Staples Incorporated’s Strategy

Introduction

Staples Incorporated (Inc.) is an American multinational company that operates in 24 countries. This business was established in 1985 with the primary objective of manufacturing and supplying office equipment. Its head offices are located in Farmington, Massachusetts. Despite being a leader in the office supply industry, this company has not been doing well since 2010. Its financial reports reveal that its sales volume has been growing at a lower rate contrary to what is expected. Moreover, the value of Staples’ shares has been dwindling compared to other organizations’ stocks in the same index (David and David 484). Regardless of this company’s poor performance, the salary of its chief executive officer (CEO) remains high. Rather than reducing the pay package, this organization raised the CEO’s annual income by 41% (David and David 484). In 2010, the CEO received an increment in his performance-based bonus, including stock and option awards, even though the company performed poorly during this year. The lack of a good compensation plan is a significant aspect that has led to this company’s poor performance.

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Staples Inc. has outlets in the United States, Europe, Asia, and Australia. Nonetheless, the majority of stores are in the United States. In 2011, its financial statements showed that foreign stores were doing better compared to American outlets. In the same year, this institution’s quarterly net income decreased by 28% while its overall annual revenue went down by 3.8% (David and David 484). Stiff competition and low growth in the company’s gross domestic product (GDP) levels contributed to poor performance in the United States. The corporation’s primary competitors include Office Depot, KMart, OfficeMax, Walgreens, and Wal-Mart among others. As revealed in this paper, Staples requires a complete overhaul of its strategic plan to enhance competitiveness because the present strategy has been ineffective. This report will also give recommendations on what should be done to improve Staples’ performance.

Mission and Vision

Staples Inc. lacks a well-defined mission and vision statement. Nonetheless, an investigation of its operations confirms that this company’s primary mission is to ensure that customers do not encounter challenges when buying office equipment. According to David and David, Staples insists on ethical sourcing by requiring suppliers to abide by the established labor and environmental policies (487). It strives to offer value to clients via a mixture of environmental-conscious products, low prices, superior and innovative brands, and outstanding customer services. Furthermore, it has a unique program, Staple Soul, which mirrors its commitment to safeguarding the environment, moral values, society, diversity, and reporting.

Internal Assessment

Business Segmentation

The primary strength of Staples lies in its business segmentation strategy. This corporation has divided its business into three distinct segments, which are North American Delivery, North American Retail, and Global Operations. They enable it to target and serve a wide customer base. The delivery unit is the most industrious of the three (David and David 488). The performance of the international operations unit keeps on fluctuating. Its retail segment is comprised of multiple stores that are spread across the United States. It also includes in-store kiosks that sell a range of this company’s products. Other entities within the retail division include UPS Ship and Copy & Print Centers.

This organization has an online unit known as Quill that enables SMEs to order and receive products directly. Its international operations consist of numerous country-based units, which include Corporate Express, a merger in India, and Staples China. These divisions add to the company’s strengths since they aid it to exploit the global market. Staples China runs 27 outlets in Shanghai, Beijing, and Guangzhou (David and David 488). These stores are vital in distributing the company’s products across China. The desire to expand the current market share has led to Staples venturing into the Indian market. As a result, this company has partnered with Pantaloon Retail Limited, a major retail business in India.

A critical strength of Staples Inc. is its ability to meet customers’ unique needs. The company operates a lucrative business unit dubbed Corporate Express in countries such as Australia, New Zealand, and the Netherlands. This segment aids the business in meeting consumers’ exceptional needs. It goes a long way towards enhancing customers’ loyalty. This organization appreciates the importance of offering complimentary office supplies and services. Corporate Express enables it to provide specialized services to individual customers (David and David 488). Such services include technology solutions, janitorial services, catering, promotional marketing, and printing functions. The above different segments enable Staples to serve not only the local but also the international market.

Distribution

One of the major costs attributed to running office supplies business involves inventory management. The high demand for office products calls for organizations to have efficient inventory management plans. A significant strength of Staples lies in the seamless distribution network that enables it to reduce inventory costs. This company does not require keeping huge stocks in various outlets (David and David 489). Understanding consumers’ needs and behavior is essential in inventory management. Staples Inc. keeps a customer database that allows it to identify consumers’ demands to meet them effectively. Such needs keep on changing in the office supplies industry. Hence, it is imperative to have reliable information about individual product trends to ensure that a business does not stock goods that do not sell fast. Staples Inc. conducts market research to identify products that are in high demand. Moreover, it mainly targets high-volume purchasers and corporate organizations. This distribution strategy helps to minimize inventory costs while at the same time boosting throughput at the retail level.

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The corporation has a website, which is essential in managing inventory, distribution processes, and product lines. Organizations are trying to reduce operation costs by eliminating physical stores. Staples.com, which is the company’s website, has allowed this business to minimize inventories in most outlets. This company sells over 30,000 products through its website (David and David 489). Customers order products online and collect them from the nearest outlets. Alternatively, clients may purchase goods and request that they be delivered to their workplaces at a cost. In 2010, Staples bought a fleet of electric cars intending to aid in the distribution of products (David and David 490). These trucks not only help in the delivery of products but also environmental conservation. One may argue that investing in electric trucks was a bad idea for this corporation since they are expensive compared to diesel vehicles. However, it is crucial to note that consumers’ behaviors have changed drastically. Today, many customers opt to deal with environmentally friendly companies. Thus, Staples is assured of attracting more clients, particularly those who are environmentally conscious.

The primary objective of Staples’ move to restructure and improve its distribution network was to reduce operations costs and boost efficiency. Improvements in the distribution system have enabled this company to sell products at competitive prices. Staples Inc. has not operated without setbacks such as lawsuits. In 2009, it was accused of violating the Fair Labor Standards Act for making employees work for more hours without paying overtime (David and David 490). This company has also witnessed instances of fraudulent transactions involving employees. One wonders if Staples has procedural guidelines and incentives to help in its management of internal affairs.

Marketing

Marketing is a critical component of an organization’s strategic plan. It serves as a link between a company and customers. An institution may not succeed in supplying innovative commodities or services to the marketplace if it lacks evidence-based promotion mechanisms. Additionally, it would be difficult for a company to interact with customers and gather feedback without employing a marketing strategy. Staples Inc. uses appealing marketing phrases to attract customers’ attention. For instance, this company devised a “That was easy” slogan following the production of “Easy Button” to facilitate its sales (David and David 490). It improves brand visibility by displaying products in publicity vehicles and popular television programs such as “The Office”. This company has outlets in locations with high traffic, thus making it easy for customers to access and buy its products. Moreover, its leadership scouts for potential clients and issues them with promotions and offers. This organization makes sure that promotional messages concur with the needs of all targeted customers and enterprises. Staples Inc. has a database that contains vital information about various market segments (David and David 490). This data is vital in formulating advertisements and other promotional strategies.

Finance

Staples’ financial statements do not look promising. One of the weaknesses of the company is the declining sales volume and profit margin. Despite Staples being a leader in the office supply business, its annual net income is still low. This outcome can be attributed to the poor performance recorded in the North American Delivery segment. A statement released in 2011 showed that the company had done little to reduce short-term debts (David and David 490). Nonetheless, it had made significant strides in repaying long-term debts. An analysis of the company’s balance sheets indicated that its total liabilities increased in 2011 compared to 2010 (David and David 490). Additionally, two changes were noticeable in this corporation’s cash flow. Staples used a significant amount of money to repurchase stocks. Furthermore, its operating income went down significantly due to limited growth in the supply chain and the reduced product margin rate. However, there is hope that this company’s revenue will rise due to the high demand for breakroom equipment, facilities supplies, and technology solutions.

Another weakness is its overreliance on suppliers. This company does not manufacture office equipment. Instead, it liaises with manufacturers who produce the products according to their specifications. Overdependence on suppliers affects its profit margin. Moreover, Staples is forced to sell its products at high prices to offset production costs. Hence, it becomes hard for it to target price-sensitive customers. Even though Staples has invested in online marketing, it has a major opportunity of investing in social media platforms. Today, almost all companies and individuals have social media accounts. Failure to be active on social media deprives Staples of the opportunity to interact and target many clients. Appendix 1 represents a SWOT matrix for this company.

External Assessment

Strategic Partnership and Product Diversification

A strategic partnership between Staples and Buro School Direct, a Swiss company, has helped to grow the organization’s market share in the region. Buro School Direct has been in operation for decades. Hence, it understands the dynamics of the Swiss market. Consequently, Staples leverages the company’s experience to improve customer value and expand market share. Staples business has the opportunity to establish alliances with local companies in international operations to avoid unhealthy competition and minimize costs. This move will enable it to adapt to foreign markets within the shortest time possible.

Product diversification helps a company to overcome competition and increase sales volume. The company under investigation has an opportunity to diversify its product lines. The corporation has already ventured into the technology industry intending to grow its product line. Apart from selling computer hardware, this organization distributes a range of digital devices. A joint venture between Staples and Barnes & Noble has enabled it to sell NOOK color readers (David and David 489). The primary challenge is that Staples has not been in the technology business before. Hence, it lacks the knowledge to compete with companies such as Apple and Amazon. The sale of branded products, specifically in the office supplies industry, has evolved over several years. As a result, this company has a chance to invest in the production of branded merchandise. Staples Inc. sells over 2000 branded products globally (David and David 489). The assumption it makes when making these sales is that consumers prefer buying branded commodities to ordinary products. Moreover, a company has the liberty to design, produce, and distribute products based on the needs of the target market. This organization liaises with different manufacturers who facilitate the production of branded goods.

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The location of a company’s outlet is critical because it determines the number of customers that the organization reaches per day. As Staples continues to establish retail outlets across the globe, it has an opportunity to set up kiosks in strategic locations. Specifically, it should identify areas with high populations where such kiosks can be profitable. This move will go a long way towards assisting the business to promote its products and reach many clients.

Economic Forces

Economic slump influences consumers’ confidence and, consequently, their spending. Customers become frugal if they suspect that a country is experiencing financial difficulties. Economic recession is a great threat to Staples’ survival. In 2011, Staples was a victim of slowed gross domestic product and adverse federal and state financial policies (David and David 492). High unemployment levels in the United States meant that most households had limited disposable income. A cutback in the federal stimulus capital resulted in a reduction in state spending. Moreover, the increase in the cost of supplies and crude oil across the globe affected this company’s spending.

Many customers were unwilling to purchase office supplies and other products and services (David and David 492). Today, another threat revolves around variations in commodities and oil prices, which affect Staples’ expenses. This organization is price-sensitive. Hence, it opts to spend in line with the condition of the global market. Moreover, Office Depot and OfficeMax pose another threat to Staples’ online purchases in different market segments. This corporation is compelled to offer incentives as a way of attracting customers. Such a strategy affects its profit margin since it has to lower prices to overcome competition.

Technology

Technological developments have enabled organizations to automate and digitize many processes. One of the areas where technology has been of significant value is record keeping. Many companies are gradually doing away with the use of papers. The organization has not been left behind. It has invested in technology to enhance recordkeeping and document sharing (David and David 492). Moreover, it has installed self-checkpoint machines in American stores to minimize queues. Staples Inc. has invested in the radio frequency identification device (RFID) mechanism, which has improved inventory management. Despite the company benefiting from technology, the adoption of the RFID among other developments by the majority of its target institutions poses a threat to its business. The use of mobile technologies has resulted in low demand for office supplies. Thus, this institution has lost a significant market share to technology-oriented firms that offer office solutions.

Environmental Factors

The rise in the rate of global warming has led to environmentalists and governments introducing laws that seek to curb pollution. Businesses are encouraged to deploy green energy sources. One of the sectors that contribute to environmental pollution is the paper industry. Hence, businesses, which distribute office supplies, have come up with varied initiatives aimed at reducing the rate of paper usage as a way to conserve the environment (David and David 492). One of Staples’ corporate social responsibilities entails training teachers on how to assist students to participate in environmental conservation programs. The unrelenting support for the green campaign will pose a significant problem to Staples. Many office supplies and equipment are made of paper. Thus, the demand for these products is expected to go down since offices will look for alternative resources that do not contribute to environmental degradation.

Competitors

Staples Inc. faces another threat from two major companies, namely, Office Depot and OfficeMax. As aforementioned, office supply companies operate in comparable ways. Office Depot is the second-largest office supply business in the United States. It has over 1100 outlets across America and Canada (David and David 494). Furthermore, this company has at least 400 stores in foreign countries (David and David 494). Office Depot’s success lies in its aggressive market entry strategy. In 1989, this company opened multiple outlets across the world, thus becoming the leader in the office supply industry (David and David 494). Today, it focuses on the international market, which explains why it is keen to open multiple stores overseas. The corporation under investigation is divided into three primary units, namely, the North American retail, international, and the North American business solution.

The retail division focuses on the supply of the routine assortment of products. Furthermore, many stores in this division provide universal office services such as copying and printing. Office Depot has ventured into technology services to exploit the increasing demand. Staples Inc. offers personal computer support (David and David 494). It also deals with network installation and maintenance. The business solution unit serves small and medium companies. It supplies them with technology, the Internet, and office equipment. This unit is comprised of a workforce that is devoted to identifying and meeting the demands of various enterprises.

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It also has a contract business segment that offers contract pricing to average and big businesses. Office Depot has outlets in 55 states across Asia, Europe, and Latin America (David and David 494). These stores operate under the company’s international division. Just like Staples, Office Depot has not been doing well financially. This situation indicates that the future of the office supply industry will be characterized by problems unless firms diversify their products and services lines. The first quarter of 2011 saw Office Depot’s revenue drop by 3.2% (David and David 494). Its financial statement showed that sales in the three business units went down significantly.

OfficeMax is the third-largest office supplies company internationally. This firm was established in 1988. Since then, it has witnessed tremendous growth, opening multiple stores across the United States and overseas. OfficeMax has establishments in the United States, Mexico, and Puerto Rico (David and David 494). It sells a blend of OfficeMax-branded and name-branded products. They include pens, papers, organizers, forms, a selection of technology solutions, and office furniture. Moreover, it offers document and printing services. Apart from retail stores, OfficeMax has a contract unit that deals with enterprises and government institutions directly (David and David 494). It has an online marketing platform that allows it to liaise with customers and distribute products from manufacturers to clients without having to store them in warehouses. Since 2008, OfficeMax’s profit has declined constantly, a phenomenon that can be attributed to changes in the office supplies industry.

Strategy Formulation

Organizations within the office supply industry function under similar business models. Therefore, the success of a firm in this sector depends on the effectiveness of its strategic plan. Moreover, companies such as Target, Kmart, and Wal-Mart have invested in the office supply business, thus taking a portion of the market share from the big three. Changes in the industry, technological growth, and the call for environmental conservation have affected the demand for office supplies, hence introducing more problems to Staples’ business. However, it can modify its current strategic plan to enhance growth and reduce competition. Moreover, this company should look for ways to encourage consumer spending. For instance, it can revisit its product pricing strategy, which dictates the level of competition amid the three main competitors.

This business should focus on several areas that influence its success. They include the supply chain, retail stores, and international operations. Currently, Staples runs multiple warehouses and fulfillment centers across the world. These facilities add to the company’s operations cost. This corporation needs to restructure the supply chain to eliminate the need for multiple warehouses and fulfillment centers. There is a need to increase retail store output. Overseas stores operate under numerous uncertainties and complexities, thus making it difficult for them to yield substantial profits. Staples should restructure its global operations to increase profitability levels. Today, many customers lack the time to visit stores to sample the available products. Instead, they prefer to buy goods online. Other clients like to use multiple channels to buy goods and services. Staples should connect its catalog to physical stores.

Strategy Implementation

Accelerate Growth

To address the earlier identified problem of declining revenue, Staples should invest in online and retail businesses as a way to boost sales volume. Technological advancement has enabled customers to sample and order products online. This company should work on its online and mobile capacities to help it to reach more clients. Investing in technology will help the organization to offer tailor-made services to diverse customers. This institution has made significant success in the distribution of technology solutions, copy and print, breakroom supplies, and facilities. It should focus on other products beyond office equipment to increase its customer share. Moreover, Staples should come up with cost-reduction mechanisms to minimize operations costs and boost profitability.

Supply Chain Improvement

Supply chain management is critical to reducing operations costs. This company has been experiencing problems related to the ineffectiveness of its current logistics network. Hence, it should improve its supply chain by placing all distribution channels under common leadership. Specifically, it should streamline operations in both the physical and virtual marketing platforms to enhance customers’ experience. Reorganizing functions of the supply chain will enable this company to capitalize on the available retail store resources, augment productivity, and boost online growth. Additionally, it will save the institution the cost attributed to inventory management since Staples will not need to store goods in warehouses.

Speed is crucial in the office supply industry. Many institutions do not order supplies beforehand. Instead, they wait until the products are about to run out before they can contact their suppliers. Therefore, businesses in this sector should ensure that they have efficient supply chains. Staples should link the current inventory database to its accounting system and website. This strategy will enable customers to order and receive products immediately. Moreover, it will be easy for this company to monitor inventory levels in various stores to ensure that it does not run out of stock.

Reorganizing International Operations

Restructuring operations in overseas retails will curtail complexities and enhance performance. Many delivery businesses and stores have been underperforming in the European market. This company should consider closing them. It is imperative to form strategic alliances with local office supply companies abroad to facilitate service delivery. The lack of experience in foreign markets is a major problem that has been hindering the success of its overseas establishments. Strategic partnerships between Staples and foreign companies will solve this problem by exposing it to a wider customer base. However, to gain the loyalty of new and existing clients, it should endeavor to consistently offer quality products and services in all foreign outlets. Rebranding its retail stores will go a long way towards helping this company to achieve the vision of being a global brand.

Strategy Evaluation

Technology has influenced the office supply industry since many institutions no longer use traditional products such as stationery. Despite Staples being the leader in office supplies, its annual revenue has stagnated for the last seven years. As store traffic continues to decline, closing underperforming stores will save the company billions of dollars. Staples’ pre-tax cash charge will increase significantly. One might argue that the closure of retails will result in the company losing significant market share. This assumption is not entirely true since more customers are turning to online shopping. This company should now direct resources to Internet marketing.

Most customers do not have time to visit outlets. Hence, they prefer to shop online. In 2012, Staples’ online sales increased by 10%, an indication that many customers are avoiding physical stores (David and David 495). Staples’ strategy of introducing novel product lines into its online platform will attract more clients. Clients who use both catalog and retail outlets spend more money compared to those who visit stores only. Hence, investing in online shopping platforms will not lead to clients ceasing to frequent stores. Instead, it will give Staples a chance to target multichannel shoppers. This move will boost consumers’ expenditure. Individual clients will be expected to spend at least twice as much as they do when they visit a single shopping channel.

Conclusion

Staples Inc. has been in the office supply business for decades. It sells a range of office products and offers technology solutions. The leadership of this corporation has embarked on a campaign to grow product lines as a measure to boost its competitiveness. Nonetheless, much needs to be done to enable it to affirm its influence in the sector. It should improve the supply chain to guarantee the efficient delivery of products. For this corporation to boost its performance, the data analyzed confirms that it needs to focus more on overseas markets. Staples should look for foreign markets where competition is limited to establish its influence. The formation of strategic alliances with local companies in overseas markets will help this company to grow its market share. Moreover, it will reduce operations costs since Staples will not need to conduct extensive market research or hire staff.

Work Cited

David, Fred R., and Forest R. David. Strategic Management: Concepts and Cases. 15th ed., Pearson Education Limited, 2014.

Appendix 1: SWOT Analysis Matrix

Internal Factors Strengths Weaknesses
  • Multiple retail stores across the world
  • Multiple channels offering
  • Effective customer retention programs
  • Provision of additional services
  • Reducing sales and profit margins
  • Overreliance on suppliers
  • Limited presence on social media
External Factors Opportunities Threats
  • Chances of strategic partnerships
  • Providing additional services and product lines
  • Establishing kiosks in strategic locations
  • Economic recession
  • The rise of digital alternatives
  • The emergence of superstores
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