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Project Profile
Staples began as
an office supply store dedicated to offering the same low prices on office
supplies that large corporations can count on as a result of quantity purchases
and discounts. Headquartered outside of Boston, Staples invented the office
superstore concept and today is the largest operator of office superstores in
the world. Today, Staples, Inc. is an $11 billion retailer of office supplies,
business services, furniture and technology to consumers and businesses from
home-based businesses to Fortune 500 companies. The company has a worldwide
presence with over 1,400 Staples superstores operating in the United States,
United Kingdom, Germany, Netherlands, and Portugal. There are approximately
55,000 associates serving customers through the superstores, mail order
catalogs, e-commerce and contract business. A Staples' store typically carries approximately 8,500 items,
delivery business stocks approximately 15,000 items, and the Internet offers
another 100,000 products (Staples, Inc.; Staples Annual Report, 2001).
The
corporate mission is clear: “Slashing the cost and hassle of running your
office! The core values of the corporation continue with the theme of C.A.R.E.
Customers – Value every
customer
Associates – Support them as
valuable resources
Real Communications – share
information with people when they need it
Execution – achieve our
business goals" (Staples, Inc.).
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History
of Staples
Staples,
Inc. was founded by Tom Stemberg and Leo Kahn in 1985 as a collaboration of two
rivals in Boston, Massachusetts. In
1989, an initial public offering raised capital and Staples introduced catalog
delivery service. By 1991, Staples
opened stores in Canada and in 1992, they expanded into the Europe.
Staples grew quickly in the late 1990s, reaching sales of $3 billion by
1996. Ideas such as a 24 hours
store, an airport store, and a dot.com link were implemented.
In the United States, Staples changed the way ordinary people purchased
office supplies. By 1999, Staples
expanded into Germany, the Netherlands, and Portugal. In 2001, Staples
integrated their e-commerce ability into their brick and mortar superstores.
In 2002, Forbes Best of the Web stated “For the third year in a row,
Staples.com is named one of the best sites for small business” (Staples,
Inc.).
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Scope
of Business
Staples
currently operates three business segments:
North American Retail:
The Staples 20,000 square foot superstore is the foundation of this segment.
(Staples Annual Report 2001).
North American Delivery:
This segment consists of:
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Contract:
This segment offers customers services and pricing on office supplies
based on contracts with medium- to large-sized and Fortune 1000 companies.
The StaplesLink.com website, provides real-time inventory,
company-specific contract pricing and line-item shipping status to these
businesses.
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Business Delivery: This division combines Staples website, Staples.com,
and its catalog businesses, offering delivery services of its products
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Quill: Staples acquired office
supplies direct marketer Quill Corporation in 1998. "Quill and
Quill.com continue to operate as a separate brand from Staples, serving
small- to medium-sized business customers through its wide variety of
industry- and topic-specific office supplies catalogs" (Staples,
Inc.). |
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European
Operations: Staples launched
its European operation in 1992, and currently has more than 175 stores in the
United Kingdom, Germany, the Netherlands and Portugal.
The European delivery division serves customers in the UK and Germany.
Staples just recently (early 2002) launched its first European e-commerce
site in Germany (Staples, Inc.).
Staples
targets “four principal end-user groups:
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Power users (customer spending over $500 per year in office
products excluding computers and furniture; primarily home-based
businesses, home offices and teachers);
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Small businesses and organization with 1-50 office workers;
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Medium-size businesses and organizations, which have between 50 and
500 office workers; and |
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Large
businesses with more than 500 office workers" (Staples Annual Report,
2001). |
Although Staples has the ability to offer other
services (furniture, payroll and web services), the product that is their
central focus is low priced office supplies. Their office supplies include such
things as binders, briefcases, file folders, labels, paper, pens, planners,
supplies, scissors, tape, glue, etc.
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Strategic
Plans
Staples
forward looking strategic plan plays homage to the first store opened in
Brighton, Massachusetts in 1986. The “Back to Brighton strategy” (Staples
Annual Report, 2001, p. i), was announced at the end of 2001 with primary
implementation to take place throughout 2002 and beyond.
The
goal behind the strategy is really to get back to the basics of business. Using
strategic realignment to streamline the company, Staples wants to put the focus
back on its core customers - small business - while putting less emphasis on
low-margin products that appeal to mainstream consumers (Reidy, C., 2002).
Staples is also focusing on the power consumer, or the home-based
individual who spends a significant amount each year on office supplies. The
expected results of the strategy are “profitable sales growth, improved profit
margins, and increased asset productivity” (Staples Annual Report, 2001, p.2).
To
better serve its core customers, Staples is rolling out a new format it calls
the Dover store. Smaller than
previous stores, it is designed to cut costs and improve profitability (Reidy,
C., 2002). The Dover stores offer
cost savings benefits in that they cost less to build, $400K v. $700K. Some of
this is due to the 4,000 sq. ft reduction in size, which has the added benefit
of holding less inventory and therefore reducing the cost of inventory. The plan
is to have a quarter of the U.S. based stores in the Dover format by Year-End
2002 as a result of remodeling and opening new stores.
In
a further effort to maximize revenue, minimize costs, and focus on the small
business, Staples is in the process of analyzing all of the products carried.
One result of this analysis was a shift in product lines, removing a large
portion of consumer based products and replacing them with business items. For
example 30% of the stores no longer display ready to go computers and instead
support a “build-to-order computer assortment” more attractive to businesses
(Staples Annual Report, 2001, p. 8).
Within
each of its business segments, Staples has specific plans as well. In the North
American Retail segment, the company is very focused on offering “customer
value through a combination of broad product selection, everyday low prices,
outstanding customer service and convenient locations” (Staples Annual Report,
2001, p. 9). Staples also plans to increase the number of stores in their
current U.S. markets, although overall growth will be slower and fewer stores
opened than in previous years. The one exception is a new market presence in
Seattle. Finally, “Staples Express,” stores that are 30-50% of the average
size will be opened in targeted urban areas.
In
the North American Delivery segment, Staples plans to focus on customer
acquisition and retention, through the use of targeted marketing programs. To
manage costs, the company has plans for “expanding distribution capacity…
and consolidating and optimizing call center locations” (Staples Annual
Report, 2001, p. 9).
Finally,
international expansion will play a key role in Staples growth. The goal is to
increase revenues for the European Operations by more than 20% annually, through
the opening of 20 new stores per year. Initial plans also include a website
presence in Germany in 2002. However, despite Staples recognition of the
tremendous opportunity offered by the European Operations for growth, it’s
current focus on existing business, is putting a hold on expansion outside the
current European markets.
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Performance
and Competitor Information
Staples
“Back To Brighton” strategy is already paying off. In 2001, Staples opened
or converted eighty stores to the Dover model.
Staples’ delivery business was integrated with their Internet and
catalog services, producing their fastest growing business segment with
double-digit sales increases and a 280% profitability improvement in 2001
(Staples Annual Report, 2001). In the same year, Staples delivered an 18% increase in
earnings per share to $0.66. Staples Contract, the contract stationer product
line also produced impressive results securing 7,800 new customers and improving
profitability (Staples Annual Report, 2001).
Three
years ago marked a period of aggressive new market entries.
In 2000, 166 new stores were opened in North America.
Staples executives attribute the investment in new store locations to the
company’s lackluster performance in 2000.
Staples’ performance fell short of the company and investors’
expectations (Staples Annual Report, 2000).
In 2000, earnings per share declined 13% to $0.58 from $0.67 in 1999.
Notwithstanding Staples’ poor results in North America, the company maintained
a leadership position in the industry by growing revenues 19.7% to $10.7
billion, exceeding performance targets for Staples.com and achieving
profitability in Europe for the first time.
Overseas, European revenues grew 48% to $717 million in 2000.
(Staples Annual Report, 2001) The
United Kingdom, Germany, the Netherlands and Portugal, the countries in which
Staples does business combined to represented 43% of the Western Europe office
products market.
During
2000, 21 stores were added to bring Staples to a total of 159 stores in Europe.
In 2001 Staples operated 175 stores in Europe, 77 in the United Kingdom, 55 in
Germany, 33 in the Netherlands and 10 in Portugal (Staples Annual Report, 2001).
Also in 2000, Staples and Office Depot each held a 4% share of a $240
billion US market share of the office superstore market.
Office Max is the third ranked competitor in this industry with a 2%
market share. Presently, Office
Depot continues to be Staples’ most dominant competitor and Office Max
continues to maintain a third rank position.
The
following tables shows sales by each major product line for Staples as a
percentage of total sales for the periods indicated:
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Fiscal Year Ended
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Product
Line
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2-Feb-02
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3-Feb-01
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29-Jan-00
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Office
Supplies and Services
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40.8%
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39.6%
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43.0%
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Business
Machines
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29.8
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28.7
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26
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Computers
/ Related Products
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22.3
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23.9
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23.1
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Office
Furniture
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7.1
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7.8
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7.9
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India vs. China
India and the People's Republic of China (PRC) are two countries that
have recently become more accepting to the advantages and benefits of
globalization. India, with its market diversity, has developed new business and
trade partnerships with the United States and other countries. However, it is a
nation, steeped in rich tradition and culture that is slow to change. China has
demonstrated modernization with an economy that has shown improvement
as its position within the global economy strengthens.
The Republic has become a country that has evolved immensely within the
past few years into a powerful state.
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India
India,
a subcontinent in southern Asia, is the second most populated country in the
world. With almost one billion people, “it has a reasonably favorable
pro-business environment that aims to attract multinational companies (MNCs)”
(Ramachandran, 2000, p. 1). It is also a country with a multitude of natural
resources and rich farmlands. However, entering the market in India is not
without its challenges of the nation. Accordingly, these obstacles stem from the
economic, political, and cultural components. Therefore, it is paramount that
the Indian business environment is carefully and strategically analyzed. This
should be accomplished by market analysis, country analysis, and market
segmentation.
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India’s
Economy
India’s economy opened up to foreign investors in the early 1990’s.
This occurred due to a national financial crisis, and therefore forced the Prime
Minister P.V. Narasimha Rao to radically change India’s socialist inspired
economy. In 1997, the country adopted the GATT treaty, thereby allowing for more
global trade and lessening the imposed tariffs (Ramachandran, 2000, p. 3) .
These changes have been welcomed by foreign investors, particularly the United
States, and some of the people of India. However, these economic reforms have
not improved the lives of the
millions of Indians that live in poverty. And,
even though these changes may benefit the country, some Indians fear that
culture and tradition may be altered by foreign investment.
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India’s
Political Climate
India is the largest democratic nation in the world, with a federal
republic of 26 states and seven union territories. Its legal system is based on
English common law. Many Indians and foreign interests have pursued
opportunities in India optimistically, by employing judicial activism and
international trade agreements (www.tradepartners.gov.uk). In addition, the
lifting of tariffs and the desire for a position in the global marketplace makes
these possibilities obtainable. On the other hand, some Indians worry about
allowing foreign firms to gain controlling interests in domestic firms. Perhaps
many feel that Indian brands can continue to satisfy the Indian lifestyle. (Ramachandran,
2000, p. 2-3).
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Indian
Bureaucracy
The
heavy bureaucracy in India makes in difficult for foreign investors to conduct
business. “Even with improved economic policies, foreign firms find that doing
business in India can be exasperating. The bureaucracy wields broad power,
compounding inefficiencies left over from decades of socialism” (Ramachandran,
2000, p. 4). To this end, foreign
companies have to be willing to work with varying agencies and obstacles of the
Indian federal government to get this accomplished. Ramachandran (2000) also
states that there are three key areas an American firm should examine before
deciding where to locate and minimize bureaucracy: the quality of the
infrastructure, political leadership, and incentives such as tax subsidies.
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India’s
Culture
Many
American companies falsely assume that Indians, or any foreign country for that
matter, will adapt to foreign and global products and services. “But the
reality is that India has a rich, 4,000-year old culture with strong,
deep-rooting beliefs and attitudes” (Ramachandran, 2000, p. 5). Foreign
investors and companies must strive to understand the Indian culture if they are
to be successful. For instance, price is extremely important in the Indian
culture, more so than the value. Thus, the Indian culture is one of frugality
and tradition.
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China
 Located
in eastern Asia, the PRC with over 1.2 billion people living in an area only
slightly smaller than the US, is the most populated country in the world. Over the past several years, it has transitioned from an
entirely government centered nation to a more people-focused state where its
citizens now have the freedom to enjoy entrepreneurship, freedom to own
property, etc.
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China’s Economy
The
PRC has taken very seriously its commitment to economic restructuring, which is
one of the main aspects of China’s reform.
It was in the first 30 years after the founding of the PRC, the Chinese
government carried out a system of planned economy, and goals and objectives for
various parts of economic development were all established by the state.
Factories produced goods according to state regulations, and farmers planted
crops also according to state regulations. Commercial departments stocked and
sold their stocks according to state regulations, and “the qualities,
quantities and prices of the goods were all fixed” by the state regulations. As a result, this system of planning contributed to the
PRC’s stable, planned economy, but on the other hand it restricted the
potential for huge economic development and “sapped its vitality” (China.org,
2002). It was at the end of the
1970s that the PRC became aware of the gap in economic growth between China and
other countries, hence China’s great resolved to reform its “decades-old
economic system” (China.org).
Since
1997 the PRC has stressed that the non-public sectors of the economy be an
important part of the “socialist economy of China” (China.org, 2002), in
which productivity and profitability is encouraged for the basics of production,
such as “capital and technology”, in order to make economic restructuring
achieve great strides. At
present, a socialist market economy system is well on the way to being
established in China, and the primary role played by the market has been
enhanced in the area of resources allocation.
Meanwhile, the macro-control system basically takes shape.
In addition, the less concentrated form of economic growth has been
replaced by a more concentrated system. Projected by a schedule, the “socialist market economy”
will be more enhanced by 2010, and by 2020 a fairly mature “socialist market
economy” will have been established in the PRC (China.org).
The
PRC is definitely a country worth looking it due its rising economy. The Chinese
economy has grown at a rate of 7.9 percent, in the first three quarters of the
year 2002. This growth has improved
the country’s industrial value when it demonstrated growth by 12.2 percent on
an annual basis and the country’s investment in fixed assets also rose by 24.3
percent (China Daily, 2002).
Another
attractive trait with China is its goal to build a “well-off society of a
higher standard in an all round way in the first 20 years of this century to the
benefit of well over one billion people in this period” (stated in Jiang
Zemin’s President’s report to the 16th National Congress of the
Chinese Communist Party in Beijing). China
hopes to continue to develop the country’s economy, “improve democracy,
advance science and education, enrich culture, foster social harmony and upgrade
the texture of life for the people”. The
country seems to have a schema that presents important strategic opportunities
for China for the first two decades of the 21st century to clench
firmly and take advantage of the brilliant outcomes predicted.
China also intends to build on the great strides it has already made with
its economy, government, etc. by promising to continue working for more decades
into the future to achieve the “modernization” of China and to transform the
state into a “strong, prosperous, democratic and culturally advanced country
by the middle of this century (Xinhua News Agency, 2002).
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Websites
/ Resources
Click
here for our list of resources.
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References
Anonymous. (2000). Environment market in India. Retrieved online 11.05.02 from http://tradepartners.gov.uk/environment/india/profile/characteristics.shtml
China Sees Double Digit Growth in Tax Revenue.
China Daily. November 8,
2002. Retrieved online 11.06.02 from http://www.china.org.cn/english/2002/Nov/48283.htm
China’s Tax
Revenue up 11.8 Percent. Retrieved online 11.06.02 from
http://www.china.org.cn/english/government/46012.htm
China to Build Well off Society of Higher Standard: Jiang. Xinhua News Agency, November 8, 2002. Retrieved
online11.08.02 from http://www.china.org.cn/english/China/48295.htm
Economic System. Retrieved online 11.06.02 from http://www.china.org.cn/english/features/38200.htm
Reidy, C. (2002). Back to basics -- and profits. Boston Globe [Online].
Retrieved online 11.06.02 from http://www.boston.com/globe/business/packages/globe_100/2002/stories/back_to_basics_and_profits.shtml
Staples. (2001). Staples Annual Report. Retrieved 11.06.02 online from http://investor.staples.com/ireye/ir_site.zhtml?ticker=SPLS&script=700
Staples. (2000). Staples Annual Report. Retrieved 11.06.02 online from
http://investor.staples.com/ireye/ir_site.zhtml?ticker=SPLS&script=700
Staples, Inc. Retrieved online from 11.04.02 from http://www.staples.com.
Ramachandran, R. (Jan/Feb 2000). Understanding the market environment of India.
Business Horizons, 43(1). Retrieved
11.02.02 from http://mdusa.lib.umd.edu
Relations with Developing Countries. Retrieved 11.06.02 online from http://www.china.org.cn/english/features/38186.htm
Relations with Major Countries. Retrieved 11.06.02 online from http://www.china.org.cn/english/features/38187.htm
Sullivan, J. (1999). Exploring international business environments.
Needham Heights, MA: Pearson Custom Publishing.
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