Balanced Scorecard Program

1. Balanced Scorecard Program Lia Torre Terri Leofsky Tory Kindlick Yoftahe Zewdu Iyolo Mabila Rachel Katz

2. 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

3. 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.

4. Company Operations Barnes & Noble operations consist of: • retail bookselling • college bookstore management • online retailing • book publishing

5. Company Mission Our mission isto 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 in our 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 our dedicated 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.

6. Competitive Landscape 1) 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

7. Competitive Landscape

8. Competitive Landscape

9. Competitive Landscape

10. Financial Perspective Goals Measures Customer Perspective Operations Perspective Goals Measures Goals Measures Innovation Perspective Goals Measures The Balanced Scorecard How do we look to owner’s? In which activities must we excel? How do customers see us? How can we continue to improve?

11. Customer Perspective Goals: 1) Satisfy Customer Needs 2) 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

12. 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

13. Customer Perspective 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

14. CustomerPerspective 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

15. Customer Perspective Objective #4: Increase perception as community store Measure: More people participating in B&N programs Target: 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

16. 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

17. Financial Perspective Goal: 1) Financial Stability Objectives: Maintain Real Estate Strategy Increase Department Same Store Sales Increase B&N.com Financials Increase EVA

18. Financial Perspective Objective: 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

19. Financial Perspective Objective: Continue to increase sales by department (return to 2007 levels) Measure: OBY department sales increase; particularly the children’s department Target: Increase category by 5% year over year Initiatives: Increase promotional activities within the children’s department; Direct mail & Online e-mail by interest, Increase awareness of book blogs and online book clubs

20. Financial Perspective Objective: Increase B&N.com Financials Measure: Increase B&N.com sales Target: Increase sales by 3% Initiatives: Advertise within the store, Increase online ONLY promotions, Start a book blog on Starbucks.com

21. Financial Perspective Objective: Maximize Shareholder Value Measure: Increase EVA Target: Bring EVA to a positive Initiatives: Increase Profits Control Expenses Control Capital Increase Accounts Payable

22. Financial Perspective

23. Internal Operations Goals: • Increase efficiency of operations to decrease costs • 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

24. Internal Operations Objective #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.

25. 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.

26. Internal Operations Objective #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.

27. 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.

28. Innovation and Learning Goals: • Grow through innovation, mergers, acquisitions, and global expansion • 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.

29. 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

30. Innovation & Learning Objective #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.

31. Innovation & Learning Objective #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

32. 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

33. BSC Perspective Mission Goals Objective Link Our 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. • Maintain Real Estate Strategy • Increase Department Same Store Sales • Increase B&N.com Financials • Increase EVA Industry Leader in Book Retailing Financial • Increase market share through innovation • Expand global presence by penetrating international markets • Growth through mergers and acquisitions • Grow internally through employee empowerment Learning and Growth • Increase Customer Loyalty/Retention • Maintain strong sense of Customers’ changing needs • Add value and convenience for customers • Increase perception as community store Customer Maintain Community Store Concept • Improve employee productivity • Improve inventory management • Reduce order-to-delivery time for B&N.com orders • Develop customer focused process innovations Internal Operations

34. 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

35. 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