本文是西方大学一个case study,求该案例的策略分析，注重用各种策略工具分析（five forces, swot,等等）然后最后给几个未来发展的建议策略。

SAVING WATERSTONES

James Daunt, the Managing Director of UK based bookshop chain,

Waterstones, was waiting for a critical conference call with the firm’s Russian owner, Alexander

Mamut. Following the announcement of further losses, Daunt had assembled his senior managers

in the meeting room at the company’s flagship Piccadilly store to discuss the next phase of the

firm’s strategy. He knew they would need to provide a good case in order to convince Mamut

that they were on track to turn the company around.

Company Background

Traditionally, booksellers have tended to come from companies with a book selling background

and a proven track, such as WH Smith which began a newspaper vending shop in 1792, opened

their first book stall in 1846 and grew over the years into the multi-national chain we know

today. Foyles, which also enjoyed world renown, but on a much smaller scale, recently opened a

bookshop in Bristol. This was their first venture outside the capital, as previously their

bookshops were all London-based. Tim Waterstone too started with one shop in central London

but enjoyed rapid growth and expansion to the end of the 1980’s when a succession of takeovers

and mergers appeared to threaten the brand.

Waterstone’s originally came into being in 1982 when Tim Waterstone, then an employee of

WH Smith, was sacked, due to failing to establish the WH Smith brand in the USA. He decided

to open his own bookshop in Kensington, London, and used his £6000 redundancy money from

WH Smith. He wanted to establish a different kind of bookshop and based it on the business

models and techniques he had seen in America.

He employed highly literate staff and reinvigorated the window displays by using literary authors

in front-of-store. His methods were successful and soon Waterstone’s became established with a

This case was written by Alex Janes and Yvonne Potter based on secondary sources. It was prepared solely to provide material for

class  discussion.   The  authors  do  not  intend  to  illustrate  either  effective  or  ineffective  handling  of  a  managerial  situation.  Some

assumptions  have  been  made  in  the  preparation  of  the  case  and  the  authors  may  have  disguised  certain  names  and  other

identifying information to protect confidentiality.

Copyright 2014, Alex Janes and Yvonne Potter       Version:  2014-03-16

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chain of shops behind them.

Waterstone’s expanded its store portfolio but by 1989 WH Smith had acquired a controlling

interest in the company. The swift expansion had made the chain difficult to manage and in 1993

WH Smith bought the company in its entirety. The new ownership lasted for only five years. In

1998, EMI and Advent Capital, together with Tim Waterstone, bought the bookstore chain and it

became part of the HMV stable along with rival Dillons. Tim Waterstone tried to buy back the

chain in 2006 but his attempt failed. HMV expanded once again by adding Ottakar’s and

launching Waterstones.com in the same year.

By 2011 Waterstone’s had become Britain's largest bookshop chain with almost 300 stores.

HMV then sold it to Alexander Mamut, the Russian billionaire who at the time also owned

Russia's biggest mobile phone retailer Evroset. James Daunt, who had been the founder of

Daunts Bookshop, was appointed as the new managing director of Waterstones.

The revolution in bookselling

The US launch of Amazon.com in 1994 marked the beginning of the end of traditional

bookselling. Amazon’s UK operations commenced 2 years later in 1996 and almost immediately

began to have an impact on how consumers purchased books. On-line only retailers, such as

Amazon, were able to keep their costs and hence their prices, lower than the high street

bookshops because they didn’t have the overheads associated with retail outlets – from rents and

rates to labour costs (see Exhibit 1 for details of cost and revenue drivers in traditional

bookshops). On-line retailers were also able to stock many more books than the average

bookshop due to their unlimited virtual shelf space.

Traditional bookselling was at the end of a long supply chain starting with authors and

illustrators and their manuscripts. Authors might have a direct relationship with the publisher or

through literary agents, such as Curtis Brown, founded in 1899, who represented authors like

crime writer Jeffery Deaver, or David Higham Associates, who set up business in 1935 and had a

plethora of award winning clients, including J.M. Coetzee, Jacqueline Wilson and a stable of

celebrities such as Stephen Fry. Publishers then handled most of the processes of turning a

manuscript into a finished book. This typically involved editing, proofreading, typesetting, cover

design, printing, distribution, and marketing. Larger publishers might go direct to the retailers

but many smaller presses which lacked their own sales forces would distribute their titles via

wholesalers, such as Gardners and TBS (for a simplified supply chain see Exhibit 2). Retailers

came in many different shapes and sizes. The high street in the UK was dominated by chains

such as Blackwells, WH Smith and Waterstones, although many of their rivals had ceased

trading in recent years, such as Borders which closed in the UK in 2009, and other rivals had

been acquired by or merged with Waterstones, such as Ottakers and Dillons. In addition to the

chains, there were just under 1,000 independent bookshops on the UK high street at the

beginning of 2014, down from over 1,500 in 2005. Book clubs also accounted for a significant

element of sales to consumers and ranged from those run by media outlets such as the Times and

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the Guardian newpapers, through TV celebrity endorsed organisations like Richard and Judy’s

book club, to local reading groups and children’s book clubs.

Supermarkets were late to the bookselling world, entering the market after the Net Book

Agreement (NBA), which fixed the retail price of books, was outlawed in 1997. Waterstone’s

had been one of the main booksellers to discount book prices before this, starting in 1991.

However, the entry of Tesco, Sainsbury’s and their like meant that discounting became the norm

and consumers rarely had to pay full price for a book in the UK. Supermarkets tended to focus

on a small range of books that were likely to sell in high volumes and so were able to negotiate

better trade discounts on these titles than any other channel (see Exhibit 3 for comparative

figures on trade discounts).

Internet booksellers, such as Amazon, were also able to negotiate better trade discounts than high

street retailers on a wider range of books and not just best-sellers, again due to the volume of

titles they sold. The growth of the internet represented a further challenge to high street chains

such as Waterstone’s. One of the key selling propositions the firm had focused on in the 1980s

and 1990s was the wide range of books in their shops. This was undermined by the unlimited

shelf space available to e-tailers and, in particular, Amazon’s objective to be able to get any book

in print quickly to the consumer.

Waterstones had responded to these changes under HMV’s ownership by cost cutting through

centralising book purchasing and cutting staff as well as negotiating deals with publishers to

promote more popular titles in exchange for up to £27 million a year. These deals usually

included placing the publishers’ titles in prime locations in the shop and making them part of the

three for two offers that were at the heart of Waterstones’ sales promotions.

However, it was not just changes to the type of retailers selling books and the growth of the

internet that shook up the UK book sector. The music industry had seen dramatic changes in the

way its products were consumed as a result of the digital boom and now bookselling was facing

a similar challenge. The first digital books and e-readers became available in the UK in 2008 and

Waterstones was the first UK bookshop to sell Sony’s e-reader that year. Amazon’s first Kindle

device was launched in the UK in October 2009, despite the fact that the market had been slow

to adopt e-readers with only 100,000 devices sold in the first 18 months. The Kindle offered a

different package, allowing books to be downloaded anywhere via a mobile connection (as

opposed to a PC connection) and Amazon had negotiated deals with three of the four big

publishers, Simon & Schuster, Penguin and HarperCollins to provide over 200,000 titles in

digital format. Amazon was rumoured to have a 90% share of the e-book market in the US and

looked set to dominate the UK in a similar manner.

The growth of e-books and e-readers increased dramatically and by the end of 2009, the US

bookstore Barnes and Noble had launched their own offering, the Nook. The entry of tablet

computers into the fray with Apple’s iPad, which combined their iBooks service with music,

games and a whole host of other apps, gave consumers even more choice. Each of these devices

was adopted by a range of publishers and retailers serving the UK market. Another e-reader, the

Kobo, launched in the UK in 2011 and was sold by WH Smith, as well as a growing number of

independents. By 2012, other chains, such as Blackwell’s and Foyles had allied with Barnes and

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Noble to stock the Nook. But perhaps the most surprising decision was Waterstones’ decision to

sell the Kindle. In a move some commentators described as “letting the fox into the hen-house”,

the firm agreed to sell the Kindle in their 280+ bookshops from May 2012.

Looking to the future

The book trade in the United Kingdom was facing a number of challenges as a result of the

economic downturn. The events of 2007-9 had affected public finances and, as the amount of

revenue local government was able to raise fell, many had made cuts to both their library and

education services. Libraries bought £900m worth of goods and services (not all in the form of

printed books), so represented a significant customer for some publishers. Educational spending

on textbooks might also be reduced owing to the increases in tuition fees at Universities and the

scrapping of various allowances for students at Further Education Colleges and Sixth Forms. All

of which might lead to lower sales of printed textbooks and more demand for less expensive ebooks as students were likely to have less disposable income.

Continued economic uncertainty and under inflation pay increases in both public and private

sectors would be likely to result in less consumer spending in general for at least another two

years. Most consumers in the UK felt worse off at the beginning of 2014 as increases in the price

of energy and food meant they had less disposable income. Nonessential spending on items such

as books was likely to remain depressed and price would play a large part in purchase decisions,

which could favour e-books over the printed version.

With 80% of UK households connected to the internet by 2012, on-line shopping and the use of

social media were also having a profound impact on the publishing industry. As more older

consumers increased their use of the internet and digital channels for shopping those booksellers

with an effective e-commerce platform were likely to pull away from the rest of the pack. In

2011 some 27% of the over 65s in the UK used the Internet for shopping. Books sold over the

internet were forecast to increase from 40% of the total sales in the UK in 2013 to 52% by 2017

(see Exhibit 4 for details). A range of price comparison sites for books, such as

www.bookbutler.co.uk and www.bookbrain.co.uk, had grown up, which meant consumers had

better knowledge of what was on offer from different retailers. Other sites, such as

www.booklore.co.uk, contained peer reviews of new titles and along with buyer reviews on

Amazon had resulted in the demise of the literary reviews many newspapers had produced in the

past. The increasing use of tablets and e-readers was also changing the way books were

consumed in the UK. Digital sales had grown from £100 million in 2008 to £411 million in 2012

(see Exhibit 5 for details).

Changes in technology were also having an impact on the way books were produced. As the

market for printed books in the UK fell, many publishers used the opportunity to clear out their

lists of authors, especially those writing books that lost money or only just covered their costs. In

the past there had always been an understanding that much of the output from publishers,

especially at the literary end of the market, would not make money and was frequently

subsidised by bestsellers. Trade discount had always formed the largest proportion of the end

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price of a book (see Exhibit 6 for further details) but with increasing pressure from internet

bookshops and the supermarkets, publishers’ margins were being squeezed and this was likely to

get worse as costs rose for printed books while the demand for them continued to fall. Offering

the back catalogue of an author’s work digitally was one way a publisher could generate income

with lower costs, but increasingly authors themselves were realising that they could go direct to

readers via the e-book format. Amazon had been quick to understand the potential for epublishing and offered a direct publishing service to authors via their Kindle platform. Royalty

rates were 70% although prices were much lower than most printed books. Other firms such as

Smashwords, BookBaby, Apple (via iBooks) and Barnes and Noble (via their Pudit) also offered

self-publishing platforms. While self-publishing only accounted for 2% of book sales in the UK

in 2012, in some genres, such as crime, romance and science fiction it accounted for 20%.  In the

US the growth of this phenomenon had been explosive with over 350,000 books produced by

2012. While many titles disappeared without trace, some like Locked In by Kerry Wilkinson sold

over 300,000 copies and paid the author far more than she would have earned in a conventional

publishing deal.

The new owner

Alexander Mamut purchased Waterstones from HMV in 2011 for £53 million and in the process

became another Russian billionaire buying a well-known UK brand. Mamut originally trained as

a lawyer but worked as a banker for much of his early career before investing in everything from

mobile telecoms to fertilizer. His interest in the book chain may have come from his friendship

with the founder, Tim Waterstone, but may also have stemmed from his genuine interest in the

publishing industry. Mamut’s publishing company, Atticus, brought JK Rowling’s work to the

Russian public. The company had strong links to Hachette, one of the largest publishing firms in

the world, which had a 50% stake in Atticus.

Mamut was well connected to the political elite in Moscow and had been a key supporter of

Boris Yeltsin’s re-election in 1996. In more recent years he was reputed to be one of Vladimir

Putin’s close circle. His portfolio of projects and investments showed vision beyond many of the

other oligarchs whose wealth came from primary industries such as oil or minerals and heavy

manufacturing. Mamut often focused his time and energy on culture and media projects such as

the Pioner Cinema; LiveJournal.com, Russia’s most popular blogging platform; and the Strelka

Institute, which he founded to improve postgraduate education in architecture.

Change at the top

Alexander Mamut had already signalled to the market that he would bring in a new chief

executive to run Waterstones as soon as he controlled the chain. James Daunt had already

founded and run his own chain of specialist bookshops, with 6 branches and profits of just under

£1 million in 2010. The new managing director was a confirmed bibliophile, having given up a

highly paid career with JP Morgan in the US in order to return to the UK to follow his passion

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for literature and travel. Daunts bookshops were more high end boutique stores and some in the

industry questioned his appointment to run Waterstones with its more populist approach. Daunt

read history at Cambridge and was educated at Sherborne School, so some considered him elitist

and out of touch with what the public at large read. Other commentators pointed to the fact that

he was an industry insider and had a good knowledge of books and bookselling, with the strong

performance of his own chain of shops, despite the recession, as evidence that he was the right

person for the job.

Daunt’s strategy

The new managing director did not waste any time in developing a new strategy for the firm.

Even before the purchase of the chain from HMV in June 2011 it was clear that there had been

little investment in Waterstones and many of the changes made by the previous regime had

alienated core customers by focussing on special offers and popular titles such as celebrity

biographies. Some in the industry felt the bookseller had lost its soul as it pursued a lowest

common denominator approach with discounting the norm and publishers choices dominating

the front-of-house displays in the shops.

Daunt’s literary background and experience of successfully running a more niche operation led

him to focus on the customer experience. With Mamut’s financial support, he was able to start

investing in refurbishing the stores. By the end of 2012 some 40 shops had been overhauled with

a further 60 earmarked for 2013. The new layouts contained larger tables, better lighting, wifi,

and, in some cases, catering through the creation of Café W outlets. The initial impact of the

changes seemed very positive with Daunt reporting to the Bookseller in October 2013 that

refurbished stores had increased revenue of between 5 and 10% on average and some, such as

the Brighton, St Albans and Aberdeen stores, reporting year-on-year increases of between 50 and

100%. Some of the larger increases in revenue stemmed from closing duplicate shops in the

same town or city. The firm closed 6 stores in 2012 at a cost of £2.1 million.

The new strategy also included a return to the old style logo. The lower case lettering put in

place by design agency Venture Three in 2010 was replaced with a capital W and the

Waterstones name in Baskerville font. Daunt saw this as reflecting the iconic nature of the brand

and giving it more authority and confidence. The apostrophe between the “e” and the “s” was

also removed to make the name more suitable for URLs and email addresses.

However, the need to operate the chain more efficiently was also part of Daunt’s plan and to

achieve this he set about re-organising the company. At the beginning of 2013 the firm’s losses

reached £37.3 million (see Exhibits 7, 8 & 9 for summary financial statements). The managing

director announced that there would be far reaching changes to the way the business was run

which would reduce the number of regional managers needed. Shops would be part of clusters

which meant that fewer regional managers would manage more outlets. In May 2013,

consultation began at local level with over 500 of the company’s managers about changes to the

structure within the stores. General manager, branch manager, assistant manager and deputy

manager posts would all be abolished to be replaced by a single new role of bookshop manager.

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The change would save money, but more importantly, according to Daunt, it would put the

emphasis on shop-floor selling, engaging with the books and the customers. Many publishers

appeared to welcome the move but Waterstones’ staff were less enthusiastic and by July 2013

more than 60 managers had resigned from the firm rather than go through the process of

applying for the new roles. Some of those interviewed by the Bookseller said they were

disgusted by the process and that the chain was losing many of their most creative and

experienced managers. The new bookshop managers were expected to “prioritise service above

everything else”, “lead the team of booksellers to deliver consistently high levels of service,

expert advice and hand-selling” as well as “provide regular feedback to the shop team”. The

focus on bookselling was also supported by a partnership with the University of Derby to create

the Waterstones Academy which would deliver the UK’s first professional qualification in

bookselling. Daunt’s experience of lecturing at La Scuola Librari Italiani in Italy had given him

the idea to set up the Academy in recognition that many of the attributes needed for bookselling

were graduate-level skills.

By the beginning of October 2013, the changes to the staffing were largely complete leaving

about 3,500 staff working there, but the firm had lost some 200 experienced managers and

morale amongst employees had hit “rock bottom” according to some sources at the company.

This was in stark contrast to the intended outcome of the changes. According to Daunt, the new

roles were intended to support a move away from the centralised system that had grown up under

HMV’s ownership.  This had involved every shop stocking the same books whatever its location

and using “planograms” which gave strict instructions as to how shop staff should lay out display

tables and other point of sale materials. Daunt also ended the promotional deals with many of the

publishers. Under the new structure more local diversity would be encouraged with the bookshop

managers having much more autonomy than their predecessors in terms of the books they bought

and how they displayed the titles. The firm’s distribution system would also be reconfigured to

allow for this diversity and the Hub set up under HMV dismantled. However, this did not please

all of the remaining staff at the firm and the situation had worsened by the end of November

2013 with the loss of four of its key buyers from the central team and Ros Hines, the marketing

director, who also decided to leave the company.

Daunt remained upbeat about the prospects for the firm and was sanguine about the reorganisation claiming that the pain would be worth it in the long run. Losses at Waterstones

reduced to £23 million in 2013 and the chain was even able to open new bookshops in places

such as Blackburn in Lancashire and Ringwood, on the edge of the New Forest (see Exhibit 10

for Waterstones shop locations). A new website was planned for July 2014 which would sell

self-published titles for the first time. The website would also make use of the chain’s

relationships with authors that often came to their bookshops for signings and the expertise of

their booksellers. Daunt’s aim was not to compete directly with Amazon in terms of quick, cheap

and efficient supply of books, but to provide a more “curated” experience both on-line and in the

bookshops. There would be an emphasis on helping customers discover new books and authors.

In terms of physical bookstores, the chain remained larger than its high street rivals (see Exhibit

11 for details of competitors).

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The Conference Call

Although James Daunt knew his strategy had reduced the losses at the firm, there were still

challenges ahead. The process had been tough for many in the company and some of the changes

– such as continuing to sell the Kindle – had been criticised. He knew that Alexander Mamut’s

patience would only last for a limited time and he was keen that Waterstones should not be

another of the firms that the Russian billionaire bought and sold on. A new owner might not be

so understanding or have Mamut’s interest in books. Daunt would need some good advice and

new ideas from his senior team to take the strategy forward and provide a good case to the owner

during the awaited critical conference call.