Staples Case Analysis

SIGNS R USPRIVATE

I. HISTORY

A. Walter Simmons opened company in 1948

B. Partners didn't work out - Did not agree with policy of putting most time into creating signs and very little time into running the shop.

C. Success in custom-designed signs

1. Neon signs for drive-in theaters during the later 1940's and early 1950's

2. Screen-printed electronic circuits for a telephone equipment manufacturer

3. Oil companies opening stations in suburbs 1960-1973

4. Grocery store chains (weekly specials and two for one coupons) in the mid 1970's - mid 1980's

D. The last three years have brought declines in sales

II. INDUSTRY ANALYSIS

A. Potential competition

1. Risk is high

a. Barriers to entry are fairly low

b. New technology allows smaller competitors to enter at least a segment of the industry

B. Existing Rivalry

1. Rivalry is high for smaller jobs

2. Not a lot of competition in custom sign work

C. Bargaining power of suppliers

1. Power is fairly low

a. Supplies such as paper, ink, etc. can be purchase from a variety of companies

D. Bargaining power of buyers

1. Institutional buyers have quite a bit of power

E. Threat of substitute products

1. Threat is moderate because customers now have the ability to supply much of their needs because of the change in technology

III. CORPORATE-LEVEL STRATEGY

A. Offers a variety of products and services

1. Banners

2. Silk-screened poster cards

3. Painted plywood signs

4. Vinyl-letter signs

5. Letter vehicles

6. Design assistance

7. Custom-design signs

8. One-of-a-kind items such as books or commemorative plaques

IV. BUSINESS-LEVEL STRATEGY

A. Utilizing a focused differentiation strategy

B. Focus on custom-design needs

C. Using more personalized service and creativity than competition.

V. STRUCTURE AND CONTROL SYSTEMS

A. Centralized authority.

B. Compensation system – based on hourly rate.

C. Wilma owns almost all shares of stock.

D. All purchases made on C.O.D. basis.

E. Personnel

1. Wilma

a. Handles the finances, project scheduling, purchasing, writing up of bids, and general shop management.

b. Is also involved in calling on prospective customers and does some sign painting and design work.

2. Jim Davis

a. Does a lot of the commercial work and most of the banners.

3. Hank Richards

a. Handles most of the vehicle lettering and customer design job.

b. Also checks out potential jobs and writes up bids for the work.

4. Saundra Cox

a. Part time worker

b. The bulk of her time is spent running the computer.

c. Also does odd jobs around the shop.

VI. INTERNAL ENVIRONMENT

A. Strengths

1. Creates custom-designed signs and one-of-a-kind items such as books and plaques

2. Provides design assistance to customers

3. Has skilled employees who possess graphic design skills

4. Has good location - university and statehouse in walking distance

5. Provides delivery service

6. Company has no debt

7. Wilma belongs to the Chamber of Commerce

8. Longevity of the company

B. Weaknesses

1. Marketing program

a. Very little marketing being done

b. What marketing there is, is ineffective

(1). Ad in yellow pages - high cost – does not lead to repeat customers

(2). Full-color brochure - tried in 1987 - sent to 50 customers with no responses or orders generated

2. Management

a. Little delegation

b. Owner spending a lot of time on the day-to-day running of the business

c. Wilma not comfortable in leaving business for more than a couple of hours

3. Few regular or repeat customers

4. Compensation program - not adequately rewarding

5. Third straight year of declining sales

6. Company has no debt - Is not investing in new technology

7. Offers full-line service to all customer groups

(Trying to be all things to all customers)

8. Financial problems

a. Losses doubled between 1988 and 1987 as sales declined by about 10%

b. Total assets fell from about $10,000 to $5,000 in the same period.

c. Owner has taken a pay cut to keep the business viable

9. Prices higher than competition

10. Lacks modern technology

11. Layout of shop could be better

VII. EXTERNAL ENVIRONMENT

A. Opportunities

1. Lack of competition in complex sign design and manufacture.

A. Could utilize a focus strategy instead of trying to be all things to all people.

B. Use the custom design aspect to create a competitive advantage.

2. Potential customers are unaware of what this business has to offer.

A. Increase marketing effort.

B. Hire outside agency to provide marketing assistance

3. The University, government agencies, etc. could become regular customers.

4. New technology evolving on almost a daily basis.

B. Threats

1. New technology

a. Has made entry into the sign business easy.

b. Has eliminated the need for sign-painting and lettering skills

c. Has lowered cost of doing business so that prices charged to customers can be lower

2. Increased competition

a. Many new businesses causing a shakeout

b. Franchise units with up-to-date technology seem to have a secure place

c. Stress low price and quick turnaround

d. Competitors have a low-cost advantage and can be cheaper because high school students are able to operate the computer sign machines

3. New locations

a. Competitors locating in the suburbs

b. Mall settings

4. Verbal rent agreement could cause problems later.

VIII. RECOMMENDATIONS/EVALUATION

A. Specialize only in custom-designed items

1. Most profitable

2. Utilizes special skills this company has

3. Can focus on the area that differentiates them the most

4. Will miss out on easier jobs that could bring in good money

B. Continue to offer a full-line sign service from custom-designed signs to the low-cost computer generated signs

1. Can cover all signage/printing needs of customers

2. Will have to invest money in new computer system and more personnel

C. Improve marketing program

1. Use more personal selling - Look to Wilma, Hank and Jim

2. Build repeat business - Look into possibility of using discounts

3. Emphasize availability of design assistance

4. Decide what the target segment is

a. Can use this to their advantage and possible create long-term relationships with customers

b. Marketing will create more expense

D. Use commission system for compensation of employees - Build a client base with this

1. Commission work can be motivational to employees

2. Could end up costing Wilma more to pay her employees

E. Delegate authority in order to free up Wilma for personal selling.

1. Good management skill that shifts work to others

2. Must be able to trust employees to do the job

F. Secure new capital to purchase an up-to-date computer and spend more on marketing.

1. Could bring in more and repeat business

2. Will create more expense

G. Redesign the shop layout to bring activities to the front of the store where the public can see the work.

1. May be expensive to redesign the shop

2. Employee work will have to be worth the watching

3. Could slow down work, knowing that people are watching