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Better world books

  1. 1. INTRODUCTION OF BETTER WORLD BOOKSThe case examines the business model of Better World Books (BWB), the US based online bookseller.Founded in 2002, the company collected old and new books from individuals, booksellers, recyclers,libraries and colleges. Apart from donations, libraries and colleges also sold old books to BWB. BWBeither donated the collected books to the organizations promoting literacy or sold them online. Bydonating and selling used books, BWB helped to keep away millions of pounds of paper waste fromlandfills. The books that did not sell were recycled. BWB also had a Carbon Neutral Shopping Cart,through which, the company collected two to five cents on the cost of each book from every customer atthe Checkout link on its website. The collected money was used to buy carbon offset to compensate theenvironmental impact of shipping by the company and its literacy partners. In the financial year 2008,BWB earned revenues of US$ 21 million and had a revenue target of US$ 31 million in fiscal 2009.CORE VALUES AND MISSIONBetter World Books is a global bookstore that harnesses the power of capitalism to bring literacy andopportunity to people around the world.WE LOVE BOOKSRespect the book: read often and help others to do the same.FLABBERGAST OUR CUSTOMERSSeek out opportunities to make a difference with value, service & selection.INVEST WELL. WASTE NOT.Choose wisely; consider the return on your efforts & the impact in your actions. Reuse, reuse,reuse….then reduce & recycle.LEAD THE MOVEMENTTake a stand; share your enthusiasm and build momentum through human connections.SPEAK THROUGH ACTIONPut your ideas to work; play to win but never fear failure.BE PASSIONATEWear your heart on your sleeve; stand up for what you believe.PURSUE GROWTH & LEARNINGChallenge yourself; make a point to try new things.BE GENUINEKeep it real; be honest with others and true to your quirktastic self.EMBRACE CHANGEAdapt to circumstances; help others find ways to succeed in our evolving world.RESPECT OUR TEAMBe humble; welcome diversity and recognize that shared success is the only kind that matters.
  2. 2. WHERE THEY ARE AT PRESENT AND WHERE THEY WANT TO GO?On May 06, 2009, Better World Books (BWB), the US-based for-profit social venture, wonBusinessWeeks3 "Americas Most Promising Social Entrepreneurs" award. BusinessWeek considered forprofit’ companies which had been in operation for at least one year for the award. It asked its readers tovote for those businesses that were making money as well as bringing about societal change. About12,000 BusinessWeek readers cast their votes for 25 finalist companies and BWB got the first place with36 percent of the votes. According to BusinessWeek, "With 36% of the vote, online bookseller BetterWorld Books led the pack. The 200-person company makes money selling books it gets for free from anetwork of individuals and institutions across the country."4BWB also figured at the 12th position in Time magazines list of ’25 Responsibility Pioneers’ who werechanging the world, published in September 2009.As of late 2009, BWB had plans to expand overseas, develop a book-publishing division, andoffer a book-rental service from its website. They also want to achieve Revenue of $75Million by 2012.Business: Online bookseller of new and used booksLocations: Alpharetta, GA; Goshen and Mishawaka, IN; Edinburgh, ScotlandRevenues: $45 millionEmployees: 300Ownership:• road based stock options for both employees and nonprofit partners• bonuses for employeesEngagement:• comprehensive benefits• detailed quarterly updates provided to all employees• engagement surveysBusiness result:• low employee turnover• increased profitability during economic downturn
  3. 3. RECOMMENDATIONS TO A STRATEGYThe core strategy to take the revenue to 75 million USD should still stick to core values and existingmodel of the company as the social cause and people cause cannot be forgotten to increase the revenueeven during economic downturns As the economy reels, enterprising individuals who apply businesspractices to solving societal problems are gaining support from public and private sectors. The existinggrowth model of BWB indicates extreme positive signs of growth in spite of economic downturns ofrecessions and hence a similar business model should be applied while keeping technological, economicand competitive advantage as flexible to adapt to market situations.New Advancements in developing the renting book model of website and e books/ readers shall beconsidered with due weightage to additional costs and risk considerations.Expanding overseas to new developing economies like BRIC countries shall be considered keeping the EUeconomic crisis in mind, however advantages from crisis should be taken in terms of more donations andcost cuts by various school , colleges and library institutions.Developing own publishing house in a low labor environment with a greenfield investment today shall beconsidered for better revenues in near future.To gain more investment and support from organizations promoting literacy across the world likeUNESCO and other social responsible organizations like CRY and others can contribute to company’scapital in terms of subsidies and support programmes in turn of advertisement on books and other mediaconcerning methods to create awareness and other social causes.Let us illustrate same in a SPECIALT approachSUPPLIERS PEOPLE ECONOMY COMPETITORS INDUSTRY AUDITORS LEGISLATION TECHN OLOGYExisting People Projects E Bay, Amazon Industry as Copyrighter Regular legal Carefulsupplier as and any and other e a whole has s, and other advisory investmbase should society investment book providers been on a B corp councils with ent inbe enhanced and s in along with downwind organization various websitewith employe economicall various pirated track al open copyrighting advertisadvantages e both y prone downloads and though initiatives agencies and ementfrom current should areas and other fluctuating should library and portalscrisis from be kept countries competitors due to continue to book owners andcost cuts in in mind should be presence in recession maintain with correct publishivarious for any kept in expansion advanceme transparenc documentation nglibraries overseas mind countries should nt in y and should be houseschools etc. expansio however be taken in mind technology ensure exercised to also ns and advantages also any change and busy correct avoid any going other should be in existing lifestyles, systems in incidents. lean in decision taken from technology like e however a place, more Legal outsourc crisis. book readers new focus on HR outsourcing ed etc. customer managerial can also be a projects. segmentati activities. alternative. on is there.
  4. 4. PEOPLEBetter World Books’ 300 mostly full-time employees work at its Indiana warehouse where its shipping andreceiving operation is based. The company offers a generous benefits package to 100% of its full timeworkers, and supports its part time employees toward having “a path to full time employment andbenefits,” says CEO David Murphy. He notes that as healthcare premiums have gone up, the companyhas worked to assume a significant amount of the financial burden to help lessen the impact of highercontribution costs for employees. The company has developed an extensive scorecard by which it tracksits social, environmental and financial metrics for continuous improvement, as well as surveyingemployees annually to get their input. One survey question asks what employees value about working atBetter World Books, and a clear response is that the social mission matters to the employees, accordingto CFO Paul Sansone.The recent economic downturn provided the company with a test of its core values. The South Bend /Mishawaka/ Elkhart, Indiana area was hard hit by the recession, with deep losses in its manufacturingbase. The company met this challenge by stretching to avoid layoffs. When reducing the workforce by 42was all but inevitable, the CEO and Co-Founders took a 20% pay cut, VPs took 15%, managers 10%, andfloor employees took 5% (without a loss in benefits). Management promised employees that if they hittheir target by the end of the year everyone would get a bonus.They delivered. The company was profitable by the second half of the year and all salaries werereinstated – except the executives’. Murphy says the move to retain the executives’ pay cuts for a yearinstead of six months prompted questions from employees who thought everyone should benefit from thecompany’s return to growth. Murphy thinks that the employees’ concern shows that the managementteam did the right thing by “making the cuts, sacrificing, and communicating,” he said. Openness andtransparency with the financials during the downturn was also key in keeping the team intact. Note: aftera full year of the executive pay cuts, the board voted to restore six months’ worth of pay cuts made toexecutive team salaries, based on performance.Message to society should always circle around that fact that From the spring of 2003 throughSeptember 2009, Better World Books has collected more than 25 million books, raising more than $7.3million for over 80 literacy and education non-profit organizations, sending 1.5 million books to ourpartner programs & saving over 13,000 tons of books from landfills.Hence as consultancy we can recommend that Shared sacrifices and clear communication about the firm’s financial situation during an economicdownturn will help maintain morale and may even improve business performance and hence can beexercised in future if requiredFor any overseas expansions people’s aspect from both society and intercultural point of view cannot beignored , also in developing countries the ratios of book supplied to books purchased can be completelydifferent from the existing countries, the employee the customers the suppliers and above all societyincludes people and hence due importance should be given to them while executing any such decision.
  5. 5. CAPITAL AND SHARED OWNERSHIP:The 300-person company makes money by selling books it gets for free from a network of individuals andinstitutions across the country. In 2009, it started giving stock options to its five major literacy partners,an innovation designed by Good Capital, the lead investor in a recent $2 million venture-capital round.Helgesen expects Better World, which has secured around $4 million in equity investment in total, tobring in $30 million in revenue this calendar year and be profitable in 2010. He credits the companysreasonable prices with its success ("Five used books for $15," reads a recent ad on its Web site). BetterWorld sells about 10,000 books a day.Better World Books shares equity with all employees, including warehouse workers earning$9-$10 perhour, through its incentive stock option program. Each employee receives an initial grant of stock optionsafter one year, followed by subsequent awards based on performance. While Murphy notes somechallenges in educating employees about the benefits and risks of sharing equity, small group “lunch andlearns” on a range of financial literacy topics have contributed to a more financially savvy workforce.The company has received outside investment from Good Capital and several angel investors. If there isa liquidity event, the partners expect significant rewards for investors, management, and all employeeswho hold options. In addition, however, the book seller will have another, more unusual, beneficiary inthe deal – itsNon profit literacy partners.Better World Books had always planned EMPLOYEES MATTER 65 to share gains with these partners –Books for Africa, Room to Read and others – which help the firm achieve its mission of eradicatingilliteracy around the globe. When Good Capital invested, they helped the company think through addingthe nonprofits,not just as beneficiaries of charitable contributions (the company previously donated a percentage ofrevenues), butas equity holders. The CEO and Co-Founders initially created a 5% equity stake with a regular vestingschedule for these nonprofits, based on the promise that if Better World Books could finance their work,the partners would help even more people learn to read. To keep the incentive structure in place, thenonprofits gain a greater equity stakethrough measureable improvements in their literacy targets. To the company and its investors, the modelmakes sense financially and socially.As Good Capital principal Kevin Jones puts it, the social mission is “baked in.” In other words, due to theirunique structure, the nonprofit partners and Better World Book’s employees – often the last considerationin conventional corporate deal making – will always have a seat at this company’s table.Business Results | Although Murphy says that he cannot empirically tie the firm’s employee engagementpractices to better financial results, he points to the company’s turn from unprofitable to profitable duringdifficult economic conditions as evidence. “Over the past year, our business has done better than everduring a time when we easily could have had losses and high employee attrition,” he said. “Instead, weheld together and the fact of shared cuts– later reinstated – kept everyone’s spirits up.”Hence we can recommend that there can be creative solutions for engaging both employees and otherstakeholders in company success, also support from organizations promoting literacy across the worldlike UNESCO and other social responsible organizations like CRY and others can contribute to company’scapital in terms of subsidies and support programmes in turn of advertisement on books and other mediaconcerning methods to create awareness and other social causes.
  6. 6. TECHNOLOGYInvestment in technology should be focused and should enhance existing competitive gauge in theindustry , also in economic leanness enough measures should be taken on lean in existing softwareswithout sacrificing the upgrades as per the need of the hour and trend and user friendliness portals forboth customers and companies,For overseas expansions and further publishing house initiatives technology can not only play a role inthe core product delivery, besides that technology can also be crucial for marketing advertising andgenerating revenues for BWB from advertisements on websites,The current outsourced partners contracts should be renegotiated with BOT (Build Operate and Transfer)model to minimize cost and invest same in various other technological advancements to generaterevenue, market of e book and e book readers is on rise and hence tie ups with various manufacturers ofsame for preinstalled e books and cost associated projects can be initiated instead of directly enteringinto an existing competitive technology market.The diagram below illustrates the focused investment on technological aspects for both existing and newAdvancements to target various new and existing systems for becoming more efficient and hencegenerating more ROIApart from softwares and websites technology will play a key role if BWB plans to initiate their ownpublishing house and will hence require big investments initially and should hence be planned asapAnd executed with effective communication and energy saving ground for carbon footprinting.
  7. 7. OPERATIONALIn late 2009, BWB had 250 to 300 full-time employees. In the seasonal textbook business, Augustand January were the busiest times, during which the warehouse staff increased to 50 employees.These employees sorted each incoming book by condition—acceptable, good, very good, like new—and attached stickers, including a code to identify its source. They scanned each book’s bar code toenter information into a database, organizing the books as they came in.As the number of collected books will grow, further BWB will need more warehousing space, which canlead to further investments also increase in workspace and requirement of more skilled resources asper the advancement in technology will lead to further expansion of work force.With the core activity incremental, new investment in publishing house and website development forrenting books will create operational complexities for department of coordination between rentingbooks department and conventional department, hence as the complexity will increase the reduction inwaste mechanism will be required to ensure minimum efficiency and productivity losses.Not only in terms of internal operations , also as any organization grows similarly book collectionprogrammes and other activities operations will lead to further complexity , hence same can beoutsourced up to an extent for cases of remote book collections.With overseas expansion the need of bringing books to a central system or warehouse and thendelivering to customer should be minimized further with more distribution centers and widely spreadsmall warehouses also keeping the point of customer delivery as close as possible to the warehousedelivering same.The above mentioned diagram illustrates the change in operating environment to support the reviewsystems of existing processes for both in house and outsourced operations from both cost anddevelopment point of views.
  8. 8. BUSINESS MODELBWBs business model reflected its commitment to the TRIPLE BOTTOM LINE APPROACH. The companymade efforts to achieve social, environmental, and economic sustainability. It directly donated books andgave financial support to literacy initiatives worldwide. Moreover, a percentage of each sale was givenseparately to the individuals, libraries, or colleges as well as literacy partners chosen by them. BWB didnot advertise in the media about collecting and selling books; awareness about its business model wasmainly spread through word of mouth. According to Helgesen, "Every time a customer is flabbergasted,they are going to tell people, and that endorsement wont cost us a dime. Since its inception, BWBshowed its commitment to the triple bottom line approach. The company made efforts to achieve social,environmental, and economic sustainability. It measured its performance in three areas - PEOPLE,PLANET, and PROFIT as shown in the diagram.Today the company sells used books on major sites like and E-bay’s as well as itsown website. Just six years old, the company earned $31 million inrevenue in 2009 and has preventedover 33 million books from entering landfills todate. As part of its expansive social mission, Better WorldBooks is a certified B-Corp,a movement to expand the legal structure of corporations to includeemployee,community and environmental interests when making business decisions.Hence we can recommend that current business model is contributing to vision of the company and is intandem with the core set of values , there can be questions raised on social cause of the business to bereduced to support the goal of revenue and in extreme economic crisis, however the longer run modelsuggest that the CSR visibility and such initiatives are helping BWB for their vision"Right now only one out of seven people is a potential customer—if we can bring people up to levels ofequivalent literacy—were helping our long-term business model," says Helgesen, who launched thebusiness with fellow Notre Dame alum Christopher "Kreece" Fuchs
  9. 9. SUMMARY  To Gain a exponential growth and keeping current market trends and situation in mind as explained in strategy section above Expanding overseas to new developing economies like BRIC countries shall be considered keeping the EU economic crisis in mind, however advantages from crisis should can also be taken meanwhile in terms of more donations and cost cuts by various school , colleges and library institutions.  Developing own publishing house in a low labor environment with a greenfield investment today shall be considered for better revenues in long run future and also going to a safe model option but not completely should be exercised to support the seasonal business offset any risks due to seasonal business.  Existing supplier base should be enhanced with advantages from current economic crisis from cost cuts in various libraries schools etc.  To gain more investment and support from organizations promoting literacy across the world like UNESCO and other social responsible organizations like CRY and others can contribute to company’s capital in terms of subsidies and support programmes in turn of advertisement on books and other media concerning methods to create awareness and other social causes.  New Advancements in developing the renting book model of website and e books/ readers shall be considered with due weightage to additional costs and risk considerations.   The core value and business model should remain intact however should be made flexible to adapt to new market trends and the social approach indirectly should be made more public so as to gain sympathetic and advertising advantages form same.  E book reader manufacturer tie ups for pre installed e books as mentioned in sections above will lead to more revenue to support further investments at the same time will minimize the risk of vulnerability in directly entering an existing competitive market of e books.  Careful investment in website advertisement portals and publishing house also going lean in outsourced projects will help reducing costs and increase ROI.  With close monitoring of current ongoing path and keeping current and past revenue trends in mind the revenue will achieve the targeted figure of $75 Million USD - Vineet Kumar Tyagi
  10. 10. REFERENCES1 Company Web site: Jim Meenan, “$4.5 Million Boosts Mishawaka’s Better World Books,” South Bend Tribune, April 8, 2008.4 Nick Leiber, “The Most Promising Social Entrepreneurs,” BusinessWeek, May 1, 2009.6 Ekjyot Saini, “Michigan: To one charity, old books mean a better world,” Michigan Daily,September 20,2006.7 Stephanie Elam, “Building Better World a Book at a Time,” (accessed July 2,2009).9 Gene Stowe, “Literacy the Bottom Line; ND Grads Begin ‘Social Venture’ to Put Old Books to GoodUse,”South Bend Tribune, January 24, 2005.13 Gene Stowe, “BWB Revamping Its Process,” Tribune Business Weekly, April 10, 2007.14 Stowe, “Literacy the Bottom Line.”Stowe, “Literacy the Bottom Line.”16 Christina Hildreth, “Old Textbooks See New Use; BWB Donates to Literacy Charities,” South BendTribune,June 6, 2006.17 Hildre