Booksellers

1. In order to reduce the control of the federal agencies and private industry have on UC Berkeley, the following concrete strategies may be proposed.

1) The importance of these resources may decrease if UC Berkeley is successful in utilizing the intellectual property and non-material capital within the university. UC Berkeley should concentrate on the effective use of its own financial resources in designing new projects. It is reasonable to change the university’s objective from the maximization of its revenues from various sources to the maximization of its long-term efficiency through realizing of the intellectual property potential. It may be reached with the help of internal independent small projects within the university that do not require significant external investments.

2) The discretion of other organizations over resource allocation may be affected if the system of cooperation with them is changed. It is reasonable to have contract agreements with them in relation to ultimate results rather than a research process per se. For example, UC Berkley may guarantee some chemical innovations in 6 months, but the contract obligations include only actual results, and the university is free in allocating the available resources in accordance with its own understanding of the research problem.

3) The number of alternatives available may increase if new innovation entrepreneurship projects are realized. They may be potentially interesting for both students and alumni. If the majority of these projects that may be based on venture capital are successfully implemented, the structure of financial flows may be diversified. It may also require additional decentralization of UC Berkley’s organizational structure.

2. Both the traditional booksellers and big box retailers participate in typical competitor relationships trying to satisfy the needs of the same customers. The local booksellers concentrate on the other market segment as they propose unique books in accordance with the needs of their local customers. Thus, they are in a position of indirect competition with other booksellers. As the traditional booksellers and big box retailers operate at the same market environment, the process of selection is present. Other things being equal, consumers prefer purchasing the same goods for lower prices. Big box retailers have a substantial volume of operations, and they focus only on the bestsellers that may generate the highest market demand. Consequently, they may establish comparatively low market prices as they maximize their profits through high quantity demanded. The traditional booksellers cannot adequately respond to this strategy. As a result, the process of selection decreases their market share.

In other words, big box retailers utilize scarce economic resources in a more efficient way and are able to strengthen their market positions with the help of the price competition. The local booksellers continue their operations in the market because they do not directly compete with big box retailers. They provide unique products for local customers and do not have to respond to the economy of scale challenges introduced by big box retailers. It may be expected that the current tendency will continue to exist in the near future. It means that the market share of big box retailers will increase even further at the expense of the traditional booksellers. It seems that the traditional booksellers do not have any effective strategies that may counter-balance the influence of big box retailers. At the same time, the local booksellers will continue to exist, and they will be even more concentrated on their local customers’ needs. Their market share will depend on the dynamics of their customers’ demand.

3. Size advantages play the central role only if companies compete at the same market segment. For this reason, big box retailers have considerable advantages in comparison with the traditional booksellers. However, the local booksellers do not operate at the same market segment. Therefore, they work in another market niche and do not depend on the average costs of big box retailers. The main reason for this situation is the bell-shaped curve of the demand for books. Thus, big box retailers focus on the highest point (bestsellers), and it is the optimal strategy for them as they may utilize their size advantages in this way. The local booksellers orient on other fractions of this curve and do not have to minimize their costs in order to stay competitive in this market.

Moreover, many customers may consciously support the local booksellers as they understand their importance in providing unique books. They may also be willing to pay higher prices for two reasons. Firstly, big box retailers do not offer such books, and the local booksellers are the only sellers providing such services. Secondly, increasing the revenues of the local booksellers will increase their profitability and enable them continue their operations and satisfy future consumers’ needs. It is reasonable for the local booksellers to concentrate on the marginal areas of the bell curve in the future as well because big box retailers cannot enter this market niche (the expected quantity demanded is low for them). The only source of generating higher revenues for the local booksellers is better clarifying the dominant customers’ needs and satisfying them in the most effective way. This strategy will be optimal for both their profitability and consumers’ satisfaction. The structure of the market may also be optimized in this way.