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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 111032)
2. Law Jia Chin (MR 111139)
3. MdJazli Bin MdJohari (MR111130)
NAME OF CASE:
Case 11: Office Depot, Inc – 2011
Marks/ Grade:
COMMENTS:
2
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
3
1. Introduction & Case Study 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 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.
4
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 Current Situation Future Situation
Logical
Assumptions
Made
Threats arose
from
paperless
transaction
environment
Currently most of the
revenues come from the
sales of paper, office
machines and furniture.
However, the world is
shifting into paperless
environment
Paper and paper
related products will
be eliminated
Revenues and
profit decreased
Threats from
major
competitors
Primary competitors such as
Staples, OfficeMax and
secondary competitors such
as Wal-Mart providing
similar products and
services
Cut-throat price
competition as
foreseen
Revenues and
profit decreased
5
Quality of
service
decreased
Quality of service is low, for
example the errors on Office
Depot website happened
very often, contact number
of customer service
department hardly get
response
Consumer choose
to purchase the
products and
services from other
competitors
Revenues
decreased,
profit decreased
Non-
recurrence
expenses is
high
Non-recurrence expenses
(stocks damaged during
transportation,
compensation to customer
due to damaged and late
delivery etc) related to daily
operations is high
Consumer choose
to purchase the
products and
services from other
competitors
Revenues
decreased,
profit decreased
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 Weighted
Score
Strength
1. Strong brand name 0.10 4 0.40
6
2. Strong retail stores network – had over 1500 retail
stores worldwide 0.10 4 0.40
3. Strong distribution channel – online shopping, retail
stores, call centers 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
Key Internal Factors Weight Rating Weighted
Score
Weaknesses
1. Weak financial position – loss money continuously for
few years 0.10 2 0.20
2. Weak competitive performance if compared to major
competitors – Staples, Wal-Mart 0.10 2 0.20
3. Non-recurrence expenses is high 0.10 1 0.10
4. Poor service quality – both online and offline
customer service 0.10 1 0.10
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.
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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 –
increase total revenues 0.15 3 0.45
2. Online shopping users are increasing 0.15 3 0.45
3. Develop new product mix – to overcome
the effect brought forward by paperless
transaction environment
0.15 3 0.45
4. Provide new business services 0.15 3 0.45
Key Internal Factors
Weight
Rating
Weighted
Score
Threat
1. Paperless transaction environment –
threatened the current business model of
Office Depot
0.15 3 0.45
2. Intensive competition from other major
players in the industry 0.15 3 0.45
3. Rise of hypermarket and giant
wholesaler 0.10 3 0.30
Total 1.0 3.00
8
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.
9
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 scores of 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.
10
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.
Financial Stability (FS) Environment Stability (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
FS
ES
IS CS
Aggressive
Competitive Defensive
Conservative
11
Competitive Stability (CS) Industry Stability (IS)
Market Share -4 Growth Potential 4
Service Quality -3 Financial Stability 3
Customer Loyalty -2 Ease of Market Entry 2
Competition’s 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.
12
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
Management
0.15 2 0.30 3 0.45 3 0.45 3 0.45
Advertising
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
Total
1.00 3.10 3.85 2.95 3.55
13
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.
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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 Future Situation Logical
Assumptions Made
To be adaptive
in paperless
transaction
environment
Whole world is moving
into paperless
transaction stage, sales
of paper related
products (A4 paper,
photocopy machine etc)
dropped
Efforts have to be
made in
transforming current
business model to
adapt with the new
trend
Revenues increased;
market share
increased
Maintaining
key
competitive
advantages
Nowadays, Office
Depot facing vigorous
competition, revenues
and market share
dropped sharply
Efforts have to be
made in improving
competitive
advantages so as to
survive in new era
Revenues increased;
market share
increased,
sustainability
increased
Explore new
market
Currently there are only
100 over stores outside
America, however the
revenues increasing,
potential new market is
there
Explore into EME
markets e.g. China,
India, and South
East Asia countries
Global market share
increased; revenues
increased
15
Improve
product mix
Current product mix
focus mainly on office
furniture, IT hardware,
office machines and
stationary, low profit
margin high competition
Develop new
product and
promotional mix
Revenues increased,
market share
increased
Define existing
issues related
to operation
and service
Consumers lost faith
towards the company
Resolved the issues
and improve service
quality
Regained customers
faith; Revenues
increased; increased
sustainability
10. Implementation Action Plan
The main objective of this 3 years strategic planning is to increase the
profit and the sustainability of Office Depot in the future. After 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
implemented?
Explore EME market
especially China, India and
South East Asia countries
Approach internet-based
media for promotion and
advertising
Why? Increased market share
globally, increased total
Promote the presence of
Office Depot further through
16
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;
- Carry out survey on customer
needs;
- Set up Office Depot stores
and warehouse in the target
market;
- Joint Venture, alliance or
work together with local firms,
so as to grab the market share
rapidly
- Make use of social media
such as Facebook, Twitter in
promoting the presence of
Office Depot;
- Advertise on famous
websites, search engines,
forums to gather more
attention, low cost high
efficiency than conventional
media channels
Where? Potential EME market Globally
When? Immediately Immediately
Who? International Division,
Marketing and Sales
department, Retail partners,
Surveyor
Marketing and Sales
department, IT Support
department, Public Relation
department, Social media and
online advertisement platforms
17
Implementation
Actions 2. Improvised on current operating and servicing issues
What to be
implemented?
Define and resolve the
issues related to non-
recurrence expenses
Improve quality of service,
both online and offline
Why? To reduce losses due to
transport failure, transport
delay, stocks damaged
To retain customer’s faith and
loyalty
How? - Develop complete standard
operating protocol (SOP) for
warehouse and logistic
department;
- Make everything, every
incident, every single
movement of stocks traceable;
- Reorganize the layout of
warehouses, follow “First In
First Out” concept, stocks that
have to be send out place at
front;
- Revise on the efficiency and
capability of current logistic
partners, change if necessary
- Improve on current online
shopping cart system;
- Update Office Depot official
website regularly with news
and promotion;
- Decrease server and service
center down time;
- Organize training program for
all the employees, especially
front line staffs, and all the
retail partners, so as to
improve the overall service
quality;
- Carry out customer service
evaluation and survey every
quarter
Where? Office Depot stores globally Globally
When? Immediately Immediately
18
Who? Warehouse department,
Logistic department, Human
Resource department, Finance
department, IT Support
department, Logistic partners
Basically all the employees of
Office Depot Inc are involved
19
Implementation
Actions 3. Revised and improvised on current product mix
What to be
implemented?
Develop new computer
software and systems
Introduce new services e.g.
business card, banner and
wallpaper
Reorganize existing office
furniture and IT hardware
product segment
Why?
To diversify current product
mix, so as to grab market
share in this coming
paperless working
environment era
To diversify current product mix,
explore new market and industry,
increase revenues
Profit margin for furniture
and IT hardware products
are low if compared to
others software and related
services, and the risk of
getting damaged is high;
How?
- Established new Software
& System Development
department;
- Invest in R&D of new office
software, or related systems,
especially web-based
systems (e.g. email systems,
online shopping cart, POS
system, P2P systems);
- Introduce printing of business cards,
banners, and wallpaper services to
the market;
- Cost is low if printing is in large
amount; high margin;
- Offer customize or design services
related to business cards, banners
and wallpaper printing;
- Decrease the varieties of
furniture and IT hardware
products offered now;
- Clear off existing stocks
through special promotion
prices;
- Closed down existing
product line or services
related to furniture and IT
20
- Promote the new office
software and systems to the
clients;
- Offer customize service for
clients, in developing
software or systems (e.g.
email systems, online
shopping cart, POS system,
P2P systems) that suits
them best
- Approach those agencies with huge
demand on these services, for
example Bank, Financial institutes, or
sales companies
hardware product slowly
Where? US Globally Globally
When? Immediately Immediately Immediately
Who?
IT Support department,
Software & System
Development department,
Marketing & Sales
department, Retail partners
Printing department, Marketing &
Sales department, Retail partners
Warehouse department,
Logistic department,
Marketing & Sales
department, Retail partners
21
11. Impact of Action Plan
Impact
Impact of action plan
Maintain
competitive
advantage
Improve
market share Revenues Sustainability
1. Exploring and penetrate into new market base
Explore EME market Yes Yes Yes Yes
Online promotion and
advertising effort Yes Yes Yes Yes
2. Improvised on current operating and servicing issues
Resolve non-recurrence
expenses issues No No Yes Yes
Improve service quality Yes Yes Yes Yes
3. Revised and improvised on current product mix
Develop new computer
software and systems Yes Yes Yes Yes
Introduce new services Yes Yes Yes Yes
Reorganize existing
office furniture and IT
hardware product
segment
No No Yes Yes
22
12. Contingency Plan
Contingency plans are proposed as below so as to minimize the possible negative impact brought
up by the plan.
Action Plan
Strategic Decision Made
1. Exploring and penetrate into
new market base
2. Improvised on current
operating and servicing issues
3. Revised and improvised on
current product mix
Potential
Problem
Entering wrong market at wrong
timing
- Service quality provided by
individual dealers/ distributors
may be inconsistent;
- Existing dealers/ distributors
refused to changed
- Time and expenses involved
are huge;
- Lost existing market share
and customer in office furniture
and IT hardware segments
Contingency
Plan
Detailed survey and planning are
needed before taking any action
Carry out worldwide mentoring
program for every employees
Detailed survey, budgeting and
planning in beforehand;
Why?
- To avoid potential losses that
may arise;
- To decrease the overall costs
and time consumed
To ensure the service quality
provided by employees
worldwide are consistent.
- To decrease the overall costs
and time consumed;
- To retain existing customers
How?
- Convey customer needs and
rival survey;
- Do detailed survey on culture,
- Develop a systematic training
program, which is to be
implemented globally;
- Make use of existing customer
base, approach them to
engage in new products and
23
rules and regulation, legislation,
politics, geographical and other
related information of targeted
market before entering
- Conduct performance
evaluation worldwide once in a
half year
services;
- Convey detailed budgeting
and planning before setting up
R&D team
Where Targeted EME markets Globally Globally
When? Immediately Immediately. Immediately.
Who?
International Division, Marketing
and Sales department, Finance
department, Retail partners,
Surveyor
Basically all the employees of
Office Depot Inc are involved
Warehouse department,
Logistic department, Marketing
& Sales department, Finance
department, Retail partners,
Surveyor
24
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.
25
14. References
[1] Office Depot Case Study - Increase Workplace Safety by Motivating
Employees. Available online at www.cashort.com
<Retrieved on 6-Nov-12>
[2] Office Depot – Company profile and SWOT analysis, 2011. Available
online at http://www.freeswotanalysis.com/retailing-swot/463-office-
depot-swot-analysis.html
<Retrieved on 6-Nov-12>
[3] Shaun Bevan. (2012), Office Depot to downsize, relocate stores to save
$20M. South Florida Business Journal Nov-2012.
<Retrieved on 7-Nov-12>
[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
<Retrieved on 7-Nov-12>
26
15. Appendix
Exhibit 1 (Source: STEILLA SERVICE, 2011):
Exhibit 2 (Source: Internet World Stats, 2009) [3]:
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Exhibit 3 Internet User in Malaysia (Source: World Bank, 2011):