FREE ESSAY ON OFFICE DEPOT CASE STUDY

OFFICE DEPOT CASE STUDY

Introduction
The Office Depot case study is designed to measure the skills of success of the well
known office supply chain. This study analyzes key strategic issues that are important
for Office Depot's sustained growth and success. Office Depot maintains its success as
the result of their relentless focus on a simple formula: 
To offer the broadest selection of high-quality office products, services and information
that their customers need at everyday low prices. Office Depot's mission statement is to
be the most successful office products company in the world. Office Depot's simple
formula and mission statement has created an industry leader.
Corporate History
Since Office Depot was founded in 1986, they have revolutionized the way office products
were sold through warehouse retailing. Warehouse retailing involves buying directly from
manufacturers in high volumes, this has been successful due to its low overhead costs and
savings to customers. Low overhead trickles down to the consumer, who is able to purchase
its every conceivable office needed product at up to 60% off of list prices. 
Office Depot had opened 10 stores within its first year, following the immediate success
of its first store in Florida. With direction from Office Depot's Chairman and CEO, David
I. Fuente, Office Depot opened 16 additional stores in 1987. By 1989, Office Depot had a
total of 67 stores. In April, 1991, Office Depot merged with another growing office
supply chain, Office Club. This merge put Office Depot on top as the largest office
products retailer in North America. 
In 1992, Office Depot went international. Office Depot entered the international arena
when it acquired the Great Canadian Office Supplies Warehouse chain in Canada. After
successful conversion of five Canadian Office Supplies Warehouses to Office Depots in
Canada, Office Depot opened additional stores throughout the country. Office Depot
continued its expansion when it entered the market in Colombia and Israel in 1993. By
1997, Office Depot had opened locations in Poland, France, Hungary, Japan and Thailand.
The company ended 1999 with 825 stores in the U.S. and Canada alone. This expansion is
one of the strategies used by Office Depot to lend to its successful growth and plans to
continue its expansion in the future. 
Business Strategies
In the highly competitive market of office supplies, Office Depot has proved itself to be
at the top of its game, holding a strong second place over their biggest competitor,
Staples. Competitors, such as Staples, have shown only a 6% increase in sales over the
past year while, Office Depot reported sales of $10.3 billion, a 14% increase over the
$9.0 billion reported for 1999. They have reached this level of sales and success by
achieving major goals and objectives set by the company. Office Depot has developed
excellent standards for customer service, successful advertising campaigns and expanded
into global markets. Each of these accomplishments have aided Office Depot in gaining a
strong foothold in the office supply market and brought them one step closer to becoming
number one. 
In spite of Office Depot's growth and success, its greatest challenge may be yet to come.
In order to surpass Staples and become number one in the industry, Office Depot must
carefully and successfully plan and execute two key strategic plans. The first is a
continued level of excellent customer service and increased convenience for their
customers. Office Depot needs to maintain a knowledgeable and helpful staff, comprised of
quality people that can provide an atmosphere in the stores that makes customers feel
welcome. A welcome atmosphere with a knowledgeable staff is necessary in order to
continue to build a larger customer base for the company. 
In a world of technology, customers are constantly looking for ways to receive their
merchandise quicker. To maintain its current success, Office Depot must remain on top of
the changing technology and expand its already established Internet ordering system.
Customers, at the present time, can look through an online catalog, place an order and
have it shipped directly to their home or office. Several companies, like the
telecommunication company, GTE, have contracted with Office Depot in order to offer
discounts of up to forty percent to their employees when they place their orders online.
With this service comes the guarantee that the order can be picked up at any store with
in two hours. 
With technology comes a need for extreme efficiency so that products reach the consumer
as quickly as possible. Office Depot currently maintains this demand by operating a
national business to business delivery network that includes over 2,000 trucks, 1,000
account managers, 30 customer service centers, more than 60 local sales offices and seven
regional call centers. This national business to business delivery network is part of
Office Depot's Business Services Group (BSG). This group caters to the needs of the
delivery customer. Delivery sales through BSG are Office Depot's second largest
contributor of sales and operating profit. 
The second major strategic plan that Office Depot must implement is to continue to expand
into markets that have not been tapped by other companies in the industry. In August of
1998, Office Depot completed its purchase of Viking Office Products, one of the
industry's leading direct mail marketers of office products. This merger has helped
Office Depot's total sales for the first quarter of 2000 increase 17% to $3.1 billion
from the $2.6 billion reported for the same period in 1999. Through this wholly owned
subsidiary, Office Depot now has operations in 19 countries including Australia, Austria,
Belgium, Canada, Columbia, France, Germany, Hungary, Ireland, Israel, Italy, Japan,
Luxembourg, Mexico, the Netherlands, Poland, Thailand, the United Kingdom as well as the
United States. Overall, this increase in its domestic and international store base has
been Office Depot's largest driver of their overall sales.
Although it has been a relatively short time since the acquisition, Office Depot has been
very careful with the transition and take over of their new company. Instead of sweeping
through the company and eliminating employees and leaders from Office Depot personnel,
they have simply combined the executives from each company and integrated employees
together from each company. This was a smart move for Office Depot because many times
when companies merge, there is a great deal of upheaval and profits and some of their
customer base may be lost due to disgruntled workers and their families. 
In order to expand and gain a dramatic edge on Staples, Office Depot must expand into
those industries it has not tapped, such as the manufacturing of office products.
Manufacturing of their own products would allow lower costs to consumers due to decreased
shipping and receiving costs. This would result in less mark up cost and an ability to
sell high quality products while maintaining lower prices. 
Growth and Future Expansion
Aside from the profit expanding possibilities of manufacturing of its own products,
Office Depot has potential to grow in many areas. Office Depot's continuous growth and
expansion lends to its becoming a household name. Store recognition and convenient
locations are key to any business's success. This growth includes the company's
continuous potential due to its growth in the international market. Office Depot made
excellent preparations prior to entering its current international markets, this research
and compatibility are necessary in order for concurrent efficiency of smooth and
profitable entries into new international markets. 
For example, in November of 1998, Office Depot purchased their joint venture partner's
interest in their France Office Depot retail stores. This acquisition did not call for
the closure of any existing operating facilities. Instead, Office Depot and Viking
headquarters were consolidated to offer a more conveniently located headquarters. 
Office Depot also was able to integrate the warehousing and delivery of Office Depot and
Viking brand merchandise in each of their existing warehouses. 
Also, internationally, 53% of total sales increases in Office Depot's International
Division resulted from the start-up of their Japanese catalog operations and the
consolidation of their Japanese retail operations in April, 1999. Catalog and store sales
increased 6% and 20% respectively, however, unfavorable rates of exchange negatively
affected these numbers. This is a continuous area of concern for Office Depot to consider
as exchange rates and other competitive economic conditions which exist in international
markets may impact sales in the future as well.
The establishment of the Euro, the fixed conversion rate between existing European
currencies, may affect their ability to price products differently in various European
markets. Local taxes, customer preferences and product assortment may reduce the
magnitude of price equalization. It is not likely that the Euro will have a material
effect on their financial position.
Besides physical store locations, one of the fastest ways to become internationally
recognized and accessible is through the Internet. Currently, 20% of consumer
transactions are conducted electronically. From a marketing and advertising standpoint,
the Internet can offer easy and economical advertising as well as entrance into new
markets. Office Depot has a great many opportunities available to them through the
Internet. However, there are many similar sites on the Internet so it is vital that
Office Depot maintains an upper hand by offering easy browsing and other key points.
Consumers are looking for convience in the Web. Consumers want their information
presented to them quickly and easily. Office Depot currently is ranked
#1 of the Top 100 Electronic Business Innovators by E-Business 100. Neither Staples nor
Office Max make this list. 
In order to strengthen their competitive position in pursuing new business domestically
and internationally, Office Depot is expanding their highly successful electronic
commerce platform. Office Depot's websites, www.officedepot.com and www.vikingop.com,
provide individual customers with many convenient and time-saving capabilities. These
websites offer real-time inventory, address and payment authorization, access to previous
orders, access to status of orders, flexible delivery and returns, special speed features
and cross-selling product suggestions. 
One feature of the website is the Office Solutions section which currently offers
articles on topics which are particularly important to small businesses. These articles
provide ideas in areas such as getting organized and tax time. By grasping what the
consumer wants, Office Depot enhances its opportunity for growth by offering these
special services for small businesses. As small business is such a large, growing part of
the business world and as more of these businesses gain international access through the
Internet, there is a growing need for these types of services. 
In the future, Office Depot plans to improve and expand its Internet capabilities to
offer assistance to a broader customer base. The range of services and products available
through their Internet sites will be expanded greatly in the future.
Another possible area for growth on the Internet would be for Office Depot to team up
with universities or student prone sites in order to offer special discounts and or
promotions. There are many sites specifically targeted at college students. These sites
often are linked with all sorts of merchandise which is ideal for the college student.
This is an area of opportunity as college students are always looking for ways to save
time and money.
Additionally, Office Depot currently has a five year agreement with AOL to develop a
small business site, offering business-related content and programming specifically
addressing the needs of a small office consumer. This small business site will offer
buying guides and directories as well as a quick checkout tool. The site will provide
millions of small businesses with streamlined access to the tools and resources they need
to remain competitive, while offering a broad array of Office Depot merchandise. 
The small business proves promising however, Office Depot may be losing out on a
potential profit maker by overlooking resources already available to them. Office Depot
could gain substantially by offering special services within its stores and by out
sourcing employees to help small businesses. While the Internet is widely used and
recognized, there is still a need for in store service in the area of small business
which Office Depot cannot let fall to the wayside. Letting the Internet be the sole focus
on small business would be detrimental. 
Another area of expansion that Office Depot should consider would be the possible merger
with a computer or software company. As computers are used in nearly every aspect of the
business and personal world today, a merger with a computer superstore such as CompUSA
could prove to be powerful and profit worthy step. This merger would open a new consumer
base and much sales capability. 
Office Depot has already proven its ability to merge with another company successfully
and profitably when it merged with Viking Office Products. The only foreseeable problem
could be the mammoth company a merger of this sort would create. It may be difficult to
maintain its strong customer service while it continues to grow and expand.
Ethical Scenario
We have seen problems when large companies join in such instances as the Microsoft
upheaval. It is necessary that Office Depot maintain high ethical standards in 
all situations. Part of Office Depot's mission statement: to be the most successful
office products company in the world involves conducting their business with
uncompromising honesty and integrity. As an example of this integrity and honesty we will
review an ethical scenario.
Tom Jones, a newly appointed Sales Assistant, enjoys working at Office Depot and is
hoping to have a successful career at this company. His boss, Eric Smith, has given him
the assignment of strengthening Office Depot's relationship with local elementary
schools. Smith asked Jones to convince local area school teachers to buy their supplies
exclusively through Office Depot. Smith has strongly suggested that Jones meet with
teachers and offer them substantial incentives if they will agree to require their
students to purchase a particular set of school supplies that are available primarily
through Office Depot. Meanwhile, the local media is focusing on this issue and the local
paper has recently published a letter from a school teacher about similar pressure
adopted by other retailers.
The ethical dilemma Jones is facing is one that no new employee wants to encounter. He is
facing a decision that will either get him into a costly lawsuit and into the public
criticism, or the possibility of getting demoted in his company. Jones has to decide
whether to be a civil worker for society, or a supporting father at home where they need
his job as a means of living. The situation can be viewed from various perspectives,
depending on which ethical theory one believes in. Other factors may also apply, varying
in the geographic location, cultural background, and time.
Through relativism, the theory states that ethically correct conducts are determined by
the people, one may deem that it is plausible to say that Tom's act was ethical.
Relativism is based on what the majority favors; whatever the majority feels is right,
then it shall be for the rest of the people. It is similar to the modern concept of
Democracy, for which the majority rules.
Utilitarianism, is the theory that maximizes utility of any actions. In Utilitarianism,
ethical issues are determined as those which maximize happiness upon all individuals. An
act is deemed to be ethical if it has the maximum utility and happiness in comparison
with other available options. In this case, it is foreseeable that Tom's act may maximize
utility while satisfying the maximum number of people affected. By offering dedicated
office supply to the students of the local schools, Tom would help the community while
also helping his company grow. 
While Tom may have much support from the prior two theories, according to the Duty
Theory, it is unethical for Tom to do what his employer told him to do. Duty theory, as
the name may suggest, is derived from duties that one much abide to. The general rule is
that one has a duty to choose the optimal choice. In addition, one must also not receive
personal benefits from doing his duty. In such context, Tom surely has committed an
unethical act.
Divine Command and Virtue Ethics are the remaining major ethical beliefs we may apply to
this dilemma. Both theories are very demanding of individuals and their already limited
possibilities. Divine Command is based on the Ten Commandments of the Bible, for any act
that does not violate any of the Ten Commandments is deemed as ethical. Virtue ethics ask
only that the intent of any act be for the good of all things living. In both cases,
Tom's act can be said to be ethical.
The best decision may be for Jones to inform his superior of the current situation that
may deem harmful to the company if the request by the manager is taken. Jones could
explain that the time to implement that strategy may not be now, but could be a plan of
action at a more beneficial time. Perhaps, at a time when this sort of strategy is not
under the public's scrutiny. If the superiors are unwilling to hear his pleads then,
Jones, would have no choice but to comply with the request made by his superiors and do
as told or face the consequences. It is Jones' obligation to his superiors to do as he is
told for the best interest of the company. If they are willing to take the ethical risk,
Jones would have to comply with their decision. Since it is not an illegal action, Jones
would have no obligation to report the unethical act to a regulatory agency; unless an
illegal act has been committed. In this scenario, Office Depot has maintained its high
ethical standards. We will now take a closer look at articles comparing Office Depot's
competition in some areas.
Evaluation of Articles Concerning Competitors
In order to evaluate the competition, we carefully reviewed numerous articles provided
for the case study. We came to the conclusion that the article which was most unbiased
was, Discount Captures Lion's Share of Back-To-School Sales in '98 by Mike Troy for
Discount Store news. This particular article discusses the strong sales increase at
discount stores over the months of August and September. This increase was primarily due
to the large number of parents and students shopping for back to school supplies. This
time of year is second only to Christmas in sales for stores like Wal-Mart, KMart and
Target. Dollar stores also tend to do well at this time of the year, according to the
article. 
The U.S. Department of Education projects that by the year 2006, there will be
approximately 54.3 million students in the United States. This would impact the amount of
increased sales significantly in the coming years. Enrollments for college and high
school students are growing the most quickly. This area has particular sales potential as
more money is generally spent on the purchase of products for college and high school
students than lower grade levels. Office supplies superstores such as Office Max and
Staples are providing competition for Office Depot in this area. 
Office Max, Staples and Office Depot all attract alot of back to school shoppers because
of their low price guarantees and a greater selection of products than at discount stores
such as Walmart and Target. 
We found that all of the information contained in this article was presented in a very
factual and equally representative manner. The author was unbiased in his writing as he
gave several facts and statistics. The author gave information regarding the behaviors of
the consumers and the market as a whole, not just one store chain in particular. Discount
stores as well as dollar stores and office superstores were mentioned in the article. The
article did not promote Office Depot over any other store. For these reasons, the article
seemed most unbiased.
On the contrary, the most biased article we found was entitled, Web Presence Key Strategy
for Office Depot, from Discount Store News, October 26, 1998. This article discussed how
the office superstore started selling products over the Internet in January 1998. This
was beneficial to both its small and large business clients. Office Depot's larger
business customers can access a private website where they can gain access to 10,000
products. This website saves time for the consumer as it eliminates having to drive to
the store and purchase from the location. Because the site is open 24 hours a day, people
can order whenever they would like to. This is a quick and efficient way to purchase
office supplies. The article went on to explain how the Internet ordering is proving to
be very successful for Office Depot and that it is expected to continue to grow. 
This article seemed particularly biased due to the fact that the author only provided
promotion for Office Depot. The author even went so far as to state the Office Depot
credo. At the end of the article, the author stated that the Internet is unknown for
other retailers, but not for Office Depot. That statement seems extremely bias as well as
unfounded. The author also included prices for Office Depot products and the website
address. The article seemed like more of an advertisement than a piece of news,
particularly as no comparison was made to similar office products stores which have
websites as well. 
International Management
As Office Depot has entered many international markets, it is important to review a
scenario for which international management is necessary. For this purpose, we will
assume that a successful store manager in one of the United States stores has recently
been assigned to another country where Office Depot has operations. This manager has just
arrived in the foreign country yesterday and has just visited the store
location there. The manager has spent several hours talking to the store managers and
employees and has observed its customers. The manager has observed that several customers
in the store have spent much time using the computers for personal use even printing out
memos and spreadsheets. This practice seems very different to the manager than what has
been observed in the U.S. stores. 
In this situation the manager would go about dealing with this situation by letting
people continue to work on the computers and observe what occurs. Video cameras could
also be set up for continuous observations. Perhaps, the more time spent on the computers
will result in increased appeal to purchase one of their own, or perhaps the software
they are using. Additional information would have to be accumulated to find out how other
stores in the area might handle the same situation. The manager could also talk to the
customers using the computers and ask them what they think of this service. 
A survey could be posted, regarding the content, convience and quality of the store. The
survey would be placed throughout the store, because the opinion of the consumers is of
high value to Office Depot Management when making decisions. After consideration, it may
be in the best interest of Office Depot to continue to run things as usual with some
slight changes. Since it is a different country in which the customs are different, and
are not always easily changed. 
Management may recommend that a clerk be present in the computer section at all times.
The clerk would be ready to help customers and constantly ask people if they would like
assistance. This might also discourage people from using the computers to do their
personal work, because many people do not enjoy others looking over their shoulders. Also
if there is someone there to constantly offer help with purchasing a computer or
software, the customers might feel more comfortable buying the merchandise after they
have used it. 
A sign could be posted that says, Try it then BUY it with a emphasis on the word 'buy'.
If the sign were not successful, management would recommend that another sign be posted
next to the computers that states, Limit 20 Minutes. If people still continued to use the
computers and supplies excessively, to the extent that it would hinder others from
looking at the computers, the spreadsheet programs could be replaced with demo versions.
Demo versions do not have the ability to print. The printers could also be reconfigured
so that people could not print from any application other than demo applications. 
Finally, part of the store could be made into a work area where customers could come and
use the computers, printers and software at an hourly rate. A work area would keep those
not interested in the purchase of a computer in an area set up particularly for that
purpose. This would keep others away from those computers that
are on display for the sole purpose of sale. The work area would provide an area for
customers looking for a place to do their personal work while providing another source of
income for the store. 
Conclusion
Effective management and decision making are necessary for dealing with obstacles such as
those of international management. In fact, for any obstacle to be handled the most
efficiently and effectively, management is key. Time and again throughout this case
study, we have seen examples of Office Depots success in management as well as many other
areas. Office Depot's management focuses on encouragement and reward of its associates.
Innovation, communication and entrepreneurial spirit are valued in Office Depot's most
valued asset, its associates.
Office Depot's associate-oriented environment is the type of very basic standard, towards
which Office Depot owes its success. Superior customer satisfaction is another standard
which Office Depot defines as a company-wide attitude that recognizes that customer
satisfaction is everything. Office Depot's pledge to offer only the highest-quality
merchandise available at everyday low prices, while providing customers with an
outstanding balance of value, selection and services is continually met. This type of
pledge coincides with Office Depot's ethical view on it being their responsibility to
conduct business with uncompromising honesty and integrity. Shareholder Value is yet
another standard met to provide Office Depot shareholders with superior
Return-On-Investment. Shareholder value create continuous shareholder commitment and
satisfaction. 
It is clear Office Depot succeeds in the many areas vital to its sustained growth and
success. Office Depot sets a business standard serving their customers through multiple
channels. As the business standard, Office Depot, Inc., together with its subsidiaries,
is the largest supplier of office products and services in the world. This was achieved
through its success in selling to consumers and businesses of all sizes through stores,
business service groups and internationally. It is definitely clear that in many aspects
under many points of view, the company realizes its mission statement in the most
successful office products company in the world.