Business

(Surname)

STAPLES

ABSTRACT Innovating the retail category to change the course of history and inspire others to join in on the idea Harrison Lee, Arie Brion, Melvern Hidajat, Ricky Ang Bus 189

Staples Inc.

Company Background

Staples has thousands of members associated that are dedicated to making business easy at all capacities. The organization operates in North and South America, New Zealand, areas of Europe, Asia, and Australia. The corporation has its headquarters located at Framingham, Massachusetts. Staple has made business simple by for twenty-seven years with the majority of its associates around the world. Staple makes it simple, and more of their commodities can be sold to the respective markets.

Staple is a word- class retailer shop and the online delivery. The enterprise enables the consumers to shop in any respective stores and online as they wish to do so. The customers have the comfort of making deals online so that they access more products. Staples has served for thirty years, and is the best office equipment company and the biggest internet retailer. Staples served the necessities of the business consumers and the strategic vision for the company aimed at providing the consumers with all their desires for success. Through its channel of world-class retail and online delivery, Staples distributes office supplies, several technological products and services, the facilities and room supplies, furniture's, copiers and print services and other variety of products.

Competition

After evaluating the market talks and real time news on the marketing analysis, Staple faced with a tough competition from its rivals. It is the stiff competition that promulgated the Federal Trade Commission (FTC) to approve the new depot acquisition in the year 2013. The FTC sought that each enterprise could incur an insignificant impact towards the general prices of other stores. The impact could be just a hundred or few office suppliers that compete to serve the small and medium-sized firms. Also, the Federal Trade Commission established a growth list of the regional competitors, for instance, the W.B Mason that was able to win over the huge contracts entailing the corporate.

The belief by FTC that regional competition generated by Wal-Mart and Amazon will significantly lower the prices for both the corporate and the government consumers. However, the set prices can be slightly above the approval of a merger. Another aspect is the degree to which the organization can further purchase the supplies directly from the manufacturers. Staple has complied with the dissociation from a business that raised $1.25 billion revenues from the Office's Depot in the United States. Although the company has not committed a general provision that needs it to carry out any important antitrust approval – a situation that the purchasers are quite reluctant to assert. Staple would instead owe the Office Depot an amount worth $250 million when the EU regulators seek to block the deal. The company is also paying a premium of 44% to the closure of the Depot Pricing (Cramer).

Growth and development

Staple is a nationwide company that deals with the retail delivery and serves consumers in twenty-five countries. The company is dedicated towards the overall corporate social responsibility. At Staples, a majority portion of the company affairs is focused on being responsible to the nation. Their approach to the current business is holistic and seeks to impact positively the communities, the associate members and the nation as a whole. The growth strategy of Staples is aimed at expanding new stores and increasing the innovation in the development of their products. Staples seeks to promote the corporate and state consumers with a reduced of acquiring office equipment and making their centers a one stock shop for most items (Sally).

Current news

Staples expands their presence in the South African Region and Romania

The Staple Corporation, being the biggest internet retailer globally, had announced their strategic partnership alliance with Bidvest Walton, an industry in South Africa that is leading in the office production and the company Dacris that is also the main distributor of the office supplies located in Romania.

"The objective of Staple Corporation is to assist the consumers to consolidate their expenditure by enabling them to purchase clearly all items as required by the one stock shop." Said Christian Horn, the executive vice President of Staple "The broad offer of the products will strengthen their capacity to serve more consumers in wide region categories and enable the business to run in a manner that is productive and easily sustainable environment hence reflecting on low operational costs." (Framingham & Amsterdam).

The strategic alliance can enhance the global availability of customers to extend further their nationwide procurement creeds via a single basic solution and as a result, make their procurement process easier. Also, the organization will evaluate methods of minimizing the overall costs so that a proper insight is gained in their trends of expenditure.

The benefit derived by Staple is to develop a business to the business section of Staples that serve big enterprises say twenty or more. A large employee section of the Fortune around 1000 assist the general consumers in ensuring the purchases are increased and the cost savings are enabled. By granting the consumers a common source solution that features a general production and servicing encompassing the general office supplies, new technology, printing, furniture and other facility supplies that come alongside a standard level of the account and best matches the customer service.

Staples Current bid for acquiring an Office Depot

The anti-trust regulators by the European Union have developed an extensive valuation into the United States office supply. The bidding that cost $6.3 billion over the rival Depot has been cautioned about the possibility of hikes in the stock prices because of the deal. The Federal-State Commission of the United States is currently evaluating the deal that was conceived from the competitive authorities in New Zealand, China, and Australia. Staples Corporation is the leading supplier of office equipment in the United States. The Company is seeking an acquisition of the Office Depot in competition with the new rivals so that the sales of paper, pens, and cartridges of Ink are enhanced like the Wal–Mart Stores and the Amazon success operates (Sruthi).

The commission of Europe warned that the deal could majorly hurt the business consumers with other Intercontinental contracts in Europe and any other nationwide contracts in Sweden and Netherlands. The Commission ascertained that the transaction could do away with the most crucial competitor and thus limit any choice that suppliers can have in the markets that are already concentrated. The deal could result in high prices. According to the executive senior of Staples Ron Sargent, the enterprise assures their continuous effort to cooperate constantly with the European Commission in the perception of the acquisition procedures focusing on the Office Depot.

The acquisition of the new Office Depot is a great deal for the customers more than it is to the supplier, Apple Inc. after the call of the conference entailing the $6.3 billion agreement to purchase the Depot, the Staples Corporation executives assured that such a merge can assist the new enterprise to match strategically the global competition with both Amazon and Wal-Mart at a head- to head stand while they administer a low-cost operation. The news is indeed a good to the consumers' sight because their savings will be substantial as they enjoy quality products at cheaper price. On the other hand, the deal of acquiring a depot is of less victory to the supplier and the management of Staples usually, an amalgamation of retailers call for a contract re-negotiation with the primary suppliers to lower the prices of the respective goods ([email protected]).

Staples making the 3D printing takes place with the newly launched online platform

The new platform will allow users to submit their 3D files, and the customize designs by selecting from a wide array of materials and colors. It also adds text, figures, and images to printable project. The platform also features a responsive, interactive 3D viewer so that users can preview their creation before being printed.

Staples Corporation has presented a 3D printing that operates as a service in the retail environments and ensures the sales teams adopt the new strategy. The advanced and new service offering has made the procedure of 3D printing much easier for the whole business process.

The new arena has allowed the consumers to submit clearly their files in 3D format.

Additionally, users can customize their designs by choosing from a wide range of materials and the color mixtures. The new 3D Printing comes with unique features then allow for the addition of texts, figures and other images to the object being printed. The new online platform encompasses some responsive features that maintain interactions with the 3D viewers so that users can preview their modifications before the final printing stage is presumed.

Behzad Soltani quotes that the new project is an incremental success for the business clients that are constantly seeking for a simple way of prototyping. The prices of the service are also affordable enabling consumers to seek constantly their services through the e-commerce. The arena allows the starters to try and have the test of the 3D printing as they have the freedom to select any of the existing models and adjust it to their desired specifications.

Sculpteo supports the arena. Sculpteo is a 3D online print service that grants the consumers upon demand a printing of the 3D format for their products as well as the current manufacturing style. The founders of the Sculpteo affirms that Staples accommodation of the advanced technological print in their online platform grants the organization the entry points to make the whole public aware of the benefits derived from the 3D printing so that more business flourish with their unique set up designs.

SWOT Analysis

Strength of Staples

The major strength of Staple is its appreciation of inventions and innovations. The common aim for any business organization is to improve its revenue(Hill, 2008). To achieve this, improved sells of the company’s product is necessary. Staple uses its innovative ability to produce a slightly unique and more quality products. These products tends to more appropriately satisfy the customers’ needs than the substitute products from other firms in the industry. This helps the company acquire more customers leaning to more sells hence increased sales revenue(Hill, 2008). The innovation is evident in all the products produced in the company that is; Office products, Facility solutions, Technology solutions, Business Interiors and print solutions.

To facilitate the process of invention and innovation to the company’s advantage, Staples carries out annual Invention quest where they identify new and upgraded products to. In 2004 innovation annual quest enabled to find Wordlock(TM). This was Todd Bosche’s invention which entailed a combination lock that uses easy-to-remember words rather than numbers(Longenecker, 2012). This greatly helped the users avoid the cases of forgetting the numbers of the locks.  Staples awarded Altos and stroke a deal to sell the product at their stores. The product was distributed to eleven retail stores of Staples to be accessed by the customers.

Another strength of Staples is a large scale production of a variety of products. This has enabled the company enjoy various economies of scale, both external and internal economies. Due to the production of variety of products and services, the company enjoys technical economies of scale. Technical economies of scale is focused in capital impute and workforce specialization(Longenecker, 2012). The larger production provides the company with sufficient revenue to invest in efficient machinery and specialized equipment’s which helps the company to produce more and quality products.

The company has various departments since it is dealing with variety of products. It therefore employs division of labor and workforce specialization. This ensures efficient and fast production, distribution and sells processes in the industry(Longenecker, 2012). Production of variety of products also reduces the impact of loss in one products to the total sells revenue of the company. When there is a loss in the sales of one product, the sales of the rest of products acts as a cover up hence the deviation in the total revenue becomes minimal. The variety of products offered by the company also enables it expand its customer base. If a consumer of one of the company’s product develops a trust in the company, it is most likely that the customer will buy another product from the company if in need. For example a customer for the Staple office furniture will consider the company’s technology services if in need, after developing a trust in the company(Longenecker, 2012). The expanded customer base enables the company to sale more hence more revenue. The more revenue is used by the company to carry out other activities to improve the production and sales of the products. These activities includes Advertisement and the annual innovation quest to create more awareness about the products and to find out new inventions respectively.

Weaknesses of Staples

The weakness of the Staples majorly lies in its large production and global operation. The company has nearly 60, 000 associates serving consumers and business of all size right from home-based business to the Fortune 500 companies in various countries including Spain, Canada, Netherlands and Sweden(Longenecker, 2012). Developing an efficient organization structure that connects all the company’s branches in 26 different countries it operates in becomes difficult to the company due to this reason. The companies therefore experiences several cases of broken communication and also. Close monitoring of the employees and the departments also becomes. This has challenged the efficient connection and operation between different branches of the company operating in the different countries.

The company has employees approximated to be 90, 000. These employees are either full time or part time employees. Among these employees are leaders who heads different branches and their departments. The amount of money the company spends on paying these employees is very large hence reducing the net profit the country make(Hill, 2008). The rate of employee turnover within the company is also high. These reduces the efficiency of production since there are wasted time gaps used when searching the best replacement of those employees leaving the company.

Another challenge facing Staples is inability to build a universal organization structure which complies with the different set up of the cultural aspects in the different countries the company is operating in. The 26 countries the company is majorly operating in have varied cultural set up characteristics. For example the length of employees working hours and the wage bills varies from country to country. Crating various organization structure to fit in each country’s culture will inconvenience on the side of the company(Longenecker, 2012). This is because it will divide the focus of the company to the level of different branches in the countries. The company will therefore not be able to achieve the common intended goals. A better option on the side of the company is a common universal organization structure which proves difficult to create.

The major challenge that Staple is currently facing is the revolution in its supply chain. The initial supplying chain of the Staple involved shipping the products to the company’s retail stores. The customers would then place orders from the company and wait for the delivery incase of a bulky product. The company therefore set its structures along the supplying chain to suit the method of supply. One of the merging business trend characterizing the 21st century business world is the online shopping(Longenecker, 2012). The use of these method has been to the rise in the past few years. This is because the consumers prefers it since it minimizes the cost and also saves time on the buyer’s side. Through the method, a buyers can order for a product right from wherever they are so long as they can access an internet enabled electronic gadget.

Staples has been forced to comply with the change in the trend due to the customers demand. Currently there are in the transition of transforming their supplying chain to be majorly based on e-commerce. They are altering with their original structures in a number of ways. First they are closing most of their retailor stores since the new system does not require many stores. To illustrate this, they announced a target closer of 225 stores(Longenecker, 2012), including 200 Brick-and-Motor Stores based in Canada and USA by the end of the year 2015. These changes come at a cost to the company since they have to restructure most of their retail shops with equipment involved with online sales. Change in employees is also necessary for the company. The ones who specialized in the activities of the initial method of supply will quite their position to the new employees with knowledge in e-commerce(Longenecker, 2012). This causes the company financially considering the cost of the new e-commerce equipment and also the cost of hiring new employees. The time wasted during the process of making the changes also reduces the rate of production in the company.

Opportunity

Staples has opportunity in its area of operation. Currently, the company operates on 26 countries most of them being western countries. There are emerging markets in the developing countries like China, Vietnam and India(Hill, 2010). These regions still provides pools of cheaper labor, cheaper raw materials for production and also fair regulations controlling the foreign investment in the regions.  Staples can therefore expands its operations to these area to experience cheaper production costs. These countries will also prove a good market regions for the company’s products considering that most of these countries have high population of people. The expanded market and cheap production cost will mean more sales revenue hence more profits.

Staples also has an opportunity in the new supply chain method. Since the online marketing proves time and cost saving. Employing the method will make more people willing and able to purchase the Staples product. The statistic that the company released soon after starting applying the new supply chain method indicated that the company increased its products sales by 6% within a time span of one year(Hill, 2010). If the company could record this significant improvement when it has not even fully changed to this new trend, then it means that the improvement would be even greater if they fully adapted the supply method. More sales will improve the company’s revenue.

Threats that Staples faces

One of the threat that the company faces is the stiff competition in the industry. The other companies in the industry produces goods and services that are close substitutes to the Staples products(Hill, 2008). Most of these companies are also internationally operating and have large amount of revenue. This makes them able carry out any mechanism that can make them outdo their competitors in terms of winning the customers. For example, these companies can decide to sell their products at a lower price to lure the consumers to buying their goods. They also strive to produce more quality products to win the customers. These companies includes Amazons, Office Deports, Quest Crews, and Google and Office supplies. Staple is therefore under the risk of losing its customer base at any moment if they fail to keep up with the competition struggle in the market. This will lead to reduced sales revenue by the company.

Another threat is the deterioration in the economies of the operating countries. Staples operates in various countries whose economy greatly fluctuates. Since the company’s performance is greatly dependent on the economy of the countries they operates, a fall in economy will mean a fall in the performance of the company(Hill, 2010). For instance if one of the countries is affected but inflation, it will mean that the prices of the products will rise due to fall in the currency’s strength in the currency exchange market. Consumers, who would not be able to understand the concept, will blame the company for increasing the price. This will lead to losing some customers hence reduced revenue.

The political effects is also a threat to the company. Change in rules and regulations regarding foreign companies in the countries the company operates in will also greatly affect the company’s performance. Some countries may decide to pass rules that aims at protecting the local companies. This can be increased tax on the foreign companies(Hill, 2010). This can affect the performance of Staples Political instability in the countries where the company operates can also affect the company. Some countries have started experiencing terror attacks and even internal feuds majorly caused by election. This can lead to destruction of the company’s properties hence great loss.

Financial Analysis

There are a few important factors to consider when looking into Staples financial statements: 1) Liquidity on the Balance Sheet, 2) Earnings Growth and Growth of Net Income, 3) Return on Assets, 4) Cash Flow. Using these four metrics we can hone in on where Staples stands in comparison to its industry.

First, we will at a look at Staples’ current ratio. The current ratio measures a company’s ability to pay off its creditors – or meet its short-terms obligations. Also, the current ratio shows the company’s efficiency. Generally speaking, the higher the ratio the more liquid the company is, meaning that the company finances its short-term obligations well, and is able to meet their debt obligations. In Staples case, we see a current ratio of 1.58 according to their financial statements. This means that Staples is able cover a quarter of their current liabilities with their current assets. This is around the industry average, and if we take a look at one of Staples main competitor like Office depot, who has a current ratio of 1.52, we can see that they are relatively close. We can also take a look at Staples’ quick ratio to get a better understanding on how it manages it short-term obligations. The quick ratio in essence only takes into account the moist liquid assets, such as: cash, stock, and receivables. Staples’ has a quick ratio of .88, which means that Staples’ is relatively liquid and able to meet their short-term obligations to a fairly well degree.

Secondly we will take a look at Staples’ balance sheet. Mainly we will take a look at the Earnings growth and growth of net income. According to their most current reports: Staples shows a net income of $51.4 million. This isn’t Staples’ highest report on net income, and to get a better understanding of where Staples’ stands we must look at their trend. In the beginning of this year, Staples’ reported a net income of -260.35 million. Although it is negative, it doesn’t mean that Staples’ is terrible within the industry. If we take looking to Staples’ activity, we see that Staples’ net income is negative because they were focusing on acquiring their main competitor Office Depot. Within the next quarter, Staples’ reported a gain of $59 million, and continuing to report positive gains similar to what it was reporting in the past before the sudden drop from acquisitions. Overall, if we take a look at revenue growth over the years, we see that Staples’ has had a -4.6% revenue growth. Even though it is negative, it isn’t a terrible performance, because the industry of office retailers is currently negative. This is due to various outside factors such as decline in sales and foot traffic, shifts in the market from basic office supplies to discounters and web retailers that continue to be a threat. Staples’ intends to combat this with the merger of their main competitor, as well as cutting unprofitable stores and minimizing costs as needed. Although Staples’ Net Income is negative, they continue to be the industry leader, reporting revenues well above its closest competitors.

Staples’ has a low return on assets (ROA) of 1.2%. The ROA measures the profitability of a company in relation to their total assets or how effectively the company uses its assets. Although 1.2% is considered low, if we look within the industry of office supplies, Staples’ has an average ROA, which shows that Staples is able to uses its assets effectively. In comparison with their competition, Office Depot only has a ROA of .05%. Staples’ is dominating its competition, but still performing poorly as compared to last year’s numbers. Again Staples’ is making various changes in order to become more profitable. However if we take a look at Staples’ revenue we see that they are making 21.8 billion, which is above all their competition. The company seems to be doing really well in terms of generating revenue, and although they have a low ROA, it still holds up in their industry to allow Staples’ to be a dominant leader in office supplies.

Finally, cash flows. This last metric is important because we are looking if the company bringing in cash. By looking at the cash flow from operations and subtracting purchases on equipment we find the free cash, or cash that can be reinvested into the company. According to Staples’ most current cash flow statement, it reported $127 million dollars in net change in cash. This allows Staples to have a lot funds to put back into the company for reinvesting. This is a really good sign that Staples’ is monitoring its use of cash. With the amount of money Staples’ has free, this will allow the company to be able to reinvest into weaker segments of the business operation. For example, they are focusing on promoting their own brand products. With all the free cash that they have, Staples’ can easily allot an amount of money to be put into advertising or research and development to create a better product line. The trend of Staples free cash isn’t very stable. Over the last couple years, Staples reported volatile shifts from positive to negative. This is due to the pending acquisition that they are awaiting to be approved by the Federal Trade Commission (FTC). Thus during the last couple years, money was set aside for the purchase of Office Depot, which is why is was much lower a couple years ago compared to now.

Overall, we can see that Staples’ financial statements are fairly consistent in terms of generating revenue. Although it is heading in a downward trend, Staples is still the dominant leader in the Office Supply industry. On top of all of that, Staples’ intended on extending its lead though several initiatives such as: remolding older stores, increasing its private brand product mix and finally, purchasing products directly from manufacturers. These initiatives will help carry Staples’ in reversing the downward trend they are experiencing.

Case Questions:

5. Why was Staples able to raise significant venture capital funds for what was, after all, nothing more than a concept? By Arie Brion

The idea of starting up an office supply retail store was non-existent because there were companies out there such as, Boise Cascade that serves to larger companies but not towards small businesses. Even though at that time it seemed that Leo Kahn and Thomas G. Stemberg’s idea was far-fetched and hard for investors to buy in, but Stemberg was adamant about his idea of a retail store providing office supplies at a lower price than other office supply providers. Stemberg believed in his startup to the extent that if venture capitalists invest in his startup that he promised them that if they invest in his startup he would sell office supplies at a discount to their companies. Stemberg also promised them that Staples would not be another chain of retail stores, but a whole new retail category. Stemberg was challenging venture capitalists to join and buy-in to his idea so they too will have a chance to make a difference and help be the pioneers of a whole new retail category. Bain Venture Capital was the first firm to fund Stemberg because the general manager at the time, Mitt Romney, had his firm research 100 small businesses and the results were that the small businesses were spending twice as much on office supplies and that Romney’s own company would have saved $117,000 per year by purchasing supplies at the discount that Stemberg promised.[footnoteRef:0] After Bain Venture Capital bought in, then others followed suit as well and Staples gained $4.5 million in its first round of financing, which gave the company enough capital to open their first store. Also part of their deal with the venture capitalists was that they had to open their initial store on May 1, 1986 and a plan to start rolling additional stores as quickly as possible. [0: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C62.]

6. What were the managerial and organizational challenges facing the startup? How were these challenges dealt with? By Arie Brion

The startup of Staples faced many challenges as to it is a whole new retail category and it has never been done before, therefore there was no blueprint to what they were doing on how to conduct their business. Another of their challenges that they faced were that Staples wanted to implement a new Information System in order to keep track of customer’s purchases, so Staples may be able to reorder products to restock their shelves and know how much demand of particular products so they have enough inventory to supply local businesses. Staples wanted to also implement a way to calculate the gross profit margin they made on each item sold because most retailers at the time could only calculate the average profit margin across the mix of inventory, but the Chief Financial Officer at the time Leombruno wanted to make sure inventory turned over at least 12 times per year. Most retailers require payments in 30 days and an inventory turnover greater of 12 would allow Staples to cut its working capital requirements.[footnoteRef:1] Since no existing software at that time had the features that management wanted, Staples hired consultants to modify and customize their existing software. Another managerial challenge that Staples faced was that they were working long work days. They were not working a regular 9-to-5 job, they were making a whole new retail category and trying to innovate a whole new way to sell office supplies and target small businesses. Since that was never done before, there was no template for the management team. They did not have the resources or prior knowledge to open a new store that was geared towards that retail category. They had to be the pioneers of that new retail category and they were innovating and learning on the way. Another organizational challenge they were facing was that manufacturers were not marking their products with barcodes and it makes scanning feasible. In order for Staples to keep track of purchases and know how much product to order, they need manufacturers to put barcodes on their products. This will also help Staples’ employees scan items that come in to keep track of their inventory and it will help cashiers scan items out for the customers. If there were no barcodes on products then it would take too much time for employees to type in the SKU’s and it would make time feasible. An additional challenge that Staples’ management was facing was that they had a problem with suppliers shipping to the first store. Staples was asking suppliers to bypass the existing distribution system, and risk alienating long time customers in the established channel of distribution.[footnoteRef:2] Staples wanted to cut out the middle man and have the suppliers directly ship their products to their stores instead of first going to a wholesale warehouse and then distribute it from there. Staples used a visionary pitch to sway the suppliers their way, they told suppliers that they were out to revolutionize the retail end of the industry, Staples would be very big, and it was in the best interests of the suppliers to back the startup. Stemberg’s punchline was, “I’m going to be very loyal to those who stick their necks out for us. But it’s going to cost you a lot more to get in later”.[footnoteRef:3] Basically, Stemberg had this presence of a person who truly believes in what he is doing and had all the confidence in the world that his startup was going to take off and be successful. He had the mentality of, “Join me or get left in the dust”. Some connections that Stemberg had backed Staples up and helped get suppliers to deliver to Staples. One of their venture capitalist, Bessemer Venture Partners, also owned a paper manufacturer, Ampad, and Bessemer simply told them to start selling to Staples and they did. A huge challenge the management team faced was real estate because it was difficult to rent affordable real estate large enough to store 5,000 SKUs at a reasonable price. Most landlords were charging rent sky high and Staples was not interested. Staples eventually found a sight in Brighton, Massachusetts and other retailers failed in that location and Staples would prosper because the sight was surrounded by small businesses and that was their main target customers.[footnoteRef:4] Another challenge that Staples faced was that they were not getting enough foot traffic when they first opened their doors to the public on May 1, 1986. On grand opening day, they had a lot of customers because all Staples’ employees invited everyone they knew, then the second day they only had 16 customers and the day after that they had the same amount of customers. At that rate Staples would be shut down, so the Vice President of Marketing, Todd Krasnow, started to bribe managers at local businesses with $25, in order for them to get their foot in the door. A few stepped in and they fell in love with the prices and the amount of products available to them at an affordable price, so word spread out and the rest is history. [1: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C63.] [2: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C63.] [3: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C63.] [4: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C63.]

7. How important were the “information systems” to the successful execution of the Staples concept?

The information systems were imperative to the execution of the Staples concept. Since Staples was entering a new retail category, there was no preexisting information system that would effectively do what Staples’ concept wanted to execute. The management team decided that the information system needed to closely track sales and inventory at the level of individual items. This would allow Staples to get product information to better adjust their merchandising mix according to what the market would demand. The team also decided that they needed to collect data on customers at the point of sales. By establishing a customer database, the team would be able to directly market its product mix to specific customers and it would assist in overall market research.

The Staples management team found it difficult to create an information system that could do everything that they requested. So they had to sacrifice certain demands from the system. Lemobruno (CFO) insisted that the system needed to be capable of two things: 1) Calculate the gross profit margin on each item Staples sold, and 2) make sure that inventory turned over at least 12 times a year. The first point Lemobruno wanted to establish for the information system was to calculate the gross profit margin on each item. This would allow the management team to have better transparency on the products that sold and how much profit they would be making on the sales. This would give them vital information on what was selling versus what isn’t. So they would be able to tailor their product mix accordingly. The second item Lemobruno requested was that inventory had to turn over at least 12 times a year. This was important in the concept of staples because most retailers at the time only had inventory turnover 4 times a year. By aiming for 12 times a year, the product mix had to meet the demands of the customers and also would allow Staples to generate 3 times as much profit as establish by other retailers.

Another idea that management wanted in the information system was the ability to track sales and inventory levels as well as customer relations. This was the three-way price requirement. At the time many manufactures in the office supplies business where not making their products with bar codes. Staples immediately implemented a six-digit look-up code for each item allowing important data to be collected on each product they offered. It would allow them to track the sales and inventory levels of each product. Also at the point of sale, the information system would be able to keep track of customer’s purchase; what they bought and how frequently they visited. This would allow staples to directly market to their customers and give them a better understanding of each individual customers needs.

In conclusion, the information system needed to carry out Staples’ concept was imperative to its success. First the information system needed to be resourceful in collecting information on the customers. Staples was able to gain a better understanding of its customer base, as well as, product information. Though this information, Staples had knowledge about what their customers where buying, and also information of customers demands. Using this data, Staples was also able to meet another goal; the ability to have inventory turn over 12 times a year. The information provided by the information system allow for Staples to respond to customer’s demands and become an industry leader.

8. Staples concept was quickly imitated, but ultimately the company emerged from the pack of competitors to become an industry leader. Why?

Staples was able to emerge from the pack of competitors to become an industry leader due to two very important factors. First its distribution centers helped cut cost while still remaining competitive. Secondly its expansion strategy allowed staples to capitalize on specific markets and be the dominant supplier.

Staples set up their concept stores near distribution centers that would allow the company to operate with smaller stores. Many of their rivals used much larger stores, but Staples saw an opportunity in smaller stores. By operating in much smaller locations, Staples would save money in the long run, because rent expense would be much less. Staples stores were 35% smaller than their competitors as opposed to Office depot outlets that are massive stores. Also, by using distribution center Staples would be able to offer the same variety of goods and their competitors with much larger spaces. Inventory storage at the distribution centers allowed the stores to remain fully stocked to meet customer’s needs. The use of distribution centers also save labor costs. Staples strategically placed its distribution centers out in rural areas, because wage where lower in rural areas. Staples was very methodical in placing its stores near its distribution centers, thus expansion for the company was also a very well thought out plan.

The expansion strategy for Staples was another important key in becoming the leader of the business retail industry. Stemberg’s belief had always been that competition was inevitable and that the winners in the competitive race would not necessarily be those that grew the fastest, but those that executed best. It was this philosophy that underpinned Steinberg's insistence that the company should grow by focusing on key urban areas, and achieve critical mass of stores served by a central distribution system. Staples began to start up in major metropolitan areas such as: Boston, New York, Philadelphia, and Los Angeles. Staples opened stores in locations that where clustered together in a specific region. The stores location where so close to each other to the point that they began to cannibalize each other’s sales, so Staples could become the dominant supplier in that specific location.

Although competition was intense, Staples was able to emerge as a leader in the business retail industry. The use of distribution centers allowed Staples to have smaller stores, while still remaining competitive in product selection. Staples used their distribution centers to allow much smaller stores to have product mix and full inventory based on their customers needs. Also the expansion of Staples was very methodical and ultimately it was Staple’s philosophy that carried Staples to the top.

9. Does the expansion of Staples into the delivery business make strategic and economic sense? By Arie Brion

The expansion of Staples into the delivery business make strategic and economic sense because the delivery business was thriving. Staples’ delivery customers were mostly from larger customers and customers that shopped in-store were mostly for their home office. Office managers do not have time to shop or send someone to shop at the store to get supplies for the office. In order to get supplies, large companies made deals with Staples to have their supplies delivered directly for a discount. Staples also aligned incentives for employees as they changed the compensation system for employees, so they could set up delivery orders in-store and that particular store will get the credit for the sale and the annual bonus of store employees was partly based on how well they met goals for generating delivery sales. This was a great program implemented by Staples to create an incentive for employees to generate sales as it helps both the company and the employees. As Staples expanded into the delivery business, they grew by acquiring regional stationery companies with adequate delivery systems and established customers such as, PepsiCo, Xerox, and Ford.[footnoteRef:5] This method is known to be a horizontal integration as they acquired companies to make their market share larger in the office supply retail category. They established a consistent product line, brand image, and computer and accounting systems across all of the acquisitions. By 1991 and 1996, Staples Direct grew from a $30 million business to almost a $1 billion business. With those numbers it makes strategic and economic sense to gain market share and have competitive advantage over their competitors such as, Office Depot and Office Max. A well known acquisition took place in 1988, Staples acquired Quill Corporation for $685 million in Staples’ stock.[footnoteRef:6] Quill Corporation was established in 1956, which ran a direct mail catalog business with a targeted approach servicing the business products needs of around a million small- and medium-sized businesses in the United States. Staples integrated Quill’s purchasing to gain economies of the input side. Quills Corporation now operates under two brands, Staples National Advantage, which focuses upon large multi-regional businesses, and Staples Advantage, which focuses upon large- and medium-sized regional companies, and the flexibility to handle smaller accounts. All of this amounted to a $60 billion a year industry. This was another example of horizontal integration as Staples acquired another company to help gain advantage over their competitors. With Staples’ delivery sales volume increasing, they were able to get greater efficiencies out of their distribution network, which helped drive down the costs of doing business through this channel. Staples used regional distribution centers to hold an inventory of some 15,000 SKUs for delivery, compared to 8,000 SKUs in a typical store. In 1998, Staples.com was launched and customers had access to over 130,000 SKUs, which many were shipped directly from manufacturers with Staples acting as an intermediary and consolidator. And finally in 2010, Staples’ combined delivery business grew 40% of total sales, with some ⅔ of the Fortune 100 being counted as customers of Staples delivery business. With those numbers, Staples had established itself as the market leader in this industry and far ahead of the game and counting. [5: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C68.] [6: Hill & Jones, Strategic Management (Ohio: Cengage Learning, 2013) C68. ]

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