Staples Inc: business operations and corporate overview

Staples, Inc.

Who are the current buyers (the target markets) of your Fortune 500 products? (business to consumers or business to business)

Staples sells to small and large businesses, home office professionals, and consumers (Staples, Inc. Fact Sheet, Hoover's). Most recently, the company has focused its attention on small- and large-business customers, while devoting less time to chasing the casual consumers that discounters such as Wal-Mart and Target are successfully serving (Staples: Riding high on small biz, 2004). After realizing that about sixty-five percent of its business was derived from small-business customers who also accounted for more than ninety percent of its profits, the company made the decision to turn even more attention on these consumers. Now, more than seventy percent of its sales come from small businesses and "power users" such as consumers that have their own home offices.

What is/are your corporation's marketing mix (as) Products? Prices? Promotions? Distribution (Places)?

Staples is enhancing specialty departments such as mobile computing, copy centers, and office furniture (Smart, 2005). It also trimmed some 800 items from its product list to focus on high-profit products such as printer ink cartridges and digital photography supplies. As a result, the company has increased its operating margins from less than five percent in 2000 to nearly eight percent in 2004. Staples has recently placed a greater emphasis on its delivery business, both for home-office and consumer customers, as well as a growing contract business that supplies major companies with all their office needs. The company recently signed a five-year, $275 million deal with Bank of America. Staples does not primarily compete on price because after performing market research it discovered that this factor did not even make it into the top ten reasons shoppers chose an office superstore.

Promotions are designed to reinforce Staple's quality service to its customers (Smart, 2005). The company has created a new advertising and marketing campaign around the word "easy" that features the different ways Staples serves its customers, from in-store buying to online shopping and delivery options. To simplify rebates, a customer is given an invoice with a rebate authorization number when they make a purchase. The customer then enters the number at Staples.com, and gets a check back within four weeks.

Distribution channels for Staples consist of retail stores, and catalog and Internet businesses (2004 Annual Report). The North American Retail segment, consisting of 1,426 stores throughout the United States and Canada at the end of fiscal 2004, generated the majority of our sales and profits during fiscal 2004. Staples operates under various names in eighteen countries in Europe and South America. In addition, it operates in Asia through its equity investment in OA365, a delivery business based in Shanghai, China. Electronic commerce is rapidly replacing catalog sales (Staples: Riding high on small biz, 2004). Electronic commerce sales reached more than $2.1 billion in 2003, up more than thirty percent from the previous year.

3. Identify the appropriate target strategy(ies) that your corporation uses. Undifferentiated? Concentrated? Differentiated?

Staples uses a differentiated strategy based on superior in-store service and delivery of office supplies directly to businesses (Staples: Riding high on small biz, 2004). To improve in-store service, it has increased the number of people working in its stores and has provided them with extensive training. For the customer, this has translated into knowledgeable help, fast check out, and avoidance of out-of-stock items. For delivery of office supplies, it uses two separate sales forces, one to acquire new accounts and the other to service accounts. In this way, it avoids the problem of representatives who are too busy getting new business to pay attention to serving new accounts. As a result of its delivery service, the company is winning business from larger companies.

4. Distinguish the market segmentation variables for consumer markets.

Staples operates in three business segments: North American Retail, North American Delivery and International Operations (2004 Annual Report). Within these geographic segments, it targets four principal groups: home offices (customers spending over $500 per year on office products excluding computers and furniture; including home-based businesses and teachers); small businesses and organizations with up to twenty office workers; medium-size businesses and organizations with between twenty and 500 office workers; and large businesses and organizations with more than 500 office workers.

Staples views its ability to address all four major customers segments as necessary to increase and diversify market opportunities, increase brand recognition in groups that shop across multiple sales channels and to allow it to benefit from economics of scale (increased buying power, enhanced efficiencies in distribution and advertising, and improved capacity to leverage general and administrative functions).

5. Do a SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis of your corporation by scanning and analyzing the environmental forces (economic, political, legal/regulatory, technological, socio-cultural, competitive) by finding articles in the Wall Street Journal, NY Times, U.S. New & World Report, etc.

Strengths:

Staples is the world's largest office products company. For fiscal year 2004, its sales reached $14.4 billion, an eleven percent increase compared to 2003 (Staples, Inc. reports fiscal 2004 and fourth quarter results, 2005). Net income for 2004 was $708 million, an increase of forty-one percent from 2003. Full year North American Retail comparable store sales increased four percent. The company's success is in part attributable to its customer service, backed by strong branding for making it easy to buy office products. Improvements in inventory management, supplier relationships, and a focus on high-profit products like have enabled Staples to boost its operating margins from less than five percent in 2000 to nearly eight percent in 2004 (Smart, 2005). The company has also reduced its annual capital expenditures and increased its overall return on assets. Staples now generates more than $700 million a year in cash.

Weaknesses:

Staples has three major weaknesses. First, it likes to saturate markets with stores (Klebnikov, 2001). The problem with continued expansion is that new stores tend to cannibalize other Staples stores in the area, further hurting same-store sales. Staples growing Internet business only adds to this problem. Although a global company, Staples is still reliant of North America for the majority of its sales and profits (2004 Annual Report). Lastly, the company has no strategy for serving casual consumers, all but ceding this market to low cost discounters such as Walmart and Target (Staples: Riding high on small biz, 2004). Staples needs to keep in mind that the casual consumers of today are often the "power users" or small business owners of tomorrow. However, how loyal they will remain as their technology use and consumption increases is unclear.

Opportunities:

Staples' sweet spot, the "power users" and small business owner segments, is expected to continue to grow (Smart, 2005). Demographers and labor experts predict more employees will work at home. And, experts expect people to become more technology savvy and more likely to take work home.