Case Study on "Office Depot Inc. Situational Analysis"

Case Study 17 pages (4552 words) Sources: 15

[EXCERPT] . . . .

Office Depot Inc. Case Study

Situational analysis

Promotion

Sales Plan

Distribution channels

PROBLEMS FOUND IN THE SITUATION ANALYSIS

STRATEGIC ALTERNATIVES FOR SOLVING PRIMARY PROBLEMS

SELECTION OF STRATIGIC ALTERNATIVE(S) AND IMPLEMENTATION

In this report, we present a comprehensive analysis, insights and recommendations on various issues that affect the operations of the Office Depot. We begin with a situational analysis which kicks off with the analysis of the environmental factors that affect the company. This begins with a review of the economic conditions and trends, cultural and social values and trends, political and legal issues, summary of environmental opportunities and threats as well as the implication of these environmental factors for strategy development. We then proceed to the analysis of the industry.Under this we present a Classification and definition of industry, analysis of existing competitors, analysis of potential new entrants, analysis of substitute products, analysis of suppliers, analysis of buyers, summary of industry opportunities and threats as well as their Implications for strategy development. Next we deal with issues to do with the analysis of the Objectives and constraints of the firm, financial conditions of the firm, management philosophy of the firm, organizational structure of the firm, Organizational culture of the firm, a Summary of the firm's strengths and weaknesses as well as their Implications for strategy development. We then proceed to the presentation of the marketing strategy. Under this we present the objectives and constraints that faces the firm's marketing aspirations, an analysis of sales, profits, and market share, analysis of target market(s),analysis of marketing mix variables, a Summary of marketing strategy's strengths and weaknesses as well as their Implications for strategy development. The next step is then the identifications of the problems from the situational analysis with evidential support. Strategic alternatives for tackling the primary problems are also presented. A selection of the best strategic alternative is then presented.

Situational analysis

Environment

1. Economic conditions and trends

The housing as well as credit crisis that rocked America has very profound effects on the level of American consumer behaviors. In the U.S., there had been borrowing as well as spending that was backed with the home values. Disposable personal income is regarded as a huge driving force that affects personal consumption. This is because the higher the level of disposable income, the higher their level of spending on products and services that are considered non-essential. An analysis by the Bureau of Economic Analysis in 2008 indicated that was a negative growth in the 3rd and 4th quarters (Figure 1).This signified a considerable decrease in the level of disposable income in the U.S. retail sector.

Figure 1.Changes in disposable income.

The latest figures indicate that there has a been a general increase in the level of retail sales. The retail sales saw an increase of 0.1% from July 2011 and about 7.5% above last year's figure (USCB,2011).

Econoday (2011) also indicated the general improvement in retail sales in the figure below.

This indicates a bright future for Office Depot.

Office Depot is noted by Linzmeier (2008) to be operating in uncertain economic environment. The company is faced with the closure of several of its stores (112 stores). In addition the company was reported to be closing thirty-three distribution locations with a total of 2,200 job cuts (Linzmeier,2008). This figure contributes to close to nine percent of the company's total facilities figures.

The company is a supplier of various office products as well as services. As of December 2009, the company had 41,000 employees. It recorded total revenue of about $12,144.5 million in 2009. This was noted be a reduction of 16.2% as compared to the one for 2008 (Research and Markets,2010).The company had an operating loss of $265 million in the 2009 Financial year. The 2008 Financial year loss was however $1,545 million.The $12.1 billion revenue that the company made in 2009 was a 16% decline from the one it made in 2008. Office Depot attributed this decline in revenue generated to the tough and unpredictable economic conditions in the U.S. In 2009.

Economic factors are of great importance to Office Depot since they have a direct impact on the customer's buying behavior. Even though the global economy especially the U.S. one was officially declared to be in recession, government made substantial reduction in interest rates I places like the U.K in order to minimize the unemployment rate in 2009 as indicated in the Euromonitor (2010). Office Depot indicated $1.5 billion in terms of net loss for its 4th quarter in 2008 (Rosenberg,2010).As a consequence of this, the consumer spending power has over time improved since they have gained more confidence on the current economic condition. There is however still a lot of financial uncertainty as a consequence of the high unemployment rate in Europe and in the United States. The United States for instance in currently experiencing the lowest unemployment rates of all time. BBC (2011) reported that the number of Americans who are living below the poverty line had risen to a record high of 46.2% last year with nearly one in every six people being poor. The data indicated that poverty level rose to 15.1% from the 2009 figure of 14.3%.This no doubt would have an effect on consumer spending. The implications on Office Depot's profitability are obvious.

A study by the Office Depot Small Business Index indicated that this year (2011), there is a great expectation for business growth.

The study indicated that both small and medium sized businesses have a positive view of the economy. There is also an expectation of profits to improve (by 67%) (Home Depot,2011).

The current currency crisis has also affected interest rates, inflation rates as well as exchange rates therefore leading to a general rise in the price of food ad other essential commodities. The effect of this is that less people will buy from Office Depot

2. Cultural and social values and trends

An analysis of the Office Depot customers reveals that most of its consumers are not very young and internet savvy. Even though the rate of internet literacy has been indicated to drop over the age of sixty-five, it was predicted that the elderly population may find it convenient to place their orders online (Turban et al.,2001). The company also tales part in-person email acquisition. In this exercise, it collects customer emails at the Point of Sales, a sign that they value them (Mullen, Daniels and Gilmour,2008)

3. Political and legal issues

The most significant political and legal issue affecting the operations of Office Depot include the rules and regulations that govern the establishment and running of large retail establishments. The best example of political and legal interference that affected the proposed Office Depot-Staple merger, a merger which was opposed and subsequently rejected by the FTC (Boulton and Dalkin,1998).The other legal matter is international contract laws and labor laws. This is because the company operates is several countries which all have different laws and regulations.

4. Summary of environmental opportunities and threats

A review of the environmental opportunities and threats reveals that the company is negatively affected by business laws as well as other political factors. The company can however tap into the latest trends in consumer monitoring and e-commerce in order to boost its sales

5. Implications for strategy development

Office Depot should embrace e-commerce as well as an integrated marketing approach in order to ensure that its products are well marketed and sold.

Industry

1. Classification and definition of industry

Market Research (2011) indicated that the office supply industry is made up of revenue that is generated from the retailing of various office supplies in departmental stores that basically operate in the sale of these products. The items that are sold in the office supply market are; paper, business forms, pens and pencils, general stationary, file storage equipment, computers and accessories as well as other specialized forms of office equipment. The office services and supply market sector is made up of revenue that is generated from both the manufacture and sale of storage equipment, paper, pens and pencils, stationary, business forms as well as other office services such as photocopying, scanning, printing, laminating and binding.It is worth noting that other sector excludes the sale of furniture. The global office services and supplies market generated a revenue of $190.7 billion in the year 2010 a figure which represented a compound annual growth rate of 1.9% in the period running from 2006 to 2010 (Market and Research,2011).

2. Analysis of existing competitors

A competitor analysis reveals that Office Depot has several competitors. The main competitors are Staples Inc. And Officemax. The three when combined form10% of the close to $300 billion office supplies and services market (Shetty,2011). The remaining market share is controlled by supermarkets, discount stores, wholesale retailers as well as other independent companies. The main advantage that the company possesses over its closes rival Staples is in its international market sector. Office Depot leads in international sales as well as operating margins. An economic downturn… READ MORE

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