Boise-cascade/Officemax: A Case Study in

Boise-Cascade/OfficeMax: A Case Study in Increased Value In what way is Boise-Cascade better equipped now to capitalize on new strategic alternatives after they acquired OfficeMax? Boise Cascade or OfficeMax? What name is more resonant to your consumer-savvy ears? Very likely, the latter, brand name of the famous office supply retailer is more familiar, even though it is a relatively smaller company. In fact, OfficeMax was acquired by a giant paper manufacturing and timber milling corporation in 2001, according to the Idaho Business Review.

According to the homepage of the behemoth, acquiring entity, "Boise manufactures engineered wood products, plywood, lumber, and particleboard and distributes a broad line of building materials. The company also manufactures specialty and premium paper products, printing and converting papers, containerboard and corrugated boxes, newsprint, and market pulp" (Boise Cascade, Homepage, 2007). On the eve of the acquisition, Boise Cascade's stock price was strong for a company of its size and type. It was trading in the $24-to-$25 range, but there were fears that the company was slowly faltering.

However, by possessing the name and the brand loyalty conveyed by the words OfficeMax, Boise-Cascade acquired new consumer capital and not only expanded its distribution arm, but also gave it new prominence to distributing in the company portfolio of its strategic options -- suddenly, its retailing and distribution capabilities had grown exponentially. When Boise Cascade acquired the Cleveland-based OfficeMax, OfficeMax was the No. 3 office product retailer in America, right behind Staples and Office Depot, a not unimpressive status (Boise Cascade-OfficeMax deal seen as strategic repositioning, Idaho Business Review, 2003).

After the acquisition, the Boise Cascade Corporation shifted its business 'mix' -- it was originally getting most of its revenue from timber manufacturing, after the OfficeMax deal immediately it was getting 80% of its revenues from distribution operations and 20% from its manufacturing operations. Manufacturing operations used to generate as much as 2/3 of Boise's bottom line, but falling prices for timber and wood products, convinced the present CEO of the company that Boise had to expand distribution in paper products rather than its manufacturing.

Now Boise had a captive storefront for all of its paper products. The acquisition was an attempt to transform Boise and make it a leading market force in office products distribution as well as manufacturing. This was seen as critical to keep the company's size and rate of growth at a strong pace, and to reinvigorate its holdings and mission focus for the 21st century. The acquisition more than doubled the size of Boise Cascade's office products distribution business (Boise Cascade-OfficeMax deal seen as strategic repositioning, Idaho Business Review, 2003).

Buying OfficeMax also added critical retail value to Boise Cascade's existing contract business with other distributors. It provided growth opportunities in the small-business segment, a then-unexplored element of a company that had dealt mostly with larger chains from a paper supplier's point-of-view. Thus, the acquisition created logistics and marketing advantages as well as potential gains in administrative efficiency, for a company that was once mainly known for the manufacturing of timber products.

Few consumers knew Boise's name, it was mainly known by many other businesses it dealt with, that had little loyalty to the company. However, Boise felt it could generate additional consumer loyalty to the OfficeMax name, create a niche for itself in retailing, and having more captive storefronts would streamline its operations. This shift was necessary because timber is a finite resource, and because of increasingly limited profits derived from this sphere in the future.

Market analysts initially expected Boise Cascade would eventually be taken over or broken up and sold off because its smaller distribution component parts were more valuable than the company as a whole. The assumption was that Boise Cascade's heavy emphasis on paper and wood products operations were keeping down its potentially considerable stock value and potential. Hedging its bets, even after acquiring OfficeMax, Boise Cascade also invested in upgrading wood products and paper production facilities.

But it admitted that "reinvesting in a market that is not growing, it is difficult to make a return on capital," in other words that such a move was not likely to happen again in the near or far future (Boise Cascade-OfficeMax deal seen as strategic repositioning, Idaho Business Review, 2003). Branding and gaining a lock on a distribution 'arm' and creating a face for the company was deemed the way to go.

Initially, despite its substantial name recognition, OfficeMax had many problems attracting shoppers, perhaps one reason it lagged behind rival Staples. "OfficeMax, an Illinois-based office supply chain, employed a warehouse style design for years: White, beige and blue color schemes; rows upon rows heaped with computer and office equipment. It was no-nonsense and professional, and according to some shoppers, uninviting and hard to navigate" (Middleton.2006).

The problem was that many people would come to the store in a very functional fashion, to simply replace a printer cartridge and leave, without lingering and impulse-shopping. This consumer spending is really the bread and butter of any market retailer. In short, the functionality and lack of name recognition that plagued Boise Cascade also was true, to a lesser extent of OfficeMax as a retailer. But to be faceless to consumers for a retail company, specifically acquired for its name, was potentially deadly.

However, with the magic marketing gurus, the OfficeMax image problem proved to be quite fixable, just as Boise Cascade's acquisition rehabilitated its name for investors. In one Florida location, the new and improve OfficeMax storefront that proudly purveyed Boise Cascade products now boasts an "Internet cafe, glossy banners and a new floor plan" that is more user-friendly (Middleton, 2006). This is.