EXECUTIVE REPORTAn analysis of the sales performance of five selected OPC retail outlets, discussions of the response to a hostile takeover and new technologies, and recommendations for a viable IT Strategy.

2010Office Products Company (OPC)

INSS 640Assignment 2

Eric CzajkowskiChristopher HeadrickJames McEnteeBurt Richards

EXECUTIVE REPORT 2010

ACCESS

Transaction number is not given in the assignment, need to identify PK based on what is given

Need to identify Identify FKs and relationship (1:1 or 1:m or m:n)

SALES should be linked to PRODUCTS (not showing in relationship diagram)

grade =-3

Need analysis and discussion using data provided in the case to analyze product mix and sales at various cities

grade =-3

Outsourcing and MBA

grade =-4

GRADE 50/60

EXECUTIVE SUMMARY

Office Products Company (OPC) is an international company with headquarters in Germany. In 1952 the company went public with a majority of its common stock shares held by institutional investors in Europe and the USA. Recently, Chinese investors have started acquiring shares, including Kungfu.com. The OPC brand is recognized worldwide and serves local markets. Selling items ranging from paperclips to computers the OPC brand is synonymous with quality and carries with it a loyal customer base. However, sales have started to decline as of late because low cost competitors have begun stealing accounts.

This report provides an in depth analysis of strategic moves OPC can implement to the company’s benefit. One such move includes the recommendation to begin outsourcing jobs to India. An analysis of the sales performance of five selected OPC retail outlets, discussion of the response to a hostile takeover, and recommendations for a viable IT Strategy are included. (should also look at profits; analysis based on sales alone can be misleading!!!)

SALES BY PRODUCTPartDesc Sales Value

Box of staples €198.03

Eraser €140.28

Glue €373.80

Note pad - white €413.00

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EXECUTIVE REPORT 2010

Note pad - yellow €540.00

Paper clips (box) €183.58

Pen - type A €320.00

Pen - type B €706.86

Pencils (3) €359.58

Rubber bands (20) €333.90

Total Sales 3569.03

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SALES BY CITY AND PRODUCTCity Product SalesStockton Note pad - yellow €200.00

Box of staples €86.10Paper clips (box) €67.00Pencils (3) €140.40Pen - type A €125.00Rubber bands (20) €135.00Pen - type B €294.84Glue €144.18Eraser €53.44Note pad - white €157.50

Total Sales at Stockton 1403.46Modesto Note pad - yellow €160.00

Eraser €36.74Glue €114.81Pen - type B €264.60Rubber bands (20) €99.00Pen - type A €100.00Pencils (3) €117.00Box of staples €57.40Note pad - white €140.00Paper clips (box) €53.60

Total Sales at Modesto 1143.15Turlock Pencils (3) €59.28

Pen - type A €55.00Note pad - white €77.00Note pad - yellow €112.00Box of staples €31.57Rubber bands (20) €66.15Pen - type B €102.06Glue €64.08Eraser €25.05Paper clips (box) €33.50

Total Sales at Turlock 625.69

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SALES BY CITY AND PRODUCT (continued)CityProduct Sales

Merced Rubber bands (20) €27.00Eraser €16.70Pen - type B €37.80Pen - type A €25.00Paper clips (box) €19.43Box of staples €20.09Note pad - yellow €48.00Note pad - white €31.50Pencils (3) €35.10Glue €42.72

Total Sales at Merced 303.34Denair Note pad - yellow €20.00

Glue €8.01Pen - type B €7.56Rubber bands (20) €6.75Pen - type A €15.00Pencils (3) €7.80Box of staples €2.87Note pad - white €7.00Eraser €8.35Paper clips (box) €10.05

Total Sales at Denair 93.39

OVERALL TOTAL SALES 3569.03

SALES BY CITYCity Sales

Denair €93.39

Merced €303.34

Modesto €1,143.15

Stockton €1,403.46

Turlock €625.69

Total Sales €3,569.03

there is NO analysis, just reports are reproduced. Need to

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provide analysis based on data and look at product mix and sales at cities

RESPONSE TO HOSTILE TAKEOVER

Situation

Kung-Fu.com, a Chinese company, has been accumulating OPC stock and currently owns 5% of the outstanding common stocks. They started a hostile bid for the company on December 1, 2009 by offering 35% premium over May 30th closing price of 45 Euros. The chart below shows the closing stock prices of both companies for the last five years.

Discussion

Hostile takeovers occur when a party outside of a corporation (can be an individual or another corporate entity) pursue acquisition of a company at the disapproval of the board. These acquisitions are deemed hostile because a company’s board of directors hold a fiduciary responsibility to stock holders yet desire to maintain control of the company. The competing interests create conflict as it is almost certain if a hostile bid is accepted the board will be replaced. Conversely if the bid is rejected shareholders may vote the board out under the premise the board failed to look after the shareholders’ best interests. Here, the OPC stock price closed out May at 45 Euros. Kungfu.com initiated a hostile takeover by offering a 35% premium on OPC stock. The Kungfu.com bid of 60 Euros is equivalent to the OPC stock price from December 2007.

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Stock Price in Euro (at the end of the year)

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Dec

-04

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Date

Euro OPC Stock price

KungFu.com

OPC Stock price 30 35 50 60 50 45

KungFu.com 10 15 29 45 60 50

12/31/2004

12/31/2005

12/31/2006

12/31/2007

12/31/2008

5/30/2009

EXECUTIVE REPORT 2010

Strategy Assessment

The OPC board of directors, while concerned about declining US sales and a drop in stock price, must weigh OPC’s options before accepting or rejecting the bid. Accepting the bid artificially inflates the stock price for a limited time creating an opportunity for shareholders to maximize their ROI in the short run. Rejecting the offer allows the board to implement a strategy to increase US sales hurt during the worldwide economic recession. In the board’s favor is the fact the DAX, German equivalent to the Dow Jones, has fallen by more than 25% since December 2007.

Recommendation

In order to meet the fiduciary responsibility the board of directors owes the other shareholders, the company must have a strategic plan in place that justifies the rejection of Kungfu.com’s offer. Additionally the company must not get so focused on fending off Kungfu.com through legal proceedings and other posturing, that individual business units no longer receive proper attention. Implementing new sales strategies and cost cutting moves should not lose executive focus. Implementing the new outsourcing strategy the company is considering will help cut costs and should improve the profit margins. Improving profit margins and growing sales will increase OPC’s stock price. As long as the company can implement its new strategies in a reasonable amount of time, the OPC board should reject the Kungfu.com bid.

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TECHNOLOGIES RIPE FOR EXPLOITATION

Market Basket Analysis and Business Intelligence

The ideas behind both Market Basket Analysis and Business Intelligence is that we can use data related to our existing customers and sales in order to predict ways in which we can generate more sales. By analyzing the data we may be able to discover relationships between sales of certain products, the types of customers that purchase them, when they buy them, where they buy them, and more. Data mining gives us this information which provides meaningful information which might lead us to the conclusion that certain products should be sold at full price on certain days and on sale other days. It could also lead us to the conclusion that certain products are in higher demand in certain stores. It might lead us to group certain products together in the store so that individuals would be sure to see one and then be tempted to purchase the other.

Perhaps even more relevant are the possibilities for incorporating Market Basket Analysis thinking to the company's broader marketing strategies including online sales. Market Basket Analysis is a piece of the broader theme of Business Intelligence. The point here is that the company can get smarter about many aspects of its business models based on the data that it generates on a daily basis. The goal is to use data mining techniques to turn that data into meaningful information. Market Basket Analysis is simply one example of a use of technology that can provide a more relevant and helpful sales experience to our customers. Business Intelligence techniques can be used to address broader issues related to the business. It can be used to analyze where stores should be located (GIS Analysis shows that sales are higher to the northwest of Highway 99 [Stockton] and gradually lower as you move to the southeast [Merced and Denair]) It should also be used to analyze web activity, where web traffic is coming from, and where the potential sources for more customers reside so that they can be exploited.

Very generic discussion of BI.

NEED to discuss what MBA is and how OPC can use it.

IT STRATEGY: OUTSOURCING

Discussion

If OPC is to consider outsourcing its IT operations to another country, such as India, it needs to weigh the potential advantages and disadvantages of such a change. It is very important to make the right decisions regarding this matter because it represents a significant cost of doing business. OPC needs to secure significant value from its IT infrastructure. Spending too much or too little on IT infrastructure can cause the company's financial performance to falter. Spending too little might mean that the company will not have the tools that it needs to compete in the market.

On the positive side, this sort of structure is very much possible with today's technology with the use of Virtual Private Networks (VPNs), Cloud Computing, SaaS, and other technologies. However, before

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committing to this strategy (or any strategy for that matter), we will want to consider the competitive forces that should shape our IT infrastructure investment.

Strategy Assessment

First, we need to determine the market demand for our IT services. We should determine if it is the quality of our IT services that are causing some sales to slump. Second, we need to consider our five-year business strategy. This will give some critical insight into the types of capabilities we will need to have in the medium term. We need to seek an IT infrastructure plan that addresses our future as well as current needs. In addition to the medium term business strategy, we should also be considering our overall IT strategy to be sure that they are in harmony with one another. It is in this third stage that we need to consider the entire cost of implementing an outsourcing strategy versus other potential strategies. In this stage we need to consider the entire cost of all options. Next, we need to assess any viable options for practicality and reliability. We need to choose a solution that is established enough to provide continuous service with minimal interruption, but that is current enough to address our current needs as well as those in the foreseeable future. The final steps are to compare any potential solutions against the service and investment that our competitor firms have made. While we need to stay up-to-date with the expectations of our customers, we put ourselves at risk if we invest too much in the IT strategy. In these final steps, we need to be looking for ways to provide more for less (p. 194-196).

Recommendation

An IT strategy that incorporates offshore outsourcing should be seriously considered because of the potential cost-savings. Labor is much cheaper in India, for example, and current technology makes outsourcing a viable strategy. If it is decided that OPC’s IT strategy can remain relatively simplistic, the company could benefit from Cloud Computing and SaaS technologies, which could reduce the need for the company to absorb the cost of storing its own data. How cloud computing, Saas relate to outsourcing??? Software services could be catered to all of the company’s needs. We should be warned, however, that many firms have grossly underestimated hidden costs related to an outsourcing strategy. Travel expenses, contract negotiation, and project management costs are among these costs. All of these costs need to be included when considering the Total Cost of Ownership (TCO) related to an offshore outsourcing solution. Managing the transition to this type of strategy will be difficult, and the difference between a well-managed transition versus one that is poorly managed could mean the difference between its success and failure (p. 505-506).

cost is only one of the issue. there are many other issues like

security

skilled labor

Language

Politics

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Legal

Infrastructure

service quality’

vendor quality

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ENTITY RELATIONSHIP DIAGRAM (ERD) OF OPC CITY, SALES, AND PRODUCT DATA

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QUERY OUTPUT AND DESIGN

Products and cities that have sales of less then 5 units (Output)

Products and cities that have sales of less then 5 units (Design)

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Products and cities that have total sales less than 150 euros (Output)

Products and cities that have total sales less than 150 euros (Design)

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Total Sales by City (Output)

Total Sales by City (Design)

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Sales by product report (Output)

Sales by product report (Design)

Sales by city report (Output)

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Sales by city (Design)

Sales by city within city by product report (Output)

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Sales by city within city by product (Design)

Reference:

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Laudon, Kenneth C. and Laudon, Jane P., Management Information Systems, Managing the Digital Firm, Eleventh Edition, Pearson Education, Inc., Upper Saddle River, New Jersey, 2010.

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Requirements Maximum Points Group Points

A. Executive Report 6

(including recommendations, if any)

B. Part 1: ACCESS table: 10

Part 2: Define PK, FK and relationship among tables

10

Part 3: Queries 10

Part 4: Reports 10

C: Additional Analysis 3

D:: Hostile Takeover 3

E. Market basket analysis 4

F. Outsourcing 4

TOTAL 60

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