978-1259913747 Better World Books And The Triple Bottom Line Case

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Structure of the Case

The case is written from the perspective of Mike Miller, CEO of Better World Books (BWB). BWB is

a B corporation committed to meeting a triple bottom line of financial, social, and environmental per–

formance. Founded in 2003, the company experienced successful early growth but now faces serious

questions as to how to continue on its upward trajectory and promising growth as it transitions from

startup to a mature company in the face of ever-growing competition from online books and shrinking

book donations.

The first section discusses BWB’s early history from 2003 to 2014. BWB is the brainchild of two Notre

Dame students, Xavier Helgesen and Christopher Fuchs, who started selling used textbooks online as

a way to make some extra cash. Realizing the potential growth in the online used-book market, they

partnered with local charities to run book drives and shared in return any profits they raised. Their

motive was two-fold: they genuinely wanted to give back to the community and also recognized that

association with a charitable cause provides an added incentive for people to contribute. With the help

of another classmate, Jeff Krutzman, they wrote their ideas up in a business plan that won as “Best

Social Venture” in a Notre Dame business-case competition, netting them some much needed start-up

capital.

The young entrepreneurs initially expanded their business by sponsoring book drives on university

campuses nationwide. Student groups collected textbooks in return for a small royalty, BWB obtained

access to inventory, and BWB’s charity partners received a much needed donation. The next phase

of growth came from developing partnerships with libraries that donated used books in return for a

portion of the proceeds. By 2009, BWB had also established partnerships with multiple new and used

booksellers to gain access to even more inventory as well as joint market coverage. The company cur–

rently processes more than one million books a week, selling 25,000 books daily and is one of the top

three online sellers of used books in the world. Moreover, roughly 25 percent of BWB’s book sales take

place through its proprietary website, which the company launched in 2008. As BWB moves into a

more mature stage of corporate development, it has started to pursue economies of scope as well as

scale. While print books remain the company’s main focus, it has expanded into selling audiobooks,

e-books, digital games, movie DVDs, and music CDs.

Better World Books and the Triple Bottom Line

TEACHING NOTE

MHE-FTR-030

1259420477

REV: FEBRuARy 26, 2015

Teaching Note — Better World Books and the Triple Bottom Line

The second section introduces the concepts of social entrepreneurship, triple bottom line, and

Bcorporations:

Economically, BWB is a for-profit company, and earns a “social-profit” margin of 7 to 8 percent on

each textbook sold. Donors receive a fixed percentage of net revenue, and another 5 percent of sales

is given to one of BWB’s nonprofit literacy partners (selected by the donor). The company has created

more than 365 jobs for local economies.

Socially, BWB strives to give power to the people by promoting literacy and education through their

network of nonprofit partners. Their book sales have raised over $8.6 million for nonprofit groups, $9.5

million for libraries, and $3.6 million for college organizations. The company has also donated more

than 15 million books at no charge to global literacy groups such as Books for Africa (see http://www.

betterworldbooks.com/Info-Literacy-Partners-m-41.aspx for a list of BWB’s major NGO partners).

Environmentally, BWB has recycled or reused over 216 million pounds of books (an estimated 153

million books) and kept over 50,000 tons of books out of landfills. BWB strives to maintain a neutral

carbon footprint for all of its business activities, and the company estimates that it has offset 44,000 tons

of carbon on BetterWorldBooks.com shipping alone.

The third section provides information regarding the online used-book industry, which dates back

to the foundation of Amazon.com as the first online bookseller in 1995. Amazon has significantly

expanded its offerings, and it remains the largest and most threatening competitor, with a 62 percent

share of all visits to bookseller websites. Half.com (owned by eBay) was the first company to develop

an online used book market and ranks second with a 9.5 percent share. Alibris (owned by Monsoon

Inc.) is another contender. Other sources of competition come from book rental sites such as Chegg.

com. Competition for used-book sales is fierce, given the number of companies that have entered the

market and the fact that customers have access to price comparisons at the touch of a mouse (a sample

online search is provided in Exhibit TN-1). yet another significant challenge comes from the advent of

electronic book readers and e-book sales, placing even further price pressures on print-book margins.

The fourth section describes the major issues that BWB must face as it tries to scale up in this com-

petitive environment. In addition to its campus collection program and library donations, the com-

pany needs to cultivate new inventory from sources such as independent booksellers, community book

drives, an online portal, and so on. The company must also continue to invest in its operations man-

agement systems to manage its increased inventory and track market data, which is important given

the narrow margins on which BWB operates. One of the more recent developments is the company’s

proprietary inventory management software system that it developed in-house, and BWB is looking to

monetize the software as a SaaS solution in other e-commerce business. At the same time, BWB faces

major branding challenges and scrutiny of its social mission. The company has solid relationships with

the socially motivated customer segment, but it must find a way to make its products attractive to

mainstream buyers given that it does not necessarily have the lowest prices. Perhaps most importantly,

their competitive position is vulnerable. Copycats like Books4Cause are soliciting campuses nation-

wide (see Exhibit TN-2), and there is no reason why large competitors like Amazon could not add a

social component to their business model.

What must BWB do to hold onto “conceptual space” in people’s minds as “the” socially and envi-

ronmentally responsible used-book company? Which business- and corporate-level strategies will best

enable BWB to mature as a company, remain profitable, and attain its aggressive growth objectives?

Teaching Note —Better World Books and the Triple Bottom Line

Suggested Answers

AnAlySiS: FocuS on ExtErnAl And/or intErnAl EnvironmEntS

1. What are the vision, mission, and values of Better World Books? Critically evaluate their

usefulness to the company’s leaders in formulating strategic intent.

Teaching Note — Better World Books and the Triple Bottom Line

See Case Exhibit 3 for BWB’s mission and core values. BWB does not have a separate vision state-

ment. For an interesting exercise, you can ask the students to write a vision statement for the company,

keeping in mind the characteristics of a good vision statement listed in the text. A vision statement

should:

BWB’s mission is as follows: Better world Books is a global bookstore that harnesses the power of capitalism

to bring literacy and opportunity to people around the world.

BWB’s mission is more product-oriented (global bookstore) than customer-oriented. It promises to

bring “literacy and opportunity” to people around the world but does not identify a focal customer

2. Utilize Porter’s five forces framework to analyze the used-book industry. Is this an attractive

industry? Why or why not? Which force(s) have the strongest influence?

As shown in the table in Exhibit TN-1, the used-book industry faces a high threat of new entrants, has

high interfirm rivalry, and is threatened by potent substitutes (e-books and book rentals). Buyers have

moderate power because the product is not differentiated and there are no switching costs. Suppliers

by companies like Books4Cause?

3. What are BWB’s resources and capabilities? What core competencies do they have to help them

compete in the used-book industry?

BWB’s tangible resources include its status as a B corporation, its massive inventory of used books,

inventory management system, pricing algorithms, warehouse distribution center, and financial rev-

enues. Despite the physical nature of its core product, tangible resources are not the main source of

Teaching Note —Better World Books and the Triple Bottom Line

of McGraw-Hill Education.

universities, libraries, and other booksellers, and unique organizational culture are the building blocks

of BWB’s success. The challenge heading into the future is to maintain these core competencies, protect

them from being copied, and organize them to capture maximum value for all of BWB’s stakeholders.

4. Perform a SWOT analysis for BWB.

After students summarize the results from their external and internal analyses in SWOT format (see

Exhibit TN-3), engage them in a discussion regarding the following questions:

• Howcanmanagersusestrengthstotakeadvantageofopportunities?

For example, students might suggest leveraging BWB’s current network of donor relationships

(a strength) to reach out to corporations and individuals (new donor opportunities). The company’s

inventory management system (a strength) could be utilized to manage a broader portfolio of products

FormulAtion: FocuS on BuSinESS, corporAtE,

And/or GloBAl StrAtEGiES

5. Analyze the ways in which BWB strives to achieve a triple bottom line.

BWB is a B corporation, meaning it has publicly committed to meeting economic, social, and envi-

ronmental objectives. External auditors use the B Impact Rating System to evaluate the company’s

social and environmental performance. For more information about B corporations, see: http://www.

Economically

• BWBreceivesa“social-profit”marginof7to8percentfromeachtextbookitsells.

• Allprofitsarereinvestedinthecompany.

Teaching Note — Better World Books and the Triple Bottom Line

of McGraw-Hill Education.

• BWBhascreatedmorethan365jobs(withhealthcareandbenefitsacross threelocations).Their

warehouse in Mishawka, Indiana, was an abandoned packaging plant in a distressed industrial

center.

• In2009,BWBprovidedstockoptiongrantstoitsnonprofitpartnerstogivethemavestedinterestin

the company’s economic success. Subsequent grants will be based on performance.

Socially

• Afixedpercentofnetrevenueispaidtobookdonors(librariesreceive15percentofthenetsale

price).

Environmentally

• Byfocusingonthereuseofanexistingproduct,BWBeliminatestheneedforadditionalrawmateri–

als and production waste.

• Booksthatcannotbesoldarechanneledthroughliteracypartnerstobuildlibrariesorequipschools

in developing nations.

6. Is this business model sustainable in the long term? Why or why not?

After several years of teaching this case, we have found that most students respond negatively to

this question. The most frequent comment is that it is not possible to serve both for-profit and social

motives at the same time without detracting from the firm’s overall performance. In order for BWB to

Teaching Note —Better World Books and the Triple Bottom Line

of McGraw-Hill Education.

(2) it reduces pressure from for-profit competitors who have distinctive size and cost advantages; and

(3) it eliminates shareholder demands for a return on their investment (i.e., meeting growth and per–

formance targets). This line of discussion can provide valuable opportunities for debating the merits of

social entrepreneurship in general, as well as the specific example in this case.

Another factor that we must take into consideration with the BWB example is that used books are

a commodity product with inventories projected to decrease over the long term. The commodity-like

nature of used books begs the question of whether it is possible for BWB to differentiate its products/

services adequately to generate the necessary profit margins, and if so, how it should go about doing

Entrepreneurial firms like BWB should always have an exit strategy. While one possibility is to con-

tinue to grow in size and/or scope, BWB could also choose to milk its current niche for as long as it is

implEmEntAtion: FocuS on rEcommEndAtionS

And How to implEmEnt tHEm

7. How might BWB differentiate its product and services to create a strategic competitive

advantage?

Because of BWB’s social and environmental mission, the firm has narrower margins than its purely

for-profit competitors. This implies they either need to compete based on volume (which is difficult to

do against Amazon.com), or find ways to increase their margins through differentiated products and

services. The main value levers available to differentiating firms are:

• product features—For the most part, a used book is a used book. Possible differentiating features

include providing a wider selection, promising higher quality, or giving access to rare/difficult-to-

find items. BWB currently differentiates its books/services based on the company’s social/environ-

mental mission, but has legitimate concerns that competitors may copy their approach and adopt

their own social causes.

Teaching Note — Better World Books and the Triple Bottom Line

8. What are some other ways in which BWB can create and sustain a long-term competitive

advantage?

BWB currently utilizes a focused differentiation strategy, where it differentiates its products based

on service (no shipping costs), customization (personal notes), and its social/environmental mission.

This strategy has primary appeal to socially/environmentally conscious consumers, which constitute

a relatively small but loyal market segment. One way of growing the size of this segment without

dramatically changing the company’s underlying strategy is by expanding internationally. BWB has

Alternatively, BWB could develop a broad differentiation strategy and increase its appeal to a

broader customer base in its current markets. The success of this approach depends on the willingness

Perhaps a better alternative to broad differentiation might be to work toward an integrated or best-

cost strategy, where BWB offers roughly comparable prices AND the added value of contributing to the

company’s social/environmental mission. While this strategic approach can be quite profitable when

well executed, it can also be extremely difficult to implement because it requires careful management of

The case also indicates that the company is starting to explore various diversification options, which

could help create economies of scope as well as scale. As noted under question #6, the optimal product

mix has yet to be determined and could be the subject of a lively and interesting in-class debate.

Recent Updates

In early 2015, Scott Coning left the company for unspecified reasons.

Source: Personal communication with Diane Maier, Director of Sales & Marketing

Teaching Note —Better World Books and the Triple Bottom Line

Additional Resources

1. Better World Books keeps a running list of its press coverage on the following web page: http://

www.betterworldbooks.com/info.aspx?f=press.

2. Better World Books. http://www.cnn.com/video/?/video/living/2009/07/01/elam.mainstreet.

books.cnn&iref=videosearch (2:10).

Literature for Less. http://www.cnn.com/video/?/video/living/2009/07/01/elam.mainstreet.

books.cnn&iref=videosearch (2:16).

Two CNN clips talking about the origins and business model of BWB. The videos feature images

of the warehouse, a brief financial summary, and interviews with the founders. Nice, brief, and

objective introduction to the company as a whole.

3. Better World Books Vimeo channel:

http://vimeo.com/bwbooks/videos.

4. Better World Books youTube channel: http://www.youtube.com/user/

BetterWorldBooks?feature=watch.

Better world Books intro. http://www.youtube.com/watch?v=uk64ytD7WSQ&feature=c4-

overview-vl&list=PLE74383761B9E0D6F (4:26).

This video is produced by BWB and describes their mission and passion for books and literacy. It

starts with customers talking about their passion for books, and it then describes the origins of the

company and its triple-bottom-line business model.

Business = Social impact at Better world Books. http://www.youtube.com/watch?v= 5G3PZlWmg

Gw&feature=mfu_in_order&list=uL (1:40). This clip highlights the social impact of BWB’s

business model and explains Bcorporations.

the Environmental impact of Better world Books. http://www.youtube.com/watch?v=

p7XZ3yy6vhy& feature=mfu_in_order&list=uL (1:21). This clip discusses BWB’s environmental

activities.

inside the Better world Books warehouse. http://www.youtube.com/watch?v=V7Sm44wI-

ec&feature=related (1:48). This video provides an inside view of the BWB warehouse and its

inventory processes.

Books for Africa and Better world Books.

http://www.youtube.com/watch?v=o4d4E-VkVE8&feature=c4-overview-

vl&list=PLE74383761B9E0D6F (2:06). This is a video produced by BWB/Books for Africa as a

thank you to groups who sponsor a book drive. It discusses how donated books benefit various

aspects of African society. Students may benefit from seeing the people and places touched by

BWB’s activities, if they are having trouble grasping the human element of the company’s business

model. There are similar videos pertaining to BWB’s other major NGO partners (Room to Read,

Worldfund, Invisible Children, etc.).

Teaching Note — Better World Books and the Triple Bottom Line

5. when Sustainability means more than “Green.” http://www.mckinsey.com/insights/strategy/

when_sustainability_means_more_than_green (7:51). This is a video of a mcKinsey Quarterly

interview with Adam Werbach, author of the book Strategy for Sustainability. He discusses the need

to take a long-term perspective on business, arguing that true sustainability has four components:

social, economic, environmental, and cultural. This video is useful for prompting a broader

discussion of sustainable businesses, apart from BWB’s direct activities.

Teaching Note —Better World Books and the Triple Bottom Line

ExHIBIT TN-1 Applying Porter’s Five Forces Framework to Analyze the used-Book Industry

Factors

Leading to…

Threat of

New Entrants

Power of

Suppliers

Interfirm

Rivalry

Power of

Buyers

Threat of

Substitutes

High threat Customer switching costs

are low

Low capital requirements

Suppliers can

credibly forward

integrate

Many

competitors in

industry

Products are

undifferentiated

Buyers have

E-books offer an attractive

price-performance

trade-off

Moderate

threat

Some incumbents have

proprietary inventory and

market data systems

Brand equity varies

Buyers must purchase an

e-reader to use substitutes

Teaching Note — Better World Books and the Triple Bottom Line

ExHIBIT TN-2 BWB’s Resources and Capabilities

BWB’s Resources and Capabilities

… are they?

Valuable

Rare

Costly to

Imitate

Organized to

capture value

Teaching Note —Better World Books and the Triple Bottom Line

ExHIBIT TN-3 SWOT Analysis for Better World Books

Strengths

Reputation (first-mover advantage)

Inventory management system

Network of donor relationships

Opportunities

Increasing public appreciation for socially and environmentally

responsible businesses

Laws are slowly changing to provide B corporations with tax

status

Weaknesses

“Shoestring” budget

Competing against for-profit companies without social obligations

Threats

Price competition from other online booksellers, especially

Amazon

Teaching Note — Better World Books and the Triple Bottom Line

Additional Exhibits

ExHIBIT TN-4 Competition with Third-Party Sellers

Source: Amazon.com.

Teaching Note —Better World Books and the Triple Bottom Line

ExHIBIT TN-5 Books4Cause FAQs

What is Books4Cause?

Books4Cause runs book drives and book donation campaigns on college campuses which help fund and support various initiatives

locally, nationally, and around the world.

What type of books do you accept?

few years out of date are perfect for Africa. Newer books are often sold to raise money and cover the cost of shipping and running

the book drive.

Books are heavy, how can I get them to you?

Sounds great but in which part of the country do you pick up books?

We are based in Chicago and are running book drives all around the country. Send us an email to find out when we will be visiting

your campus. You may also sign up on our partner page to start the process of running a book drive.

What do you do with the donated books?

What causes will benefit from my book donation?

All of our book-drives benefit HSRI. We send them money, books, and warehouse all of their other educational supplies that are

sent to Ghana. We also have secondary local partners on each campus that get money and/or books. We are looking to work with

additional national and local partners. Here is a list of our current partners.

What do you do with the collected books?

Do you throw any books away?

Do you provide a tax receipt?

Source: http://www.books4cause.com/faq/.