Assignment 1: Will Technology Save the Publishing Industry?
1. Evaluate the impact of the Internet on newspaper and book publishers using the value chain and competitive forces models.
In the past, Internet has had a negative effect on all publishing, including both the newspaper and book industries. Publishing companies have experienced a decline in advertising revenues, circulation, and readership while Internet traffic to online news sites and readership of e-books has grown rapidly (1). Many blame the newspaper and publishing companies themselves, expressing a defect in the companies’ value chain and competitive force models as they relate to the Internet.
According to Michael Porter’s value chain model, a company must perform each business activity in the model in the most efficient way possible in order to add value to the company, i.e. maximize shareholder wealth and sustain a competitive advantage (2). Value-adding activities that are vital to the company according to the model are inbound logistics, operations, outbound logistics, marketing and sales, and service. The infrastructure of the company, human resource management, technology development, and procurement are all supporting activities that must be performed efficiently as well (3).
In the past, newspaper and book publishing companies have failed at performing these value-adding activities efficiently, leading to minuscule profit margins. Simply put, these companies failed to offer a level of value that exceeded the cost of their activities in the value chain. Because of the Internet, newspapers and books simply had declining value to the public. People were (and still are) no longer willing to pay for newspaper subscriptions and hardcover books when they could get them for free or for a reduced price on the Internet. Fundamentally, publishing companies failed at maintaining a cost...