DescriptionProblem-Solving Application Case—Barnes & Noble Faces its…
Problem-Solving Application Case—Barnes & Noble Faces its Last Chapter
In addition to leadership issues, bookstore chain Barnes & Noble has struggled in recent years
due to a number of questionable strategic decisions. This activity is important because it
examines the root causes of these decisions and how turnover in senior management could be
partially responsible for Barnes & Noble’s failure to establish a consistent, well-formed strategy.
The goal of this activity is to understand the root causes of Barnes & Noble’s current poor
strategic position, and to consider what needs to change for the company to improve that position
in the face of competition from Amazon and others.
Read about Barnes & Noble’s recent external and internal difficulties. Then, using the three-step
problem-solving approach, answer the questions that follow.
Barnes & Noble is the largest bookstore chain in the United States having sold more than 6.7
billion books since going public in 1993. Leonard Riggio, the bookseller’s chairman, started with
a single Manhattan location and now operates 627 stores in all 50 states. The New York-based
company has approximately 26,000 employees.1
Barnes & Noble has fallen on hard times. The bookseller has experienced declining revenues,
resulting in increased debt from $84 million in 2017 to $178 million in 2018.2 The company also
was forced to lay off its entire full-time staff of 1,800 employees in February 2018 to alleviate
some of the mounting financial pressure.3 These financial pressures have taken a toll on the
bookseller’s stock, which plunged more than 60 percent between 2015 and 2018.4 Let’s explore
the causes of Barnes & Noble’s downfall.
The Retail Bookstore Industry Has Evolved
Barnes & Noble was once vilified as a behemoth that drove local bookstores out of business. The
bookselling giant grew at the turn of the century with the number of independent bookstores
falling 43 percent from 1995 to 2009, according to the American Booksellers Association.5 This
growth was fueled by the increased development of malls and shopping centers.
The company’s fortunes changed with two critical, yet conflicting, events. First, the success of
online retailers, such as Amazon, has led to the decline of storefront traffic, which Barnes &
Noble relies on as a primary revenue source. Second, independent bookstores are making a
comeback, aided by increased customer interest in localization and a curated experience. In fact,
the number of independent store locations has increased 67 percent between 2009 and 2018.6
Stagnation and Confusion at Barnes and Noble
So why is Barnes & Noble failing in an industry that is growing in the face of Amazon? Its
flagship Union Square location in New York City provides a clue. “The CD and DVD sections,
which still occupy a sizable chunk of store space, are often deserted and unmanned,” according
to Andria Cheng, a Forbes contributor. Customers don’t seem to have a reason to come into a
Barnes and Noble like they would a niche independent bookstore. The national bookseller
doesn’t have a unique experience to offer; on the contrary, it seems to offer too much of
everything. “Elsewhere in the store, alongside bestsellers, signed copies and books…are more
examples of mismatched merchandise: journals, toys, candles and diffuser sets, tea and chocolate
selections,” says Cheng.7
Business Insider compared New York’s Barnes & Noble with Amazon stores and found Barnes
& Noble to be “like a dollar store” and that “the grab-bag inventory strategy makes the store
seem confused and desperate.” The Amazon store, on the other hand, resembled “the future of
chain retail.”8 In the end, Barnes & Noble doesn’t seem to know what it stands for, and what it
wants to be, according to Forbes.9
Who’s Atop the Hierarchy?
It’s difficult to come up with an effective strategy when you don’t have a leader. Chairman
Leonard Riggio stepped down as CEO of Barnes & Noble in 2002. The company had stable
leadership for another decade, first led by Stephen Riggio (Leonard’s younger brother) and then
by William Lynch. Lynch is credited with launching the company’s electronic bookstore and
introducing its electronic book reader, the Nook.10 Lynch stepped down in 2013, launching a
turbulent time for company leadership with five chief executives leaving between 2013 and
2018.11
Some of the turnover atop the organization can be attributed to Chairman Riggio. Riggio is
notorious for micromanaging his CEOs. An analyst at Gabelli & Company told the New York
Times that, “Anyone who joins there knows that the chairman is very hands on.”12 For example,
Riggio fired former-CEO Ronald Boire less than one year into Boire’s tenure. The chairman
simply stated that Boire “was not a good fit for the organization” and declined to provide
additional commentary after letting him go in 2016.13 Riggio then hired Demos Parneros as
chief executive. Parneros was fired for misconduct a year later and is now suing Barnes & Noble
for wrongful termination.14
The organization’s skyrocketing CEO turnover rate has caught the attention of external
stakeholders. For example, book-publishing executives expressed concerns to Riggio about
continuing management instability at the retail giant and the direction of the business, according
to The Wall Street Journal. Publishers argue that Barnes & Noble needs to have a strategy to
drive performance. This is especially important when Amazon is competing with it digitally and
in stores, and small bookstores are nipping at its heels. “I expressed frustration that if they had a
plan, we didn’t know it,” a publishing executive who met with Riggio told the Journal.15
Riggio disputes claims that Barnes & Noble is mired in a leadership crisis. “I have a big stake in
the business, I founded it and I’ve been here forever, so I think there’s a lot of stability that comes
with that. … If we’re without a leader, I’m it,” Riggio told the New York Times.16 The chairman
and interim CEO firmly believes he is the innovative leader the company currently needs. “We
have a lot of work that needs to get done, and I think I bring the necessary leadership,” he told
Publishers Weekly.
Riggio’s strategy is for Barnes & Noble to become an innovative storefront bookstore. The new
store in Columbia, Maryland, is a prime example. It features a contemporary design, USB and
electricity ports in the café, and “book theaters,” which offer a 360-degree in-theround browsing
experience. Riggio believes these types of retail outlets are the way of the future. He also
believes that the company will succeed with better merchandising and a coherent pricing
strategy.17
Riggio doesn’t appreciate having his strategy questioned, which is evident by the number of
CEOs he’s lost in a short amount of time. Only time will tell if Riggio’s vision and strategy will
fix what ails Barnes & Noble.
1. Which of the following best summarizes the problem faced in the case?
a. Barnes & Noble suffers from a poor brand image.
b. Barnes & Noble is in danger of being acquired by a competitor.
c. Barnes & Noble has had too much success with the Nook, at the expense of its other divisions.
d. Barnes & Noble’s poor financial performance is in part a result of an unclear strategy and
leadership turnover.
e. Barnes & Noble has a poor financial structure and too much debt.
2. Which of the following components of an innovation system appears to be present at Barnes &
Noble?
a. commitment from senior leaders
b. innovative culture and climate
c. appropriate resources
d. necessary human capital
e. human resource policies, practices, and procedures
3. Which component from the strategy map in Figure 15.8 is negatively affected by the following
quote from the case? “‘Elsewhere in the store, alongside bestsellers, signed copies and books …
are more examples of mismatched merchandise: journals, toys, candles and diffuser sets, tea and
chocolate selections,’ says Cheng.”
a. employee capabilities and attitudes
b. operational improvements
c. customer value
d. organizational culture
e. good corporate citizenship
4. Which of the following possible actions by Barnes & Noble would represent using a
horizontal organizational design to support the innovation strategy proposed by Riggio?
a. create new divisions that focus on innovation
b. invent an organizational design in which employees are part of functional and divisional areas
simultaneously
c. develop cross-functional teams to expand the initiatives in the Columbia, Maryland store
throughout the rest of the chain
d. create additional levels of hierarchy
e. develop a marketing strategy around Barnes and Noble’s recent innovations
5. Which of the following possible actions by Barnes & Noble would represent internal
alignment between Barnes & Noble’s human resources strategy and its attempts to be more
innovative?
a. hiring employees with a track record of innovation at other companies
b. lay off overpaid and underperforming managers
c. acquire proprietary technology from a startup company
d. creating a new brand campaign for Barnes & Noble centered on innovation
e. create a website used to solicit comments from customers about how Barnes & Noble could be
more innovative

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