Management Strategy

1. Porter’s Five Forces model to analyze the textbook industry in the US

Threat of new entrants

First, the textbook industry relies on high capital supporting and a long time to build up a good brand name. Because this industry is different with other industries, most of the customers are prefer purchasing the products from the familiar and well-known brand names, such as McGraw-Hill Education, Scholastic and ThomsonReuters. They tend to buy the products from the famous brands rather than other new brands. Therefore, the new entries may be very difficult to go in the market, because they do not have a famous brand name. Therefore, they will be very hard to attract the customers to buy their textbooks.

Second, the textbook industry relied on the suppliers. It needed to build up the relationship with suppliers. Otherwise, the suppliers may not offer the books to the publisher. The existing suppliers may only offer the books to the familiar publishers, because of the royalty fees. If they offer the books to the new publishers, they may not be able to earn more royalty fees for many reasons. For example, the new publishers may be able to take advantages of the economies of scale. When the selling price is higher than others, the sales of the books may be also decreased. Therefore, they will not take risks to change the publishers. The new publishers will be very hard to find suppliers to offer the books to them.

Moreover, the textbook industry has already reached the climax because the line of textbook industry’s market share business has become saturated. With a saturated market share, it will be very hard for the new entries begin the businesses.

Threat of substitute products or services ( Strongest force )

In the textbook industry, there are some substitute products, such as used book and illegal