Harry Lindsol’s Textbook Decision An E-book or a Traditional College Textbook

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Case Summary Harry Lindsol found that when

student indeed purchase textbook they prefer to go to bookstore

No shipping time Purchase all textbooks in one place Can resell to the store

He also found one significant trend most of student have they own device, can use as e-reader.

Traditional Business model In U.S the large-scale textbook publishing.

Important part of the textbook publisher business model was the use of acquisition edition editors who recruited professors to write textbooks for their publishing company.

Before internet came there are 2 main way to convince college

professors to use their book

The books themselves

Book representatives

Company relied on representative to make contact with professors and publicize

Heavy cost-intensive for publishing company since they have to pay salary, travel expenses and cost to entertaining professors.

Traditional Business model

Since the internet came publishers offer PDF version

Not popularCan’t

Can’t

The Platform

Publisher try to began to make their virtual book more attractive to both professor and student

The way to solve is using online platform or interactive online software that encourage people to use their product not competitors

Allow professor to choose from many options online homework

notes

Progress report

Quizzes

bring student to the topic that they don't understand

Can adopt to each individual student learning style and ability

Real time diagnose students progress and move to appropriate pace

The Platform

Competitors

Publisher only receive money when from initial sale

Used book become a big competitors because of when student sold their textbook at the end of the term

Rise of the internet provide more convince, student can search and find local store via internet

publishers could not complete effectively with the sellers of used textbooks because used books were priced at big discount

CompetitorUsed-Book

Usually it's a brand new and student were expect to keep them in excellent condition

Good in long run Reselling the book was often

less than rental price cyclical nature of textbook

editions (2-3 years)

CompetitorRental textbooks

New editions could come up with All-new or significantly modified chapters Chapter organization or might be the same just adjust minor change and

update typically an examples, common in history, calculation. some student can detect the book aren't significant difference from previous

version then they brought the old one for discounted prices online Rapidly evolving subject like computer science aren't too late for wait 2-3

year to public. This is opportunity of ebook, it’s more easier to update or modify the book.

CompetitorNew editions

16th Edition 17th Edition15th Edition 18th Edition 19th Edition14th Edition

Need to have international edition because it was too expensive for students outside the U.S

Student in U.S adopt and buy international editions so publisher began to making content significantly with international editions

CompetitorInternational Editions

Connect to Kindle store that has more than 1.3 million titles, and 1 million other title for free. The store allow user to read description, summary and user

reviews. and buy

CompetitorThe amazon Kindle

launched in year 2010 Offer same benefits as

Kindle but significant expansive than Kindle

Customer prefer High qualities

graphic and color full screen

Display near actual size

Had more use than reading

CompetitoriBooks

Student not prefer e-book for reasons Inabilities to take note/highlight Need internet and a computer to access to the book Inabilities to have a copy

Problems of e-book

Adoptable of e-book

Both iPad and Amazon offered the ability to highlight and take notes

Apple created Student card

A major issue facing of all publisher was how to balance the e-books and traditional books. traditional one require ink, paper, binding materials but e-book doesn't. so it's has room for more profit.

College textbooks are the most profitable section of the publishing business

Physical book Book retailers(on campus) generally pay publishers about half of the selling

price. authors typically get a 15% royalty Estimate cost to print a book about 10% of the selling price.

The economic of e-books

$25 $12.5(50%) $3.75(15%)$2.5(10%)

Ebook have prices set by the publisher, typically get about 70% of the selling price. typically authors get roughly 25% royalty.

$13 $9.1 (70%) $2.28 (25%)

Even though selling price of e-book are lower but e-book would gain more volume.

$3.75(15% from $25) $2.28 (25% from $13)>

The economic of e-books

In early 2012, Apple and several book publisher had lawsuit They conspired to fix the price of e-books.

The economic of e-books E-book pricing - Agency vs. Retail pricing

has a huge number of e-books almost monopoly ebook market

Set price very low $9.99, making loss to company but gain more market share

Apple was upset because of apple sale at regular price $15 where customer can buy at $9.99

Many publisher don't like it, they don't want customer to validation the book drop so low.

Under the normal pricing model, publisher provided a suggested retail price for the book

After retailer bought the book they had option to price it however they wished

The agency model publisher was able to set the final retail price of the book Amazon forced by publisher to accept new pricing model.

The economic of e-books E-book pricing - Agency vs. Retail pricing

publishers no longer had to wait the standard 2 years to update a textbook.

No shipping lead time No need to wait for printing

The benefits of E-books

publisher could update edition depend on them, McGraw-Hill called this model "evergreen edition" where information can update frequently or infrequently as possible

Completely bypass the used bookstore market In 2012 Ebook not become a standard in college class room

yet

The benefits of E-books

1) Pricing policy: predatory pricing vs agency model

2) old editions vs new editions3) international editions4) how to balance the production

of e-books and traditional books 5) Consumer perception of price

and quality

Other Problems

E-Textbook Now E-Textbook industry hasn't reach

full maturity as of yet There is still a lot of growth to

come according to Lindsol. because of the higher percentages authors received from E-textbook.

Lindsol believes he might be able to persuade professors to only use strictly ebook publishing company that he planned to start.

Lindsol believed that the ebook segment is the fastest growing product in the textbook industry and would soon overcome and overtake traditional books.

E-Textbooks5 Forces Analysis

McGraw HillSTP

o SegmentAll kinds of book publications

o Target GroupStudents and writers of all age groups

o PositioningBest books for education with quality information and best authors

Competitors

E-TextbooksSWOT Analysis

Strengths Great Background in printing

and publication since Leading education company

focus on digital learning & educational services

Strong financial position Excellent distribution of

books and digital content

Opportunities Commercial and business

printing Expanding more operations

in Europe and Asia Providing subsidies for

developing countries like Pearson

Weaknesses Core concentrate on

education sector Over dependence on US

market High prices which is an

obvious hurdle for developing countries

Threats Increase in online books and

supplement information Competition from other

global players Improved publications of

local players such as Uni-tech publications

Case AnalysisBusiness Model

Traditional Textbook The textbook Publishers business model

To acquire the editors who recruit professors who writes the textbooks to have broad appeal.

The Representative business model To relied on the representative to make contact with professors and publicize textbooks.

E-Textbook The Platform business model

The publisher use interactive online software to encourage professor to use the company’s product

The evergreen edition business model The publisher could update the content frequently as possible.

1. Human Resource

2. Operation

3. Marketing

4. Accounting

5. Finance

Functional Analysis

Functional AnalysisHuman Resources

• 4 cores employee concentration at McGraw hill– Purposeful– Collaborative– Results-driven– Passionate

• Support career development and growth inside and outside the workplace with training, programs and tuition reimbursement.

• Support diversification in organization

Functional AnalysisOperation Management

Traditional Textbook Estimated cost about 10% of the selling price.

$13 $9.1 (70%) $2.28 (25%)

E-Textbook Estimated cost about 10% of the selling price.

selling price of e-book are lower but e-book would gain more volume.

Functional AnalysisOperation Management

Allow professor to choose from many options online homework

notes

Progress report

Quizzes

bring student to the topic that they don't understand

Can adopt to each individual student learning style and ability

Real time diagnose students progress and move to appropriate pace

Focus on content student want to learn by preview, read, practice and recharge

Functional AnalysisMarketing

Marketing channels

Websites Direct SaleSocial Media

Marketing Mix (4Ps)

Product Physical book E-Book Online

platform

Price Depend on

subject Student

volume

Place Bookstore Online University

tuition fee

Promotion Discount Free

shipping

Functional AnalysisAccountingIn 2013 10% revenue

growth to $4.9 billion

19% adjusted net income growth to $931 million

Reproducing of the E-TextbookDirect Material : Reduced Direct Labor : ConstantOver Head : Tiny increased in Server expense

Functional AnalysisFinance

The year-end share price increased to $78.20 in 2013

The shareholder return five-year cumulative total return increase to $228 in 2013

The revenue increase to $4,875M in 2013

The dividend per share increase to $1.12 in 2013

These numbers reflect the good performance

Refer to performance of the company over a financial yearFormulaROAE = Net income / Average stockholders’ equity

E-Textbook Future More interactive with reader Devices compatibility Cheaper price of e-Book and e-reader New e-reader innovation More user volume

Credithttp://www.statista.com/statistics/280249/global-e-book-revenue-by-region/

The Global e-book revenue from 2009 t0 2016 tend to increased worldwide.

Thank You

References http://investor.mhfi.com/phoenix.zhtml?c=96562&p=irol-reportsannual http://www.mheducation.com/careers http://

www.mbaskool.com/brandguide/media-and-entertainment/5651-mcgraw-hill-companies.html