casadellibro.com

Casadellibro.com was an attempt to achieve world leadership in the Spanish books market and Internet was a channel of distribution to reach consumers. Under previous conditions (high expected growth and consumer demanding on line services), Casa del Libro decided to build a platform in which they could achieve high performance, security, availability and scalability. However, the conditions have changed; the platform cannot integrate effectively, the market is not increasing as it was expected and the Internet bubble exploded.

Looking at the current context, it seems illogical to keep investing on the UNIX platform. First, huge investment has already been done and not any return has taken place. Second, since cost control and loss reduction are the key factors for the short term, modifications to the UNIX platform will certainly raise short-term costs because of its inherent deficiencies. Third, since the market as a whole is experiencing bad conditions, if the company takes a look to the long term, it seems reasonable to switch to the Microsoft one. This decision has to be made for sure; the question is whether it has to be done now or in the future. Trying to apply my financial accounting concepts, calculating the Net Present Value of Option 1 (UNIX) and Option 2 (Microsoft), switching to the Microsoft Option becomes the best option because it´s seen as an investment instead of as an expense, like in the first option.

The criterion that has to be evaluated by Casa del Libro is the following:
1. Participation of sales depending on the channel of distribution and the profit margin for each channel. If on line sales have the highest profit margin, focusing on the platform will provide a welcome flow of “profitable” cash.

2. Strategies being taken by the competition. Under such difficult conditions for the industry, Casa del Libro cannot risk its position on the market. It has to be aware of competitors´ initiatives.

3. Projections for the long term, after the crisis has finished. Even though the company is experiencing bad times, it won´t last forever, so it has to keep it mind the “B” plan when the crisis is over and be prepared to take as much as it can from the market.