Harlequin Publisher Analysis

Harlequin has enjoyed a decade old reputation for being the world best publisher of women books. The books in the past were produced in a hardcover format. The recent rise in eBooks prompted the company to shift gear and adopt eBooks format of publication. The company needs to consider the threats eBooks will pose on other formats that the firm has been using. Harlequin being a company specializing in writing books for women could face economic synergies. The information provided on the trends on new publishing formats does not give publishing decisions. The lack of publishing decisions could force Harlequins to jump into a new project without considering the significant revenue the project can bring to the company. The management should therefore not simply invest in a new project simply because of the market pressures. For instance, the way digital technology has taken the publishing industry by storm and yet its revenue return capabilities have not been proved.

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Realistic expectations. The management of Harlequin should ensure that they have concrete goals. The project to be invested in should be in a manner that its initial goals are realistic. The company should gauge it against the resources available and whether it has the capabilities of increasing the current revenue. A look at Harlequins performance basing on eBooks publication has registered an overall constant and flat sales since 2000 posting a question on whether the management had considered the realistic expectations factor before investing in eBooks.

Profitability index is an index that is used in evaluating the costs of an investment and the returns that a company will generate from a project. The ratio 1.0 is the lowest acceptable measure of the index. In case that the index is less than one then it translates to project which is not financially viable.

Sales maximization technique is the recommended pricing technique for Harlequins books. Over the past period since 2000 the sales of the company have not increased so much. The company should price its books with an aim of maximizing its sales as it maintains the normal profits it has been experiencing for that past ten years. Harlequin should sell its books at a price that is nearly equal to the average cost.

Part 2

2014 expected profits for Harlequin

The expected profits for single title project is 45.4 million while that of e-books project is 59.45. The e-book project is more revenue generating when compared with the single title project. The management should consider the time value of the money invested in the two projects. The expected value technique is the certain value of the projects that Harlequin intends to invest in. A project that has positive returns and can return the initial investment amount over a short period is to be invested. The management should consider a project that has more benefits than costs. Harlequin management should consider investing in e-books format publication. The reason for recommending eBooks is that it has highest revenue return. When the cost-benefit analysis is performed on the two projects then eBooks project comes out to have the highest benefits.

How megatrends on book industry affect business performance of Harlequin.

The trends that the company should take into consideration are technology, changing people preferences and the changing social behavior. These are the keys factors that are affecting the publishing industry, but above all, it should be the evolution of behaviors on reading preferences that are most paramount. The trend right now is that children are beginning to read eBooks at an early age. Recently the evolution of technology has seen most of the young kids using smartphones and tablets. The company should consider venturing in this opportunity in future investment decisions.

Finance question.

Part 1.

The conclusion from the exhibit 1, 2 and 4.

Harlequin has a high chance of having their eBooks taking significant market share. The company specializes in writing romance books and that it the most genre that has penetrated the US market. Adult fiction takes the greatest market proportion of the total eBook sales in the US. Harlequin when compared with its competitor's other industry players has the largest eBooks revenues at 18.8%. High percentage revenue translates that Harlequin should invest more on eBooks.

E-books being a web based content is an evolution of the book industry that will impact on the income statement. From Exhibit 1 it is evident that e-book penetration in the US market has been increasing yearly with the romance genre being the highest at 55%. The company that relied on traditional print media, magazines had its day to day running depending on advertising dollars. The commercial revenue generated by the publishing is to be used to cover the cost of goods and the operating expenses. Evolving of book industry from traditional printing to digital form of printing will have an impact on the flow of advertising revenue.

Exhibit 2 display Harlequin and Amazon eBook webpages. The revenue that is collected from adverts on the web pages will increase since most book readers have changed their trends to the new digital format of publishing books. Printing industries need to keep up with technology to be successful in maintaining revenue inflows. Companies in the publishing industry have its operating margins being low. The operating costs as is most likely to increase since the new technology has created new sections in printing companies which include design, marketing editing, and proofreading. The average long term to debt capital ratio for the overall publishing industry is close to 49%, therefore, making it an important part the management should focus on to improve its liquidity ratio.

Exhibit 4 indicate that the sales for eBook have been positively increasing for the past for years since 2008-2012. The eBook share of the total book sales has also been increasing over the previous four years. The increase is sales translates to an increase in revenue collected from web-based publication.

Part 2.

Balance score card that relates to Harlequin.

The balance scored is a tool that is to be used by Harlequin management to create measures to maximize the performance of the company across all the three models (series, single title and e-book). The perspectives to be measured are financial, customer, internal business process and the learning growth of the projects (Atkinson, Kaplan, Matsumura, & Young, 2007).

PERSPECTIVE OBJECTIVES GENERIC MEASURES

FINANCIAL Positive return on investment and increase in sales growth Harlequin limited is to succeed financially and should appear to value shareholders profit maximization

customer Satisfy all readers as per their preferences and ensure customers perceive us as to quality providers Customer satisfaction and profitability

Internal Excel in promoting eBooks and ensure to excel in providing adults books The innovation will measure how Harlequin is going to identify customers needs in the future.

Performing company operations towards ensuring production of quality and reductions in costs.

Learning and growth Strive to embrace web-based publication and reach largest market base The measures that Harlequin will consider are to improve skills of their employees and to ensure availability of critical real-time information to company employees.

Strategic map for the three Harlequin investments.

Part 3.

Management tools

The whale curve technique.

This tool is used to visualize the customer profitability of a company. The whale curve will enable the ranking of client profit from the highest to the lowest. The whale curve diagram will help Harlequin to rank customers as per the profitability by the book publishing format.

The balanced scorecard.

The balanced scorecard is used by the Directorate in aligning business activities to the companies vision and strategy. The strategy is to be used in addition to non-financial performance. In the recent years, the strategic management has evolved to be used in performing a full strategic plan. The balanced scorecard will be useful to Harlequin since it will be helpful in developing strategies that will help the company remain competitive in the ever-evolving book industry.

Bench making

Benchmarking is a technique that is used by corporations to discover the best performance that a company can achieve. The performance can be within the company or when compared to the industry as a whole. The performance metric is used in the understanding identification of gaps in an organization with an aim of achieving a competitive advantage. The tool will be valuable to Harlequin since it will be used to identify the publication format that brings profit and that which do not perform well when compared to the overall industry.

Target costing

Target costing tool is a tool that helps in determinations of cost based pricing. This technique plays a major purpose since it helps companies in cost reduction and cost control. The basis of target costing is the desired return on assets and return on sales. This technique will be useful for Harlequin to price their eBooks while at the same time ensuring that they maintain normal profit.

References

Atkinson, A. A., Kaplan, R. S., Matsumura, E. M., & Young, S. M. (2007). Management accounting. Upper Saddle River, NJ: Pearson/Prentice Hall.