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Office Depot

Final presentation

katelin penaranda

on 19 January 2013

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Transcript of Office Depot

Internal Position Competitor's Graph Conclusion Office Depot Meghan Flynn, Megan Lynch,
Mary Parks, and Katelin Penaranda EBIT/EPS Analysis Weighted Average Cost of Capital Book Value: 11.25%
Market Value: 17.34% Capital Requirements Strategy Implementation Agenda Potential Strategies 1. It's Depot Time!
2. Industry Analysis
3. Update Office Depot
4. Current Strategic Issues
5. Current Strategy
6. Company Worth
7. Potential Strategies
8. Strategy Formulation
9. Our Strategic Recommendation
10. Corporate Value
11. Strategy Implementation
12. Questions & Answers
13. Conclusion Industry Overview Industry Analysis Market Share Proposed Mission Statement Financial Worth of Office Depot Updating the Office Depot Case
- Sales decrease from 3Q 2011
- Net loss $70m after preferred stock dividends Strategy Formulation Corporate Value Operating and Selling Expenses Net Present Value Effects of the Strategy Task People Tools Reward System Structure Performance - Small business focus
- Customer oriented employees
- Improve shopper efficiency
- Brand management
- Copy and print services
- Expense control
- Close and downsize stores
- It's Depot Time! Downsize store formats: 5000 square feet
- 100 stores a year, as leases expire
- All stores within next 5 years

Cost: $60 million a year for 5 years

Save: $20 million for every year implemented Global Expansion Merge Office Depot and OfficeMax - Cooperation from employees when relocating stores

- Lay off most recently hired part-time employees

- Transfer current managers to new store locations

- Managers train employees to accommodate customers first Staples Acquires
Office Depot - Communicate new retail formats through advertising

- Maximize shopping efficiency
- Decrease inventory by half
- More organized store formats - Mission statement focuses on customer satisfaction
- Employees must cater to the needs of customers
- Office Depot depends on small business customers

- Customer oriented attitudes assessed in employee evaluations Threat of New Entrants Threat of Substitutes Buyer Power Supplier Power Rivalry Intensity easy entry into Office Supply Industry
- Modern technology vs. traditional paper products
- Increase in online shopping
- One-stop-shops weak moderate - CEO: Neil R. Austrian

- President of North American Division

- Individual store managers
- Slow market growth
- Slow switching costs
- Diversity of rivals - Compare quarterly financial statements:
- Larger store formats vs new smaller formats

- Continued measure of customer satisfaction via 24 hour hotline

- Product placement to accommodate customers’ needs medium to high high intensity - Common technology
- Little branding
- Delivery offers access to distribution channels - Buyers are fragmented - Standardized products
- Suppliers are somewhat concentrated - Second largest office supply chain
- Office Depot, OfficeMax, and Staples hold 10% of the market 3rd Quarter Loss in 2012 Current Strategies - High risk
- Decrease in corporate value - 2.5% and 3% growth in proforma
- Cost cutting initiatives
- Downsizing store formats
- Investment and money saved
- Store and Warehouse Operating and Selling Expenses - Downsizing store format will decrease operating capital and sales should remain the same meaning capital requirements will decrease - Capital requirements decrease corporate value increases CR= Operating Capital/Sales Questions? - Impact on 2013 earnings
- Value of strategy
- Costs and savings - Structure A (debt)
- Structure B (equity)
- Structure C (debt/equity) Strategy - Downsizing store formats to 5,000 squared feet
- Focus on small business market
- Relocate stores to business parks and warehouse districts to capitalize on potential retail growth
- Train employees to place a larger emphasis on customer needs utilizing a smaller and more efficient store format Competitor Yearly Sales Revised Vision Statement - Small business focus
- 5 year plan to recover from 2008 sales loss Current Strategic Issues - Negative revenue from 2008 - 2010
- Lack of advertising
- Kevin Peters
- Weak global position Downsize Office Depot Office Depot's Current Strategy Our Proposed Strategy - Defensive strategy
- Staples competition
- Market share
- OfficeMax debt - Started in 2009
- Store leases
- 5,000 square feet format - 60 countries
- China
- Europe sales
- Office Depot de Mexico
- Distribution Centers External Position Competitive Profile Matrix Defensive Strategy - Prohibited by Federal Trade Commission
- Monopoly
- Unfairly raise prices
- Staples interest Internal Position - Closing nonprofitable stores
- Downsize 100 stores a year
- Store format to 5,000 squared feet
- Cutting store inventory
- Only Office Depot brand products
- Other brands and furniture sold online - 2010 to 2011, net income rose from ($46,623 million) to $95,694 million
- Investors' confidence rose due to Starboard LP investment Strengths - 2010 to 2011, sales revenue decrease $11,633 million to $11,489 million
- Office Depot closed 300 stores in North America in the last three years
- In 2009, Office Depot closed all stores in China Weaknesses - Paper based products hold more than 45% of the industry
- Worldwide office service and supply industry recorded more than 3% growth in 2010 and 16% in the 5 year period ending in 2015 Opportunities - Staples is the #1 office supply superstore worldwide
- Staples expects to triple its e-commerce in the next 3 years
- Mass merchants create competition for office supply retailers Threats - Focus on small to medium sized businesses
- Relocate new, smaller stores to business parks and warehouse districts
- Stop closing stores
- Become accustomed to the new store format in order to cater to the on-the-go customer - Weak competitive position
- Current slow market growth
- Staples dominates the market
- New competition from mass merchants Debt Ratio Office Depot Currently
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