB has rapidly grown and has found a unique niche in the book selling and donation space. As the company has rapidly grown, they are now in a season where they are reevaluating their supply chain, revenue sources, and raw materials.
External environmental analysis
P—political factors that can influence the decisions and behavior of the firm. Political factors impacting BWB include how the IRS recognizes their “B corporation” status. Their Benefit corporation status signals the company’s commitment to economic, social, and environmental objectives clearly outlined in their core values. The B corporation status is not an official IRS tax status like the more traditional S and C corporations. There is hope since the first official tax break signed into law for B corporations was in Philadelphia in 2009. Other states have followed suit (Maryland, Vermont) and others are soon to follow (New York & Pennsylvania).
E—the economic factors in the external environment. The economic factors in the external environment are the use of online bookstores as a prime source of revenue and market connecting sellers and buyers of used books. BWB has taken advantage of strategic partnerships with Alibris and Amazon. Partnering with libraries (15% of net sales) in their book sales. BWB gives 5% of net sales to one of their major nonprofit literacy partners. 7%-8% is poured back into the company. They use a triple bottom line, measured by using standard financial and accounting tools. They build their inventory through donations.
S—sociocultural factors capture a society’s cultures, norms, and values. Their focus is committed to business practices that promote literacy and Corporate Social Responsibility (CSR). As there is a wave of support for CSR and people are willing to pay more for products who share their own core values, BWB is well positioned. BWB promotes literacy and education through their partnerships with nonprofits and libraries. They have a strong environmental commitment by partnering with libraries and universities through book donations to prevent over 8,000 tons of books out of landfills. They use the US Postal Service because they use less energy per package than any other carrier. This is important to BWB due to their founders’ values and to meet their customers core support. They are able to tap into a unique niche in the market supporting CSR and sustainability.
T—technological factors to create new processes and products. The online used-books industry has been the key to BWB growth and viability. When Amazon opened their online marketplace to third party vendors, it proved to be a tremendous boast to BWB. This was a tremendous opportunity for BWB to be able to list their products on Amazon and exponentially expand its available inventory.
E—Ecological factors. BWB focuses on making an impact ecologically and have tapped into the public’s desire for environment consciousness. BWB estimates it has recycled over 53 million pounds of books. They saw a need because of the tremendous amount of waste from books thrown away by libraries, universities, and students. BWB focuses on supplying their own raw materials and eliminates production waste by collecting and reselling used books.
Porter’s Five forces—Threat of entry; power of suppliers; power of buyers; threat of substitutes; rivalry among existing competitors.
Threat of entry—the meteoric growth of e-books and Google’s recent agreement with authors and publishers to create online libraries holding digital copies of books. Google has sought to share with authors and publishers a percentage of the revenues it gets from books selling, digital library subscriptions, and online advertising. Will Google seek to replace BWB? Other socially motivated used book sellers could enter the market seeking to overcome BWB niche.
Power of buyers—copycats like Books4Cause runs book-donation campaigns and sells or donates the most usable books to support nonprofit literacy programs.
Threat of substitutes—Google may replace BWB through their e-books and focus on including out-of-print books, orphan works, and copyright protected books in their digital copies of books.
Rivalry among the existing competitors—Some competitors and critics are questioning whether BWB is misusing the word “donation” since they are a for-profit company. CEO David Murphy is questioning whether their triple bottom line may prove too difficult to uphold as the market tightens. Will the company be able to continue to donate to charity and sustain their social environmental efforts due to competition.
VRIO framework—Valuable competitive advantage— BWB supplying their own raw materials and eliminates production waste by collecting and reselling used books. BWB’s operations management with customized software to manage its inventory and track market data. Determining whether books still have market value, suitable for donation for a nonprofit partner or if it needs to be recycled. Rare—their ability to supply their own raw materials through donations and book drives is rare. Great customer service. Costly to imitate—BWB’s “no shipping costs” is a way they seek to differentiate themselves. Costly to imitate is their in house proprietary algorithm determining whether a book still has market value. Organized to capture value—partnerships with community, libraries, booksellers, university, and business groups to conduct book drives which in turn provides the raw materials for BWB profitability.
Making the diagnosis
BWB would be very wise to develop more channels of revenue. Expanding globally would make a lot of sense. Word of mouth advertising will not be sustainable for the long term without a concerted marketing campaign to engage followers. Creating additional partners as they expand globally would be very smart. Acquiring likeminded companies who have exceeded in the e-book market could be an excellent vertical acquisition. Continuing to grow in the conceptual space in people’s minds as the socially responsible book company with a brand they can support. Acquiring competitors like Books4Cause could be an option. Partnering with Google as they have with Amazon may be a creative option. Eliminate their competition and expand through acquisition may be an option.