Harlequin Case
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Apr 3, 2024
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Harlequin Case
1.
Complete the 2X2 performance / health matrix.
2.
What product is Harlequin offering?
a.
Best seller of romance novels worldwide, selling two major series Harlequin Present and Harlequin Romances. They standardized novels content, length, artwork, size, basic formats and print to make warehousing, distribution and cost more efficient. This made their rpoducts
be sold like branded literature, since the books were recognized for the Harlequin name.
3.
What are the key success factors in the industry?
4.
Conduct an Environment and Resource analysis.
5.
Is it possible that the alternatives developed in Tool #22: Decision Matrix could all
be supported
simultaneously by #R16: Resource Analysis because Harlequin is financially quite healthy
(Tool #S2: Organization Performance)? Furthermore, are
the alternatives being evaluated
\
symbiotically? Might you suggest they all be implemented?
6.
D
evelop and evaluate alternatives and make a recommendation for action
The market was growing faster than anticipated and the company was struggling to feel that it could keep track with growth
o
Searched for acquisitions but the major US paperback companies were not for sale and the small ones were not attractive
The company contract with Pocket Books was set the expire at the end of 1979 where the company would have to decide to keep going or set up its own US sales force.
T1: Harlequin Enterprises Limited is the largest publisher of romance novels in the world and has seen increasing profits since 1970. In the late 1970s the company was facing a fast rate of change, producing its first film and opening a retail store. Though the company was leaders in the industry they face challenges with the ever growing size of the romance fiction industry and had troubles keeping pace with market penetration.
T2: Rank 7. The company had mentioned that its facing diminishing economies of scales. WE can see this is net earnings on net revenue which had been growing since 1970, hitting 15.6% in 1977 and then decreasing to 13.3% in 1978. Another interesting measure of the company’s liquidity is its cash to total current assets ratio, where starting in 1970 they had 19% and now in 1978 it is 38%. Looking to sales growth, from 1977 to 1978 sales grew 56% whereas two years before sales growth was 17.5%. The company appears to be facing issue scaling with its increased sales generating substantial cash on hand. Moving forward they need to look to expanding increase operating facilities with cash on hand in order to keep up with sales and bringing production to economies of scale.
T3: Rank 8. Harlequin had a good reputation in the romance novel industry as they carried the largest market share and offered a recognizable product. Their standardization allowed for uniformity across business sections. They hired top talent from large firms and led them to do well within the business. Some employees were concerned about the concentration in romance novels and that they should attempt to diversify. The company is strong but struggles with a heavy concentration in one segment of novels that could prove to be an issue down the line.
T4: The company is in Quadrant 1 a desired state. The organizational health and performance appear strong and continues to look to be improving. An issue arises in that they may be growing too fast, leaving room for competition to enter if they can’t keep up with demand. They
will need to determine the path forward; they have established a good brand and has significant
liquidity to be flexible in its future operations.
T6:
Hard goals
o
Begin publishing romance fiction in Sweden and Finland in March 1979 at the rate of four titles per moth. Norway will be added in April 1979 at two titles per month
o
North American book division wanted to decrease the dependence on the presents and romance lines to 65% of sales and profits by 1985
Soft goals
o
Objective to keep steady growth in volume
o
5-year plan within the North American book division for diversification in series
T7: Market penetration. Harlequin sells romance fiction novels consisting of two major series, Harlequin Presents and Harlequin Romances. They operate primarily in North America and England but in 1975 began establishing foreign ventures. Harlequin is the largest romance novel
producer in the world and has seen great growth given the lack of competition and difficulty of entry. Though they have diversifies, in terms of the romance novel market which takes the largest percentage of their sales, they will have to continue to keep up with the demand in the romance novel industry, likely through expanding operations and looking at acquisitions in key markets.
T8: Harlequin offers a standardized pro
content, length, artwork, size, basic formats and print to provide a consistent offering. It allows them to market their novels as a line and as a brand, producing cost saving and manufacturing and distribution efficiencies. Their high profit margins form this method makes the industry attractive to enter but has been a failure for most attempts at competition.
T9:
T10: Threat of new Entrants (L) – There are high break-even volumes for paperback publishers and publishing a book is a high-risk venture. The publishers name matters for performance, prices for paperback rights are often above $1M and the avg earning on new releases is about 2%.
Bargaining power of suppliers (L) – Suppliers are the creators. Thousands of manuscripts are supplied each year, more so quality of content and uniqueness that matters for success.
Threat of substitutes (M) – There are other genres of novels in the market that are able to be substitutes and other sources of entertainment such as films. Costs of substitutes are relatively love but perceived difference may be high given the target market and fantasy of romance novels.
Bargaining power of buyers (L) – There are not many differences amongst competitors and not many competitors overall limiting consumers ability to substitute. There are a significant amount of customers, which is growing and are relatively unsensitive to price.
Intensity of rivalry (L) – Not many competitors that are able to be successful in the market. The market for romance novels was growing very fast but the profitability margins are low. Therefore, the romance novel industry is attractive M because there is a low level of threat across buyer and supplier power which suggests a favourable environment for existing players. Some issues arise surrounding costs of success and the availability of different forms of entertainment. Current participants in this market have the opportunity to do well but the those attempting to enter may struggle and those that provide a unique way of production may be able to ebat costs.
T11: PEEST
Political – none
Economy – Industry is not much affected by business cycles
Environment – no
Social – Customers demand is growing globally
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T12: Stakeholder is Harlequin. They have largest market share and have created a standardized product, allowing them to pick up gross margins and mass production. This limits entry and gives the company more power.
T13: Monopoly. Harlequin dominates. Many others have tried to enter but failed given the lack of lack of quality in editorial content. This means that entry into the industry is extremely difficult to enter given the dominance of one in pricing and power.
T16: Harlequin has set printers in both Canada and the US. They have thousands of manuscripts submitted yearly, allowing for the availability of choice in content. Harlequin faces upcoming challenges in its US salesforce with the termination of Pocket Books coming at the end of the year. A potential advantage is that they have a significant amount of free cash, approximately 38% of current assets in 1978 though there are little firms to acquire. Future challenges the company may face in terms of discovering a new US sales force and expanding its operations relies on the availability of external forces that they can acquire, given that internally they have substantial resources to expand.
T19: Org structure. Harlequin does not print its books. Printed and distributed where they were made