SWOT analysis of the borders company

According to the article “Borders Group, Inc.; Borders Raises $25 Million Through Equity Financing to Support Key Financial and Strategic Initiatives” (2010), Borders Group sold $25 million equity finances to financier Bennett LeBow in May 2009 so it could solve a company liquidity problem. This new capital budget will strengthen Borders’ balance sheet which recorded liabilities as $1.3 billion and stockholders’ equities as $262 million (Borders group, Inc., 2010). Moreover, Borders could provide capital to help fund the transformation of the Borders brand. These include improving the store network to increase profitability and productivity and maximizing the digital opportunity, including growing Borders.com.

Launched eBook store to digital approach

To compete with other company, Borders launched its eBook store with more than 1.5 million titles, including thousands of free titles, available in a variety of formats, including ePub, mobile and PDF (Borders opens, 2010). In addition, a company launched the Kobo eReader and Aluratek Libre eReader on Borders.com. Both devices, which are value-priced at under $150, have surpassed sales expectations. Moreover, to provide additional value around its digital offerings, Borders also offers free books to customers download Borders application (Borders offers, 2010). From its variety digital approach, Borders can achieve customer satisfaction.

Weakness:

Net losses in Waldenbooks Specialty Retail stores

Borders had 468 Waldenbooks Specialty Retail stores in 2008 summer (Milliot, 2009). However, in 2009, Borders Waldenbooks Specialty Retail stores’ revenues decreased 8.5% (Borders Group Q4, 2010). It, moreover, is lesser consumers to go to shopping in shopping mall (Industry profile: Bookstores, 2010) so Borders has continually closed Waldenbooks stores since 2001 (Milliot, 2009). In addition, Borders closed 186 Waldenbooks Specialty Retail locations in the fourth quarter of 2009. The total 212 Waldenbooks stores were closed in 2009 fiscal year (Milliot, 2010). It seems that Waldenbooks stores are still a problem for Borders to burden net losses in several years.

Missing multi-media approach

Multi-media were the most significant impact in sales of the book industry because multi-media categories are low margin categories, such as music and video. Although Borders has already expanded their DVD movies section since 2006, Borders decided to decrease their multi-media section and more focused on book selling instead. As this result, in the second quarter of 2009, Borders’s music sales were declined 51% and DVD sales were declined 48% (Borders Group, Inc. Q2, 2009). In fact, excluding multi-media, Borders’s superstore comps declined by 13%. The sales of books are around 67% of the total sales in 2008 and 2009 (Milliot, 2010).

Opportunities

Strong growing in on-line retailing market

The online retailing industry is increasing very fast because internet is becoming more and more popular. The data from Forester shows that the online retail sales reached $141 billion in 2008, which was an 11% increase. In the 2009, online retail sales reached $141 billion, which was a 13% increase, even faster increase than previous year (Reuters Research Inc., 2010). Borders’ internet service acquired a lot of experience in the past two years and the eBook is a new service which will be provided by borders in July 2, 2010. In this case, new strategies include online store and eBook which are using by Borders may help borders catch this opportunity.

Increasing Book Industry

The book market which Borders involves in is growing steadys because internet sales and many new assistant technologies like e-book are helping people to acquire and read books easily and conveniently. According to the report “book industry trend” (2009), book industry’s net income would increase 4.4% to $37.3billion in 2008 from $35.7billion in 2009. Bensinger (2010) states that U.S. book sales will rise 5.8 percent from 2010 to 2015 and most of increasing are online book selling. This data clearly shows that book industry will become larger, especially the online book market, which is a great opportunity for borders to use digital strategies such as Borders.com and eBook to change the depression in the past 5 years.

Threats

The increasing minimum wages in US

According to the article “Tables & calculators by subject” (2010), the federal minimum wage rate increased $5.15 per hour in 1997 to reach $6.55 per hour in July, 2008 and it kept going to $8.55 per hour in 2009, and remains same in 2010. All of those increases were caused by a voter begins in 1998 relative with increased inflation rate and cost did not rise in that year (High – paying, 2010). The increased minimum wages makes borders face a more serious environment. The higher cost of wages will increase burden of Borders since borders has approximately 25,000. The sharp decrease in revenue which caused by intense competition and increased cost of labors will further decrease the net income of Borders.

The decrease of consumers in shopping malls of US

The consumers gradually adapt to shop online and the traffic of shopping mall is gradually decreasing in US. Decreased mall consumers in US have made many retailers into trouble. Sales performance of malls in the U.S also becomes worse and excepted to remain in the same situation in the nearly future. Connolly (2009) states that Mall tenant sales declined to10.3% in Jan 2009, which is a slightly better performance than in November and December in 2008. In this case, Borders is a bookstore company which has physical stores and the company’s Waldenbooks which is a brand based on mall. In this case, Borders’ consumer traffic also will be affected by the decrease of consumers in shopping malls and it is clearly that the profit of Borders also will be affected.