Penguin Books: Introduction to Modern Business

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
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
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