Untitled Essay, Research Paper

Swen Neumann

Introduction to Modern Business

L.Thomas and R.CawleyPENGUIN BOOKS LIMITED The aim of this essay is to comment on how, over the last

six years Penguin Books Limited has grown and managed external and internal

changes. Sixty one years ago, Allen Lane, the managing director

of the Bodley Head, a British publishing company, revolutionised reading

with the introduction of the first ten Penguin paperbacks. Today, over 600

million paperbacks are sold yearly. At a time when there was still little

of entertainment, paperback books brought reading to the masses. Nowadays,

paperback books bring reading to the world.

During the last six years (1990-1996) Penguin Books Limited

was faced with many “environmentalist pressures,” with a continuous change

inside the company, and competitors trying to imitate its successful innovations

on both sides of the Atlantic.

The major achievement in 1990 was the introduction of

a new computer system into several parts of the Company. The Credit Control

department was the first area and Stock Management, Invoicing Systems,

Warehousing, Distribution and Sales Services followed. Now the whole of the

Company’s systems are incorporated and networked.

During this period a new lists including the Twentieth

Century Classics Series complementing the Penguin Classics, Arkana, the New

Age list and Fantail, the mass-market children’s list were introduced.

Internal change that took place during that year was the

closing down of the Penguin Bookshops (that expanded to include 12 shops

during the last decade), leaving just one, the specialist Beatrix Potter

“House of the Tailer of Gloucester”, within the Group. This change took place

due to the fact that the Company was conscious that it had to concentrate

on the publishing rather than on the retail.

This decision brought a successful completion of a management

buy-out of the shops. This action also compensated the loss that the Company

faced in august 1991, when Pearson (an international enterprise quoted on

the London Stock Exchange with major media interests including many well-known

names apart from Penguin, such as Longman, Pitman, Addison Wesley, the Financial

Times, Westminster Press, Mindscape, Thames TV and Madame Tussauds) announced

pre-tax profits of Pounds 40.7m for the first half of 1991- a drop of 58

per cent on the same period of 1990. In this period books fell from a trading

profit of Pounds 2.1m to a loss of Pounds 13.4m with Penguin losing Pounds

8m.

In the following two years no major changes have been

recorded. Although, 1993 was generally a successful year for all Penguin

group companies. Penguin UK had produced a strong programme including some

major best sellers and agreed to a joint venture with the BBC for mass market

paperbacks and film deals with two major Hollywood studios.

During 1993, Penguin accelerated its media involvement

by publishing world-wide “The Viking Opera Guide” as a book and CD Rom.

In 1994, the publishing industry realised that certain

amount of people do choose books on the basis of who publishes them rather

than who writes them. The promotion became one of the marketing tricks used

by the publishing industry (that other industries have already used for decades).

First came promotions for individual authors and titles, in 1994 publishers

took one step further by promoting the whole brand.

This move showed the change of publishers fighting for

market share. “During the recession they increased margins by cutting costs,

now they are desperate to build turnover,” said P. Mountain, deputy editor

of The Bookseller magazine.

In the next months it was seen how different publishers

were competing in their own different ways. Penguin and Wordsworth Editions

declared a price war selling paperback classics for Pounds 1 each. These

“up-market” or “down-market” were the ways of selling literature.

In September 1994 Pearson brought a new change by announcing

that publishing should be grouped by theme. As the result, entertainment-

Ladybird Books, the children’s publisher was added to Penguin and became

a subsidiary of the Penguin Group. As an outcome, Penguin’s world-wide

business showed revenues of about Pounds 370m.

A major change took place in September 1995, when the

official price-fixing of books collapsed after nearly a century.

Penguin Books announced its withdrawal from the net book

agreement (NBA), which has restricted price competition since 1900. This

took place due to the “environmentalist pressures.” As Max N. Adam, a managing

director of Penguin Books Limited , said: “We had to face reality. If books

are going to compete against compact discs and videos, we’ve got to

have a level playing field and be able to discount like they do.”

Penguin also was celebrating its 60th anniversary in 1995

with a major trade advertising campaign. This campaign included a publication

of 60 Penguin Sixties, small format paperbacks, at 60p each.

In the present year (1996), Penguin Company is still

benefiting from repeat contracts for Penguin mini-paperbacks.

In January 1996 another major political change took place,

not in favour for Penguin Company. A legislation was produced which revives

copyright protection to an important group of writers. This legislation meant

that publishers have to pay several million pounds to the estates of writers,

who died between 1925 and 1945. The change in UK legislation (introduced

as part of copyright laws across the European Union) was brought in in order

to cover the works which were previously out of copyright.

Taking the European Union single market that is taking

place into consideration, one should remember that “Nothing is “overseas”

anymore,” a statement by Kenichi Ohmae that clearly defines heborderless condition of current business approach. This brings up the

international dimension of Penguin – a dimension which is continually growing

in importance. Overseas Penguin has four major companies – Penguin USA, Penguin

Canada, Penguin Australia and Penguin New Zealand. Each of these companies

does its own publishing but is monitored by each other’s publication

programmes.

There are also several smaller marketing companies which

carry stock and consignment on behalf of the Group. These companies include

Penguin South Africa, Penguin Italia, Penguin Netherlands, Penguin Germany,

etc. They do not currently have their own publishing programmes but import

from the group companies. Due to the socio-cultural differences Penguin India,

for example, operate differently as there are import restrictions in operation

and the solution is for Penguin India to do a large amount of its own publishing.

There are also resident representatives in Hong Kong and Singapore.

On the whole, one may conclude that Penguin has grown,

with the help of acquisitions, for example, from a loss- making business

with revenues of Pounds 37m to one which in 1995 had world-wide revenues

of Pounds 360m and profits of Pounds 34m, and remains one of the world’s

largest book publishing groups.

The result of Lane being involved in a move towards

democratisation has shown that today, hundreds of thousands of books are

available to millions of readers at a low price, and the market seems to

be growing daily, selling into more countries than any other publisher, and

providing a good example of how a company is dealing with change and success

by continuing the traditions of Sir Allen Lane.

Rawsthorn, Alice. “Books cartel collapses.” The Financial Times, 27 Sep.

1995, p.18.

Stoner, James. “Management”(sixth edition). Prentice Hall 1995.