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Harlequin Five Forces Analysis Essay

High economies of scale required. For an entrant to gain success in romance novel market, it must possess mature sales, production, and distribution to operate effectively, which also leads to great risk. High product differentiation required. Other companies start to add more features while Harlequin products remain relatively unchanged. Significant capital requirement required. This is evident in Simon and Schuster’s case, in which it bears a high upfront investment for this battle. Access to distribution channels is medium to difficult. Harlequin has gained exclusive access to groceries, but failed on stand-alone retails. Other competitors either choose regular bookstore or similar as Harleuqins’; however, it might be difficult to entrants to gain access to these channels by themselves. Government policy has been very protective to authors; however, no clear restrictions on product images.

Buyers Power
Increasing buying power due to additional competing products
Low switching cost
Changing target markets
A variety of choices
Poor retention rate, high return rate
Loss of existing customers and high cost of attracting a new customer
American Romance Series to meet consumer’s tastes
Threat of Substitutes is high due to technology advancement and demand diversification.
Evident in Harlequin’s attempts of film, magazine and scholar’s choice (bookstore).

Suppliers Power
Increasing supplier power due to promising offer from Simon and Schuster Loss of excellent authors who later generate sales for Simon and Schuster shows that authors possess significant supplier power Other supplier powers such as sales force, printing business are relative stable Industry Competitors, Rivalry among existing firms

Low growth rate as more competitors are competing for a stable market
other competitors are earning market share at Harlequin’s expenses oligopolistic market is another factor of intense competition “Romance War” due to introduction of silhouette

Simon and Schuster introduced Silhouette, a rival line of romance novels, in 1980 32% market share and rising
Competes the oversea markets
Emerging competitors as a result of Silhouette’s introduction; also evident in 5 additional rival lines launched in 1982 accelerate the intensity of competition and decrease Harlequin’s market share and volume sales Possession of competitive advantage (i.e. No best seller management and standardization) which ease competition temporarily Bitter rivalry with Sillhouette

– S&S

although losing money, but gaining market share
underestimated by Harlequin
hired Harlequin’s former vice president and best-selling authors advertising budget
copied Harlequin’s Presents – confused buyers


increase slowly

dropped to half 1980-1981 ($44.7 –> 22.3)
drastically decreased from 1982 -1983 ($25.8 –> 5.5)
remove unprofitable subsidiaries – films, scholar’s choices, magazine etc

high debt ratio – rapid increase from 1980-1982, then lower in 1983 expensive bad debts from the Reader Service

40 new stores eating up all the cash
increasing costs of Reader Services
reducing costs at corporate level – cut overhead expenses by 20% sales decreased, advertising expenses increased
Working Capitals
decreasing working capitals – lack of cash flow for investment – only 33 millions in 1983

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