Balanced Scorecard Program

Balanced Scorecard Program

Lia TorreTerri LeofskyTory KindlickYoftahe ZewduIyolo MabilaRachel Katz

Company Overview Nation’s largest bookstore

As of January 31, 2009 operated 778 bookstores and 1 website.

Employs 37,000 full and part time employees

Each store features 60,000-200,000 unique titles

BN.com does 10% of total sales

Annual 2008 Sales $5.1 Billion

Company History Current company chairman, Leonard Riggio, started

as a clerk at the NYU bookstore.

Started his own competing book store in 1965

In the 1970s acquired the declining flagship Barnes & Noble trade name and flagship bookstore in Manhattan.

Within a few years, Mr. Riggio transformed the Fifth Avenue store into "The World’s Largest Bookstore," with 150,000 textbook and trade titles.

Company Operations

Barnes & Noble operations consist of:

retail bookselling

college bookstore management online retailing book publishing

Company MissionOur mission is to operate the best specialty retail

business in America, regardless of the product we sell. Because the

product we sell is books, our aspirations must be consistent with the promise and

the ideals of the volumes which line our shelves. To say that our mission exists

independent of the product we sell is to demean the importance and the distinction

of being booksellers.

As booksellers we are determined to be the very best inour business, regardless of the size, pedigree or inclinations of our competitors. We

will continue to bring our industry nuances of style and approaches to bookselling which

are consistent with our evolving aspirations.

Above all, we expect to be a credit to the communities we serve,

a valuable resource to our customers, and a place where ourdedicated booksellers can grow and prosper. Toward this end we will

not only listen to our customers and Booksellers but embrace the idea that the Company

is at their service.

Competitive Landscape1) Amazon.com, Inc.

2) Books-A-Million, Inc.3) Borders Group, Inc.

Industries Where Barnes & Noble, Inc. Competes:

Music, Video, Book & Entertainment Retail Nonresidential construction

Media Clay, Ceramic, And Refractory Minerals

Publishing Retail

Competitive LandscapeRevenues for Competitors (in millions)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

B&N Amazon Borders Books-A-Million

Revenues 2006

Revenues 2007

Revenues 2008

Competitive Landscape

Operational Expenses for Competitors (in millions)

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

$4,000.00


Expenses 2006

Expenses 2007

Expenses 2008

Competitive Landscape

Net Income for Competitors (in millions)

-$200.00

-$100.00

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00


Net Income 2006

Net Income 2007

Net Income 2008

The Balanced ScorecardFinancial Perspective

Goals Measures

Customer PerspectiveGoals Measures

Operations PerspectiveGoals Measures

Innovation PerspectiveGoals Measures

How do we look How do we look to owner’s?to owner’s?

How do customers How do customers see us?see us?

How can we How can we continue to continue to improve?improve?

In which activities In which activities must we excel?must we excel?

Customer Perspective Goals: 1) Satisfy Customer Needs2) Maintain Brand Awareness Among Customers

Objectives: Increase Customer Loyalty/Retention Maintain strong sense of Customers’ changing

needs Add value and convenience for customers Increase perception as community store

Customer Perspective

Objective #1: Increase Customer Retention/Loyalty

Measure: Increase in returning customers online and in retail locations

Target: 80% of customers are repeat / 20% increase in loyalty program sign ups

Initiatives: Provide excellent customer service and an outstanding

customer experience either online, at retail locations or through the service center.

Give customers free access to loyalty program during certain times

Nook Hotline


Objective #2: Maintain strong sense of Customers’ changing needs

Measure: Number of online surveys filled out

Target: 1,000 surveys completed per country

Initiatives: Incentives customers to provide insight as to how

B&N can be of better service Customers who fill out online survey get 10% off

their next purchase


Objective #3: Add value and convenience for customers

Measure: Increase number of visitors to website

Target: Increase number of visitors from 365 Million to 450 million

Initiatives: Drive customers to website using affiliate marketing tactics, giving customers free shipping on their online orders, presenting in-store customers with coupons valid on internet purchases only, offering customers special information only available on the web (info about in store events, coupons)

In-store kiosks


Objective #4: Increase perception as community storeMeasure: More people participating in B&N programsTarget: 5% of B&N customers to participate Initiatives: In-store book clubs, online book club blog,

test prep courses, Local college affiliation (sell university clothing and books), open mic night poetry reading

Financial Perspective

In 2008: Fiscal Year Jan 31-Jan 31 (Recently

shifted year to end April 31) No debt on the balance sheet $282 million cash on hand Comparable sales down 5.4% Net Income of $76 million Leonard Riggio owns 1/3 of company’s

share

Financial PerspectiveGoal: 1) Financial Stability

Objectives: Maintain Real Estate Strategy Increase Department Same Store Sales Increase B&N.com Financials Increase EVA

Financial PerspectiveObjective: Continue to exit small stores in the malls and

sign shorter leases than competitors

Measure: Sales per total square feet year over year

Target: Restore sales per square foot to 2007 levels

Initiatives: Continue Real Estate Strategy, Continue to relocate stores at end of terms to higher potential locations

2009P 2008 2007 2006

Square feet of selling place at year end (000) 18,900 18,900 18,200 17,900 Sales ($000s) 5,500,000 5,121,804 5,286,674 5,139,618

Sales per square feet 291$ 271$ 290$ 287$ BordersSales per square feet 203$ $228

Financial PerspectiveObjective: Continue to increase sales by department

(return to 2007 levels)Measure: OBY department sales increase; particularly

the children’s departmentTarget: Increase category by 5% year over yearInitiatives: Increase promotional activities within the

children’s department; Direct mail & Online e-mail by interest, Increase awareness of book blogs and online book clubs

Year 2009P 2008 2007 2006 2005 2004Total OBY Store Sales 0.40% -5.4% 1.8% -0.3% 2.9% 3.1%Category:Fiction/LiteratureChildrensBest Sellers


Objective: Increase B&N.com FinancialsMeasure: Increase B&N.com salesTarget: Increase sales by 3%Initiatives: Advertise within the store, Increase online

ONLY promotions, Start a book blog on Starbucks.com

Year 2009P 2008 2007 2006 2005 2004B&N.com Sales 000's 480,064 466,082 476,870 433,425 439,657 419,821 Calculated % change 3.0% -2.3% 9.1% -1.4% 4.5%


Objective: Maximize Shareholder ValueMeasure: Increase EVATarget: Bring EVA to a positiveInitiatives: Increase Profits Control Expenses Control Capital Increase Accounts Payable

1/31/08-1/31/09 1/31/07-1/31/08 1/31/06-1/31/07Investment Charge 151,821.300 165,965.900 169,980.000 EVA (65,011.64)$ (35,872.92)$ (21,797.79)$

Financial PerspectiveEconomic Value Added

1/31/08-1/31/09 1/31/07-1/31/08 1/31/06-1/31/07Operating Income 143,331$ 202,051$ 248,005$ Tax Rate 39% 36% 40%

86,809.66$ 130,092.98$ 148,182.21$

1/31/08-1/31/09 1/31/07-1/31/08 1/31/06-1/31/07Total Assests 2,993,888 3,249,826 3,196,798 Total Current Liabilities 1,475,675 1,590,167 1,496,998

1,518,213$ 1,659,659$ 1,699,800$

1/31/08-1/31/09 1/31/07-1/31/08 1/31/06-1/31/07Risk Free Rate 4% 4% 4%Return on Market 10% 10% 10%Beta 1 1 1Cost of equity Capital 10.00% 10.00% 10.00%

1/31/08-1/31/09 1/31/07-1/31/08 1/31/06-1/31/07End of Year Share Price 16.42 33.92 38.93 Number of Outstanding 55,207.00 63,662.00 65,212.00 Market Value of Equity 906,498.94 2,159,415.04 2,538,703.16

1/31/08-1/31/09 1/31/07-1/31/08 1/31/06-1/31/07WACC 10% 10% 10%Investment Charge 151,821.300 165,965.900 169,980.000 EVA (65,011.64)$ (35,872.92)$ (21,797.79)$

Internal Operations

Goals:

1) Increase efficiency of operations to decrease costs

2) Innovate to improve effectiveness of meeting the needs of our customers

Objectives: Improve employee productivity Improve inventory management Reduce order-to-delivery time for B&N.com orders Develop customer focused process innovations

Internal OperationsObjective #1: Improve employee productivity

Measure: Annual sales/number of employees

Target: Increase by 10% year over year

Initiatives: Motivate employees to perform at a higher level of

productivity through incentive programs. Provide employee effectiveness training. Install in-store kiosks.

Internal Operations

Objective #2: Improve inventory management

Measure: Inventory turnover

Target: Increase to 6%

Initiatives: Continued improvement of supply chain system to

reduce inventories. Better utilization of customer data to

predict needed inventory levels.

Internal OperationsObjective #3: Reduce order-to-delivery cycle time for

B&N.com orders

Measure: Average order-to-delivery time

Target: Decrease delivery times by 15% in first year

Initiative: Leverage relationships with shipping vendors to get

a higher level of service. Monitor online ordering process for bottlenecks.

Internal Operations

Objective #4: Develop customer-focused process innovations

Measure: Number of innovations

Target: Two innovations in first 5 years of implementation

Initiatives: Install in-store kiosks for finding books in the store. Develop mobile applications for android devices.

Innovation and Learning

Goals:

1) Grow through innovation, mergers, acquisitions, and global expansion

2) Grow internally through employee empowerment

Objectives: Increase market share through innovation. Expand global presence by penetrating international

markets. Growth through mergers and acquisitions. Employee Growth.

Innovation & Learning

Objective #1: Expand global presence by penetrating international markets

Measure: Derive 5 % of overall revenue from international sales over a five-year period

Target: Acquisition of bookselling companies with global reach

Initiative: Apply best practices used in the US and adapt those

to local markets

Innovation & LearningObjective #2: Increase Market share through innovation

Measure: Number of new customers acquired as % of overall market share

Target: 10% increase in Market share over a 5 year period

Initiative: Promotion of the Nook. Book Clubs. Promotion of Children’s section. Accept Borders coupons.

Innovation & LearningObjective #3: Growth Through Mergers and Acquisitions

Measure: Continue company growth through advancement of acquisitions

Target: Turn B&N College Booksellers library into ebooks and increase annual earnings by 30-35%

Initiatives: Advance ebook software make the nook appealing to a

new market segment Increase market share for e-textbooks

Innovation & Learning Objective #4: Grow internally through employee empowerment

Measure: Increase employee retention

Target: Return employee growth rate to positive figure

Initiatives: 980 work schedule Increase worker salary above industry standard Increase management standards Incentivize employees based on merit Employee networking events 2009

Employees1-yr Employee Growth

Employee Retention

Barnes and Noble

37,000 (7.5%) (2,775)

Amazon 20,700 35.5% 7348

Books-a-million

5,300 6% 318

Borders 25,600 (13.2%) (3,379)

Mission BSC Perspective

Goals ObjectiveOur mission is to operate the best specialty retail

business in America,

regardless of the product we sell.

Because the product we sell is

books, our aspirations must

be consistent with the promise and the ideals of

the volumes which line our

shelves. To say that our mission

exists independent of the product we

sell is to demean the importance

and the distinction of

being booksellers.

Industry Leader in

Book Retailing

Maintain Community

Store Concept

Customer

Internal Operations

Learning and Growth

Financial

•Increase Customer Loyalty/Retention•Maintain strong sense of Customers’ changing needs•Add value and convenience for customers•Increase perception as community store

•Improve employee productivity•Improve inventory management•Reduce order-to-delivery time for B&N.com orders•Develop customer focused process innovations

•Increase market share through innovation•Expand global presence by penetrating international markets•Growth through mergers and acquisitions•Grow internally through employee empowerment

•Maintain Real Estate Strategy •Increase Department Same Store Sales•Increase B&N.com Financials•Increase EVA

Link

The Future of Barnes and Noble“However, being the best at what we do, and having the best financial metrics, will not alone see us through these troubled times. If anything, we have to be even more diligent with expense controls (lower sales mean lower productivity,) inventory management, and capital expenditures. No, we will not be making Draconian cuts in capital spending as we are committed to having our stores in good repair and condition, our systems ever improving, and to making appropriate investments to secure a better future. On the other hand, new store openings will be curtailed greatly, and discretionary expenditures will be cut to the bone. Finally, unlike some of our competitors, we will not drop our contributions to the 401K plan, not stop overtime pay for holidays, and will not change the composition of our excellent benefits package. “ – Leonard Riggio

References

http://news.cnet.com/Borders,-Barnes--Noble-take-separate-paths-to-profits/2100-1017_3-245231.html

http://img213.imageshack.us/i/bm071230couponaq4.jpg/ 2008 Barnes and Noble Annual Report 2008 Borders Annual Report 2007 Borders Annual Report Hoovers.com Yahoo.com Barnes and Noble Memorandum. Oct. 29, 2008. Leonard

Riggio. Available online: http://online.wsj.com/article_email/SB122573187867493603-lMyQjAxMDI5MjI1OTcyMzkxWj.html

Balanced Scorecard Program

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