Staples Inc.

I. BACKGROUND
Staples Inc. founded in 1985 by Thomas G. Stemberg and Leo Kahn in Brighton, Massachussets. It is headquartered in Boston and employs 89,000 employees worldwide. Staples sells office supplies at more than 2,000 stores as well as through its catalog and call centers, the internet site, and contract sales force. In additional to typical office supplies, stores offer computer hardware and software, furniture, art and school supplies and printing and copy services ( Staples 10k, 2012). The company has 3 operating division: North American Delivery, North America Retail and International.

The retail stores in Australia, Brazil, China, Denmark, France, Germany, India, Norway, Portugal, United Kingdom and the United States are operate under its original name “Staples”. Argentina operates as Officenet-Staples, Belgium and Netherlands as Office Center, Canada as Staples Canada and in Italy as Mondoffice. The company recorded revenues of $25.1 billion during 2012, an increase of 1.9% compared with 2011. 39% of revenues generated from North American Retail, 40% from North American Delivery and 21% from International operation. (managementparadise.com, Staples 10K, 2012). II. STRATEGIC DIRECTION

A. Mission
“Our mission is to bring easy to offices worldwide” (Staples Soul, 2012). B. GOALS/OBJECTIVES
• Maintain our leadership position by delivering on our brand promise • Focus on customer service, customer acquisition and retention, and providing our customers a broad assortment of core office products and services. • Focuses on expanding categories beyond core office supplies, including facilities and breakroom supplies, copy and print services, promotional products and furniture. • Focus on improving our perfect order metric, which measures the number of orders that we fulfill on time and without error, and have established industry leading customer service standards to support our brand promise.

• Continue to make investments in Staples.com to enhance the usability, efficiency and overall customer experience. • Continue to be a destination for core office supply categories like ink and toner and to become an authority for business technology through redesigned stores and an expanded technology assortment. • Focus on strengthening our value proposition with customers, increasing the productivity of our marketing programs, leveraging best practices from our North American businesses, including our mid-market contract selling model, and expanding our mix of business services with a focus on copy and print. • Focuses on improving profitability by reducing overhead expense, increasing sales of higher margin Staples brand products and improving the performance of our supply chain. C. INDUSTRY – SIC or NAICS

As taken from Hoovers.com:
Primary SIC Code – 51220000: Stationery and office supplies Primary NAICS Code- 453210: Office Supplies and Stationery Stores D. MARKET STRUCTURE
The Office Supplies Industry operates as a monopolistic competition where where the market has many firms, none of which is large, there is free entry and exit into the market and each firm in the market produces a differentiated product. III. INDUSTRY ENVIRONMENT-PORTER”S FIVE FORCES OF COMPETITION A. RIVALRY AMONG COMPETITIVEFIRMS

The company range in size and product diversity: high-volume office supply providers, warehouse clubs, copy and print business, online retailers, ink cartridge specialty stores, discount retailers, as well as several local and regional contract stationers. A large number of players, low switching cost, low product differentiation, easy to expand through internet, poor market growth in recent years increase the rivalry among player. Overall, rivalry is strong. Staples competes both internationally and domestically with a number of corporations from multinational to much smaller domestic specialised retailers. Staples major competitors are OfficeMax, Office Depot and Lyreco. Staples also competes against mass merchants such as Wal-Mart (WMT), warehouse clubs like Costco Wholesale (COST), and computer and electronics superstores like Best Buy (BBY) (Merketline, 2102: Hoovers,2012). B. BARRIERS TO ENTRY: POTENTIAL ENTRY OF NEW COMPETITORS

Most office supplies have little brand loyalty, low end-user switching costs, low government regulation, and easy access to suppliers and distribution channels attracts potential new entrants.Economies of scale provide a significant advantage over the larger office supply that allow them to compete with high-volume to lead the market. Company with a strong financial able to gain better profit by negotiate better contracts with suppliers.Entry can be achieved on a smaller scale by focusing on specific productrange or by developing an online retail shop. The low growth in this industry also makes it less attractive to new entrants. Overall, the threat of new entrants is strong (Merketline, 2102) C. SUBSTITUTES

There is a big challenge for those operating primarily with paper-based office products because many companies move towards a paperless office format to decrease the operational cost and environmental friendly. Office services such as photocopying, printing and binding may be substituted by electronic forms of communications. Switching costs are moderate due to already developed ICT systems by market players. Therefore the threat of substitutes within this industry is moderate. (Pearson-Jones, 2010; Merketline, 2102) D. POWER OF SUPPLIERS

Numerous suppliers especially from low cost Asia region decrease suppliers’ power. Players tend to have several suppliers, with low switching costs, weakening the power of the suppliers; especially in the case of the larger players have more bargaining power. On the other hand, suppliers can have their own brand products to increase their own supplier power. Staples own brand accounted 27% of their sales in 2011. The lower price of own brand undercuts the power of other supplier (Pearson-Jones, 2010; Merketline, 2102). E. POWER OF CONSUMERS

Buyers in this market are varied. Buyer’s power is directly related to their spending and the size of the company. The larger size of the company can get price discounts which empowers buyers bargaining power. However, buyer power is sustained by low customer loyalty, low switching cost, low differentiation, high price sensitivity and variety of choice. Overall, buyer’s bargaining power is moderate (Pearson-Jones, 2010; Merketline, 2102). F. POWER OF DISTRIBUTORS

The power of distributors is relatively high because distributor can
choose variety player in this industry. IV. MACROENVIRONMENT- OPPORTUNITIES AND THREATS

A. LEGAL/POLITICAL
Threat
On July 24th, 2009 the federal minimum wage will increase from $6.55 an hour to $7.25 an hour. This amounts to an increase of 10.7%. The increase of the minimum wages will increase the operating expense and decrease the net income of the company (Lu, 2010) B. ECONOMIC

Threats
The high unemployment rates are having a negative impact on office product distributors; as small and large businesses and individual consumers are being more cautious and less frivolous with their money, often buying bare necessities rather than splurging their cash. (Staszko, 2011) C. TECHNOLOGICAL

Opportunities
HP introduced a new Officejet Pro and HP LaserJet printers and content management solutions designed to redefine business and government printing by enabling customers to reduce costs, increase efficiency and digitize the office. “The new offerings represent the largest upgrade to HP’s commercial printers in almost a decade, signifying the integration of intellectual property (IP) and innovation from across the organization.” (Yahoo finance, 2012) D. SOCIAL

Threats
Many modern companies are taking strategies to minimize costs and the environmental impact of their operations by moving towards a paperless office format. However, the trend toward paperless offices is reducing demand for many traditional office supplies, forcing operators to consolidate or expand their offerings.This will be affected the revenue of the company because 43.9% of the revenue generated from office supplies. (Datamonitor, 2012: marketreseach, 2011) E. DEMOGRAPHIC

Opportunities
With the advent of e-business in the United States, and international, United States online retail sales are expected to continue grows. According to Forrester Research, U. S. e-retail sales will grow by 10% a year to $279 billion by 2015. On the other hand, online consumers will increase their spending 62% by 2016. By expanding online sales, Staples can increase market share (“Internet retailer,” 2012). Threats

The NPD Group conducted a survey about the economy and spending found that 85% of the U.S consumers say that price will be extremely important or important factor in deciding where to shop in the near future, 10% more than those feel sales and special deals are extremely important. The company has more concern in pricing because right pricing strategy is a competitive advantage in the marketplace (NPD, 2012). F. GLOBAL

Opportunities
According to the Reportlinker, the worldwide office services and supplies industry recorded more than 3% growth in 2010 year to reach almost $191 million. It is expected to expand by more than 16% over the five year period ending 2015 to reach almost $222 million. “The Middle East, Latin America and Asia-Pacific are forecast to record the faster rate of growth over the coming year. There are opportunities to keep its leading marketing position in the future (Reportlinker, 2012). Revenue for the Stationery and Office Supplies Manufacturing industry in China has been increase 9.6 % annually to $9.9 billion due to the increasing domestic demand and new foreign market. “As more business are established in China, demand for stationery and office supplies will rise Revenue growth will also be boosted by the introduction of more high-end products…” (“Stationery and office,” 2012) Threat

Staples competes both internationally and domestically with a number of corporations from multinational to much smaller domestic specialized retailers. Staples major competitors are OfficeMax, Office Depot and Lyreco. Staples also competes against mass merchants such as Wal-Mart (WMT), warehouse clubs like Costco Wholesale (COST), and computer and electronics superstores like Best Buy. If the economy continues to decline they may have to cut back in certain areas in order to keep up with their competition.

V. INTERNAL ENVIRONMENT- STRENGHS AND WEAKNESS
A. FINANCE: OBJECTIVE(S)
We are also focused on improving profitability by reducing overhead expense, increasing sales of higher margin Staples brand products and improving the performance of our supply chain.” 1. RATIO

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STRENGTHS
Compared to industry ratio, Staples having 3.93% net profit margin ratio which is higher than industry ratio. This proves the ability of the company to remain competitive within its sectors. Current ratio of 1.54 illustrates that Staples’s short term assets can be used immediately to pay off its short-term liabilities. The return on assets not only increased every year but also higher than industry means that management is able to make significant profits on assets managed. Long term debt was decreased greatly from 2010 to 2012 indicated that the company’s ability to meet its debt obligation become strong. The inventory turnover ratio proves that they are fairly effective when turning goods into profit and replacing inventory. WEAKNESSES

The debt to equity ratio shows that they are not aggressive when it comes to financing their growth with debt. This ratio is low, less than one percent, showing that the large amount of equity and debt Staples’ has is not being used towards adding more assets. B. MARKETING : OBJECTIVE(S)

• Maintain our leadership position by delivering on our brand promise • Focus on customer service, customer acquisition and retention, and providing our customers a broad assortment of core office products and services. • Focused on expanding categories beyond core office supplies, including facilities and breakroom supplies, copy and print services, promotional products and furniture. • Focus on improving our perfect order metric, which measures the number of orders that we fulfill on time and without error, and have established industry leading customer service standards to support our brand promise. • Continue to make investments in Staples.com to enhance the usability, efficiency and overall customer experience. • Continue to be a destination for core office supply categories like ink and toner and to become an authority for business technology through redesigned stores and an expanded technology assortment. • Focus on strengthening our value proposition with customers, increasing the productivity of our marketing programs, leveraging best practices from our North American businesses, including our mid-market contract selling model, and expanding our mix of business services with a focus on copy and print. 1. STRENGTHS

Staples used multiple retail channels, including contract, retail stores, catalog and online site to communicate with customers in order to meet the needs of different customer groups. . Staples’s contract business targets mid-size businesses and organizations with 20–500 office workers as well as Fortune 1000 companies by offers certain. special services to customers in this category such as customized pricing and payment terms, usage reporting, stocking of certain proprietary items, a wide assortment of products with various environmental attributes and services, and full service account management. The company’s retail stores target small businesses, home offices and consumers. Staples operates through four retail store formats that are tailored to the unique characteristics of each location. Its super center, Dover, is the company’s largest retail format with a retail space of 18,000 square feet. In rural markets, Staples operates stores with retail space of 14,600 square feet and, in densely populated urban markets, stores with retail space of 10,000 square feet.

It also operates stand alone copy and print shops to cater to the needs of customers requiring quick solutions to their printing and photocopy needs. (Datamonitor, 2012) The company’s catalog and online retail channels primarily serves to small businesses and organizations with up to 20 office workers. The company’s website also offers services such as next business day delivery for most office supply orders in a majority of markets. The company leverages each of its retail channels in such a manner that it attracts different customer groups with distinct purchasing behaviors. (Datamonitor, 2012) Staples completely changed their brand image in 2003 when they created the “Easy” marketing strategy. When people see the “Easy button” they immediately correlate it to the Staples name. This brand image allows the firm to compete on a differentiation strategy. (Lean, 2000) Staples combined the traditional retailers store channels and internet channel to complementary between two channels.

These two resources are not isolated, but rather through a combination bring greater value to customers. Staples not only solve the snatch problem between online and physical stores, also used inter channel to expand the geographic scope of services. Secondly, more than 2,000 retailer stores, logistics distribution center etc, help and support to maximize the online shop to achieve a win-win situation of the old and new channels to achieve real 1+1> 2. For example, through the online query about the inventory status of a product in stores, online shopping and free delivery to stores, online product can return in any stores. These services are not any single model of the traditional or emerging companies can do. Staples made significant investments in copy & print, business technology and technology services across North America retail location and remodeled the technology area in about half of their stores and improved assortment and service capabilities ( Staples Soul, 2012) Convenient store locations, easy to use websites, fast order delivery, and efficient customer service enables Staples to attract a larger customer base and maintain its leadership position in the office products industry. 2. WEAKNESSES

Even through Staples has expanded internationally in the last few years, this expansion has not been proven to be beneficial. According to the Staples annual report, they operates in 24 countries in Europe, Austria, South America and Asia, but the revenue generated from international segment only accounted 21% from overall revenue, 81% of the revenue are generated from United States. (Staples, 2012) Staples sell a wide variety of office supplies and services, office machines and related product, computers and related products and office furniture. In 2011, they offered 1000 of new own brand product, many of them which are innovative and exclusive for Staple to the market. Their long term goal is to grow own brand to more than 30% of total sales. However, own-branded goods will eventually cause perplexity between Staples and third party suppliers. The good relationship between Staples and third party suppliers will be affected.

C. OPERATIONS : OBJECTIVE(S)
• Focuse on improving profitability by reducing overhead expense, increasing sales of higher margin Staples brand products and improving the performance of our supply chain. 1. STRENGTHS

Staples uses acquisition and joint venture strategy to expend its business worldwide. These strategies help the company strengthen its brand portfolio, increase its market share, and expand its geographic coverage, giving the company sustainable competitive advantage in marketing area. Staples has two distinct networks to fulfill the majority of their replenishment and delivery needs in North America. One of the networks has 66 delivery fulfillment centers to support North American Delivery operation. While, the other one have 4 large distribution centers to support U.S. retail operations. These distribution centers provided cost-effective operations by reducing labor costs and square footage in individual stores because they provided labor, merchandise, and freight saving by centralizing receiving and handling functions. (Staples 10k, 2012; Lean, 2000) 2. WEAKNESSES

According to Staples 10k, they plan to add stores to the existing markets and expand into select new markets. The opening of stores in current markets will cannibalize efficiency per store. Staples used Top to down management which the planning starts at the top-level of the organization. The CEO determines the general direction of the organization and establishes a master plan to achieve its overall goals, the other have to develop plans based on the master plan. Sometimes, this management styles will affected the company if the CEO not a good leader (David, 2012: Staples 10k, 2012)

D. HUMAN RESOURCE: OBJECTIVE(S)
• Maintain our leadership position by delivering on our brand promise • Focus on customer service, customer acquisition and retention, and providing our customers a broad assortment of core office products and services. • Focused on expanding categories beyond core office supplies, including facilities and breakroom supplies, copy and print services, promotional products and furniture. • Focus on improving our perfect order metric, which measures the number of orders that we fulfill on time and without error, and have established industry leading customer service standards to support our brand promise. • Continue to make investments in Staples.com to enhance the usability, efficiency and overall customer experience.

• Continue to be a destination for core office supply categories like ink and toner and to become an authority for business technology through redesigned stores and an expanded technology assortment. • Focus on strengthening our value proposition with customers, increasing the productivity of our marketing programs, leveraging best practices from our North American businesses, including our mid-market contract selling model, and expanding our mix of business services with a focus on copy and print. • Focused on improving profitability by reducing overhead expense, increasing sales of higher margin Staples brand products and improving the performance of our supply chain. 1. STRENGTHS

Staples has over 89,000 employees around the world. Diversity workplace helps company adapt quickly to market conditions. “The company invested in training and development to motivate employees and developed employee stock ownership to give them a stake in the business.” ( Lean, 2000) “ In the past ,tens of thousands of associates have received training and Staples has invested more than $10 million company-wide in training resources and support “ ( Staples, 2012) 2. WEAKNESS

Even though Staples spend a lot of money in training and development to motivate employees, but the sales per employee ratio is decresed and very low compare totheir competitors.Profit per employee decreased from $19,883 in 2006 to $8,118 on 2010 ( Hoovers, 2102; Datamonitor,2012). Staples has operations in many countries around the world, the management team in the host countries might face with the problem of cultural differences with local people in the home countries.

VII. DISTINCTIVE COMPETENCE AND COMPETITIVE ADVANTAGE

Staples has two distinctive advantage
• Customer service
• Brand Image
Staples conducted survey about customer satisfaction every month in order to know what it was that customers really want. Staples used different business techniques to provide a good customer service for customer. Staples rearranged its stores to customer-friendly layout which opened the interior of the store to give a better view of the product array. Staples store have “in store technician” that provides customers with assistance in computer installation, data protection and security, and repair and troubleshooting. Every Staples retail location has copy, fax, and pack and ship services. Giving customers easy to shop atmosphere, freindly sales person, variety services, Stapples retains a high customer service which helps them to maintain a competitive advantage over its competitors. (Lecky, 2007) Another key ingredient of success is brand image.

Staples completely changed their brand image in 2003 when they created the “Easy” marketing strategy. When people see the “Easy button” they immediately correlate it to the Staples name. This brand image allows the firm to compete on a differentiation strategy. Staples also create it brand image through different types of sales channel which includes retail stores, catalog and internet. By offering different sales channel giving convenient to customers shopping at home or at well-planned retail locations while at the same time increasing awareness of it name. Increasing brand awareness gives a opportunity for Staples to establish a positive brand image among new customer to increase market share. (Lean, 2000: Lecky, 2007). VIII. KEY WEAKNESSES

The key weakness of Staples is too depandable on U.S market. According to the Staples annual report, 81% of the revenue are generated from United States, they operates in 24 countries in Europe, Austria, South America and Asia but the revenue generated from international segment only accounted 21% from overall revenue,. They plan to add stores to the existing markets and expand into select new markets in United States. The opening of stores in current markets will cannibalize efficiency per store. In 2011, they offered 10,000 of new own brand product, many of them which are innovative and exclusive for Staple to the market. Their long term goal is to grow own brand to more than 30% of total sales. However, own-branded goods will eventually cause perplexity between Staples and third party suppliers. The good relationship between Staples and third party suppliers will be affected. IX. CENTRAL PROBLEM

The central problem of Stples is to compete and maintain leader in this high competitive industry. Staples competes both internationally and domestically with a number of corporations from multinational to much smaller domestic specialised retailers. Staples major competitors are OfficeMax, Office Depot and Lyreco. Staples also competes against mass merchants such as Wal-Mart (WMT), warehouse clubs like Costco Wholesale (COST), and computer and electronics superstores like Best Buy (BBY). X. STRATEGIC RECOMMENDATIONS AND IMPLEMENTATION

1) Develop new inovative products to benefit from economies of scale and create competitive advantage. 2) Manage relationships with supplies to develop long term relationship 3) Expand internationally by joint venture, alliance and acquisition of small competitors to increase the market shares in United States. 4) Corordinate creditors and debt to avoid financial difficult. 5) Train manager and employees to prevent inefficency.

6) Finding right pricing strategy to compete with competitors.

References

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