UNIVERSITI TEKNOLOGI MALAYSIA INTERNATIONAL BUSINESS SCHOOL SKUDAI CAMPUS MASTER OF BUSINESS ADMINISTRATION STRATEGIC MANAGEMENT (MRC 2213)
NAME OF LECTURER: DATO’ DR. MOHD. PADZIL HASHIM
STRATEGIC MANAGEMENT (MRC 2213) NAMES OF STUDENT:
1. Tan Theam Ping (MR (MR 111032) 2. Law Jia Chin (MR 111139) 3. MdJazli Bin MdJohari (MR111130)
NAME OF CASE:
Marks/ Grade:
Case 11: Office Depot, Inc – Inc – 2011
COMMENTS:
1
Table of Content
Page
1.
Introduction & Case Study Objective
3
2.
Critical Problem Scenarios
4
3.
IFE Matrix
5
4.
EFE Matrix
7
5.
IE Matrix
9
6.
Space Matrix
10
7.
CPM Matrix
12
8.
Porter Force Analysis
13
9.
Forecast Critical Factors
14
10.
Implementation Action Plan
15
11.
Impact of Action Plan
18
12.
Contingency Plan
19
13.
Conclusion
20
14.
Reference
21
15.
Appendix
22
2
1. Introduction & Case Study Objective Objective
Office Depot, Inc is one of the major suppliers in providing office products and services worldwide. The products and services mix provided including computers, computer softwares, office furniture, business machines (e.g. photocopy machine) and stationaries. Currently, there are more than 1500 Office depot stores (company-owned, alliances and franchise agreement), with more than 42000 employees worldwide. However, the company was reported a loss of $15 million in the first quarter of 2011, compared to a $20 million profit during the first quarter of 2010. In addition, the total revenue has decreased by 3% to $2.97 billion. The major problem is that the whole world is moving forward into a new era of paperless transactions, as such the current business model of the company have to be revised in order to reverse the declining trend in revenues and profits. In addition, Office Depot has recently co-operated with 3M and NASCAR stars Tony To ny Stewart in promoting the “Official Small Business of NASCAR, Courtesy of Office Depot” sweepstakes, offering $1 million to one small business owner, which serves as an marketing strategy in stimulating their businesses. A clear three-year strategic plan is needed.
3
2. Current Business Scenarios
Nowadays, the world is shifting into a paperless transactions environment, which has greatly affect the performance of Office Depot recent years; besides, Office Depot is facing a vigorous competition brought forward by other major players in the industry such as Staples, OfficeMax and convenience stores like Wal-Mart. Critical Problem
Logical Current Situation
Future Situation
Assumptions Made
Currently most of the Threats arose
revenues come from the
from
sales of paper, office
Paper and paper
paperless
machines and furniture.
related products will
transaction
However, the world is
be eliminated
environment
shifting into paperless
Revenues and profit decreased
environment Primary competitors such as Threats from major competitors
Staples, OfficeMax and secondary competitors such as Wal-Mart providing similar products and
Cut-throat price competition as foreseen
Revenues and profit decreased
services
4
Quality of service is low, for example the errors on Office
Consumer choose
Quality of
Depot website happened
to purchase the
Revenues
service
very often, contact number
products and
decreased,
decreased
of customer service department hardly get
services from other profit decreased competitors
response Non-recurrence expenses (stocks damaged during
Consumer choose
transportation,
to purchase the
Revenues
compensation to customer
products and
decreased,
Nonrecurrence expenses is high
due to damaged and late delivery etc) related to daily
services from other profit decreased competitors
operations is high
3. IFE Matrix
The strengths and weaknesses serve as key indicators to reflect internal affairs. IFE matrix has been carried out to analyze the internal affairs of Office Depot.
Key Internal Factors
Weight
Rating
0.10
4
Weighted Score
Strength
1. Strong brand name
0.40
5
2. Strong retail stores network – network – had over 1500 retail
0.10
4
0.40
0.10
4
0.40
4. Provide large range of products and services
0.10
4
0.40
5. Go green effort been appreciated by the public
0.10
3
0.30
6. Strong customer base
0.10
3
0.30
Weight
Rating
0.10
2
0.20
0.10
2
0.20
0.10
1
0.10
0.10
1
0.10
stores worldwide 3. Strong distribution channel – channel – online shopping, retail stores, call centers
Key Internal Factors
Weighted Score
Weaknesses
1. Weak financial position – position – loss money continuously for few years 2. Weak competitive performance if compared to major competitors – competitors – Staples, Wal-Mar W al-Martt 3. Non-recurrence expenses is high 4. Poor service quality – quality – both online and offline customer service Total
1.0
2.80
Total weighted score are 2.80 which slightly higher than average scores (2.50), which indicates Office Depot Inc hold strong internal strengths position.
6
4. EFE Matrix
The major external opportunities and threats of Office Depot have been identified and analyzed based on EFE matrix.
Key Internal Factors
Weight Rating
Weighted Score
Opportunities
1. Expand business into EME markets – markets – increase total revenues 2. Online shopping users are increasing
0.15
3
0.45
0.15
3
0.45
0.15
3
0.45
0.15
3
0.45
3. Develop new product mix – mix – to overcome the effect brought forward by paperless transaction environment 4. Provide new business services
Key Internal Factors
Weight Rating
Weighted Score
Threat
1. Paperless transaction environment – environment – threatened the current business model of
0.15
3
0.45
0.15
3
0.45
0.10
3
0.30
Office Depot 2. Intensive competition from other major players in the industry 3. Rise of hypermarket and giant wholesaler Total
1.0
3.00 7
The EFE matrix indicates how effective the company’s strategies and used in the capitalization of their opportunities and disclose the point of threat that are active. The total weighted score gained by Office Depot is 3.00 which is above average.
8
5. IE Factor
Internal-External (IE) Matrix is a strategic management tool that is used to analyze the strategic position of a business. The IE matrix can be drafted by applying IFE matrix score as x-axis and EFE matrix as y-axis.
As IFE weighted weight ed scores sco res of o f 2.80 and EFE weighted scores of 3.00, Position of Office Depot dropped on fifth cell, which indicates the strategy applied should be “hold and maintain”. As such the strategic planning proposed will focus on improving market penetration and new product development.
9
6. Space Matrix
The Strategic Position and Action Evaluation (SPACE) Matrix is one of the management tools that is used to determine the business strategy type that has been applied.
Conservative
Aggressive
FS
CS
IS
Defensive
Competitive
ES
Financial Stability (FS)
Environment Stability Stabilit y (ES)
Return on Investment
3
Economic Crisis
-3
Leverage
3
Technology Changes
-2
Liquidity
3
Price Elasticity of Demand
-2
Working Capital
3
Competitive Pressure
-4
Cash Flow
3
Barrier to Entry
-1
FS Average
3.0
ES Average
-2.4
10
Competitive Competiti ve Stability (CS)
Industry Stability Stabilit y (IS)
Market Share
-4
Growth Potential
4
Service Quality
-3
Financial Stability
3
Customer Loyalty
-2
Ease of Market Entry
2
Competition’s Capacity Capacity Utilization-3
Resource Utilization
3
Technology know-how
-2
Profit Potential
3
CS Average
-2.8
IS Average
3.0
Y-axis:
FS + ES = 3.0 + (- 2.4) = 0.60
X-axis:
CS + IS = (-2.8) + 3.0 = 0.20
Office Depot Inc dropped on second quadrant, indicates that aggressive strategies should be applied, so as to fully utilize their competitive advantages.
11
7. CPM Matrix
The competitive profile matrix (CPM) has been used to analyze Office Depot market position with the major competitors. Office Depot
Staples
OfficeMax
Wal-Mart
Critical Success Factors
Weight
Rating
Weighted Score
Rating
Weighted Score
Rating
Weighted Score
Rating
Weighted Score
Financial Position
0.15
2
0.30
4
0.60
2
0.30
4
0.60
Customer Loyalty
0.10
2
0.20
4
0.40
2
0.20
4
0.40
Market Share
0.05
2
0.30
4
0.20
2
0.10
3
0.15
0.15
2
0.30
3
0.45
3
0.45
3
0.45
0.20
3
0.60
4
0.80
4
0.80
3
0.60
Price Competitiveness
0.15
4
0.60
4
0.60
4
0.60
4
0.45
Global Penetration
0.15
3
0.60
4
0.60
2
0.30
5
0.75
Product Quality
0.05
4
0.20
4
0.20
4
0.20
3
0.15
Management Advertising
Total
1.00
3.10
3.85
2.95
3.55
12
8. Porter Force Analysis
Office Depot, Inc case can be analyzed using Porter’s Five Forces model so as to determine the competitive intensity:
Rivalry among competitive firms (HIGH)
There are many existing major players in the industry including OfficeMax, Staples, as well as secondary rival e.g. Wal-Mart.
Potential Entrants (HIGH)
8. Porter Force Analysis
Office Depot, Inc case can be analyzed using Porter’s Five Forces model so as to determine the competitive intensity:
Rivalry among competitive firms (HIGH)
There are many existing major players in the industry including OfficeMax, Staples, as well as secondary rival e.g. Wal-Mart.
Potential Entrants (HIGH)
The numbers of small and medium suppliers providing same products and services over internet increased dramatically.
Potential Development of Substitutes (HIGH)
There are many other firms running under the same business model as Office Depot is.
Bargaining Power of Supplier (MEDIUM)
Although there are many firms engaged in this industry, still the major players holding big portion of the existing market share.
Bargaining Power of Customer (HIGH)
There are many alternative choices for customers to choose with.
13
9. Forecast Critical Factors
The factors to be considered during the development of strategic planning are summarized into the table as attached: Critical Factor
Current Situation
Whole world is moving To be adaptive in paperless transaction environment
into paperless transaction stage, sales of paper related products (A4 paper, photocopy machine etc) dropped
Maintaining key competitive advantages
Future Situation
Logical Assumptions Made
Efforts have to be made in transforming current business model to adapt with the new
Revenues increased; market share increased
trend
Nowadays, Office
Efforts have to be
Revenues increased;
Depot facing vigorous
made in improving
market share
competition, revenues
competitive
increased,
and market share
advantages so as to
sustainability
dropped sharply
survive in new era
increased
Currently there are only 100 over stores outside
Explore into EME
Explore new
America, however the t he
markets e.g. China,
market
revenues increasing,
India, and South
potential new market is
East Asia countries
Global market share increased; revenues increased
there
14
Current product mix focus mainly on office Improve
furniture, IT hardware,
product mix
office machines and stationary, low profit
Develop new
Revenues increased,
product and
market share
promotional mix
increased
margin high competition Define existing issues related
Consumers lost faith
to operation
towards the company
Resolved the issues and improve service
and service
10.
quality
Regained customers faith; Revenues increased; increased sustainability
Implementation Action Plan
The main objective of this 3 years strategic planning is to increase the profit and the sustainability sustainability of Office Depot in the future. After A fter analyzing the results obtained from SPACE Matrix, we proposed to focus on exploring and penetration of new market base, revised on current operation and service issues, and improve current product mix. Implementation Actions
1. Explore and penetrate into new market base
What to be
Explore EME market
Approach internet-based
implemented?
especially China, India and
media for promotion and
South East Asia countries
advertising
Increased market share
Promote the presence of
globally, increased total
Office Depot further through
Why?
15
revenues
internet, low cost high efficiency, take Malaysia as example, 60% of the citizens online daily, provide maximum exposure to the public
How?
- Locate potential EME market;
- Make use of social media
- Carry out survey on customer such as Facebook, Twitter in needs;
promoting the presence of
- Set up Office Depot stores
Office Depot;
and warehouse in the target
- Advertise on famous
market;
websites, search engines,
- Joint Venture, alliance or
forums to gather more
work together with local firms,
attention, low cost high
so as to grab the market share
efficiency than conventional
rapidly
media channels
Where?
Potential EME market
Globally
When?
Immediately
Immediately
Who?
International Division,
Marketing and Sales
Marketing and Sales
department, IT Support
department, Retail partners,
department, Public Relation
Surveyor
department, Social media and online advertisement platforms
16
Implementation Actions
2. Improvised on current operating and servicing issues
What to be
Define and resolve the
Improve quality of service,
implemented?
issues related to non-
both online and offline
recurrence expenses Why?
To reduce losses due to
To retain customer’s faith and
transport failure, transport
loyalty
delay, stocks damaged How?
- Develop complete standard
- Improve on current online
operating protocol (SOP) for
shopping cart system;
warehouse and logistic
- Update Office Depot official
department;
website regularly with news
- Make everything, every
and promotion;
incident, every single
- Decrease server and service
movement of stocks traceable;
center down time;
- Reorganize the layout of
- Organize training program for
warehouses, follow “First In
all the employees, especially
First Out” concept, stocks that
front line staffs, and all the
have to be send out place at
retail partners, so as to
front;
improve the overall service
- Revise on the efficiency and
quality;
capability of current logistic
- Carry out customer service
partners, change if necessary
evaluation and survey every quarter
Where?
Office Depot stores globally
Globally
When?
Immediately
Immediately
17
Who?
Warehouse department, Logistic department, Human Resource department, Finance department, IT Support
Basically all the employees of Office Depot Inc are involved
department, Logistic partners
18
Implementation
3. Revised and improvised on current product mix
Actions What to be
Develop new computer
implemented?
software and systems
Introduce new services e.g.
Reorganize existing office
business card, banner and
furniture and IT hardware
wallpaper
product segment
Profit margin for furniture
To diversify current product Why?
mix, so as to grab market
To diversify current product mix,
share in this coming
explore new market and industry,
paperless working
increase revenues
environment era
How?
and IT hardware products are low if compared to others software and related services, and the risk of getting damaged is high;
- Established new Software
- Introduce printing of business cards,
- Decrease the varieties of
& System Development
banners, and wallpaper services to
furniture and IT hardware
department;
the market;
products offered now;
- Invest in R&D of new office
- Cost is low if printing is in large
- Clear off existing stocks
software, or related systems,
amount; high margin;
through special promotion
especially web-based
- Offer customize or design services
prices;
systems (e.g. email systems,
related to business cards, banners
- Closed down existing
online shopping cart, POS
and wallpaper printing;
product line or services
system, P2P systems);
related to furniture and IT 19
- Promote the new office
- Approach those agencies with huge
software and systems to the
demand on these services, for
clients;
example Bank, Financial institutes, or
- Offer customize service for
sales companies
hardware product slowly
clients, in developing software or systems (e.g. email systems, online shopping cart, POS system, P2P systems) that suits them best Where?
US
Globally
Globally
When?
Immediately
Immediately
Immediately
IT Support department,
- Promote the new office
- Approach those agencies with huge
software and systems to the
demand on these services, for
clients;
example Bank, Financial institutes, or
- Offer customize service for
sales companies
hardware product slowly
clients, in developing software or systems (e.g. email systems, online shopping cart, POS system, P2P systems) that suits them best Where?
US
Globally
Globally
When?
Immediately
Immediately
Immediately
IT Support department, Software & System Who?
Development department, Marketing & Sales
Warehouse department, Printing department, Marketing &
Logistic department,
Sales department, Retail partners
Marketing & Sales department, Retail partners
department, Retail partners
20
11.
Impact of Action Plan Impact of action plan Impact
Maintain competitive advantage
Improve market share
Revenues
Sustainability
Yes
Yes
1. Exploring and penetrate into new market base
Explore EME market
Yes
Yes
11.
Impact of Action Plan Impact of action plan Impact
Maintain competitive advantage
Improve market share
Revenues
Sustainability
1. Exploring and penetrate into new market base
Explore EME market Online promotion and advertising effort
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
2. Improvised on current operating and servicing issues
Resolve non-recurrence expenses issues Improve service quality
No
No
Yes
Yes
Yes
Yes
Yes
Yes
3. Revised and improvised on current product mix
Develop new computer software and systems Introduce new services
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Reorganize existing office furniture and IT hardware product segment 21
12.
Contingency Plan
Contingency plans are proposed as below so as to minimize the possible negative impact brought up by the plan. Strategic Decision Made Action Plan
1. Exploring and penetrate into
2. Improvised on current
3. Revised and improvised on
new market base
operating and servicing issues
current product mix
Potential
Entering wrong market at wrong
Problem
timing
- Service quality provided by
- Time and expenses involved
individual dealers/ distributors
are huge;
may be inconsistent;
- Lost existing market share
- Existing dealers/ distributors
and customer in office furniture
refused to changed
and IT hardware segments
Contingency
Detailed survey and planning are
Carry out worldwide mentoring
Detailed survey, budgeting and
Plan
needed before taking any action
program for every employees
planning in beforehand;
To ensure the service quality
- To decrease the overall costs
- To avoid potential losses that Why?
may arise; - To decrease the overall costs and time consumed
How?
provided by employees worldwide are consistent.
and time consumed; - To retain existing customers
- Convey customer needs and
- Develop a systematic training
- Make use of existing customer
rival survey;
program, which is to be
base, approach them to
- Do detailed survey on culture,
implemented globally;
engage in new products and 22
rules and regulation, legislation,
- Conduct performance
services;
politics, geographical and other
evaluation worldwide once in a
- Convey detailed budgeting
related information of targeted
half year
and planning before setting up
market before entering
R&D team
Where
Targeted EME markets
Globally
Globally
When?
Immediately
Immediately.
Immediately. Warehouse department,
International Division, Marketing Who?
and Sales department, Finance
Basically all the employees of
department, Retail partners,
Office Depot Inc are involved
Surveyor
Logistic department, Marketing & Sales department, Finance department, Retail partners, Surveyor
rules and regulation, legislation,
- Conduct performance
services;
politics, geographical and other
evaluation worldwide once in a
- Convey detailed budgeting
related information of targeted
half year
and planning before setting up
market before entering
R&D team
Where
Targeted EME markets
Globally
Globally
When?
Immediately
Immediately.
Immediately. Warehouse department,
International Division, Marketing Who?
and Sales department, Finance
Basically all the employees of
department, Retail partners,
Office Depot Inc are involved
Surveyor
Logistic department, Marketing & Sales department, Finance department, Retail partners, Surveyor
23
13.
Conclusion
The world is shifting into paperless transaction environment. Office Depot has to revise on current business model in order to survive in this new era. The strategic planning as proposed will definitely assist Office Depot in achieving the objectives as mentioned.
13.
Conclusion
The world is shifting into paperless transaction environment. Office Depot has to revise on current business model in order to survive in this new era. The strategic planning as proposed will definitely assist Office Depot in achieving the objectives as mentioned.
24
14.
References
[1]
Office Depot Case Study - Increase Workplace Safety by Motivating Employees. Available online at www.cashort.com at www.cashort.com
[2]
Office Depot – Company profile and SWOT analysis, 2011. Available online
at
http://www.freeswotanalysis.com/retailing-swot/463-office-
depot-swot-analysis.html
[3]
Shaun Bevan. (2012), Office Depot to downsize, relocate stores to save $20M. South Florida Business Journal Nov-2012.
[4]
Marc Gunther. (2011), Office Depot's Three-Pronged Strategy for Corporate Sustainability. The Gunther Report Dec. Available online at http://www.greenbiz.com/blog/2011/12/16/office- depots-three-pronged-strategy-corporate-sustainability
25
15.
Appendix
Exhibit 1 (Source: STEILLA SERVICE, 2011):
Exhibit 2 (Source: Internet World Stats, 2009) [3]:
26
Exhibit 3 Internet User in Malaysia (Source: World Bank, 2011):
27
