Rubric for Individual Case Analysis
Items will be rated from 0 - 5. Please refer to your syllabus for
understanding of each rating.
Identify a major problem and provide justification
Explain the industry attractiveness
Ability to identify the organization's objective and strategies
Identify and understand mission statement components; understand how
to properly revise mission statement
Develop a financial analysis for the organization
Ability to explain the financial position
Ability to conduct an internal analysis
Ability to conduct an industry analysis
Develop the IFE, EFE, and CPM, and identify the major concerns
internally, externally, and competitively
Develop matching matrixes and identify strategies
Develop QSPM and explain recommendation with justification
496
STRATEGIC MAnAGEMEnT CASES
Office Depot, inc. — 2011
Wayne E. Smith
Argosy University – Dallas campus
ODP
www.officedepot.com
Office Depot was chosen by readers of theStreet.com as the most likely retail takeover target
in 2011. Office Depot’s ceO Steve Odland left the company in 2010 after a Sec investigation
for inappropriately revealing confidential information. Office Depot lost $15 million in the first
quarter of 2011, compared to a $20 million profit the first quarter the prior year. the company’s
first quarter 2011 revenue fell 3 percent to $2.97 billion from $3.07 billion a year ago. revenue
at the 1,115 Office Depot stores in the United States and canada that have been open more than
a year fell 1 percent. new Office Depot ceO neil austrian desperately needs a clear strategic
plan to reverse declining revenues and profits. as the whole world shifts to paperless transactions, Office Depot’s historical business model is questionable.
Second Quarter of 2011
Office Depot’s second quarter 2011 sales totaled $2.7 billion, almost the same as the prior year.
the company however reported a loss of $29 million for the second quarter, compared to a loss
of $25 million in the same period a year ago. the company’s north america retail division
reported sales the second quarter of $1.1 billion, down 2 percent versus one year ago, led by a
sharp decline in computer sales. Furniture sales however increased as did sales for storage items,
printers, writing instruments and cleaning and breakroom supplies. Office Depot’s tech Depot
Services segment reported double-digit sales gains versus the prior year. copy & Print Depot
sales grew positively for the sixth consecutive quarter.
Office Depot’s north american store count at the end of the second quarter was 1,131
stores. During that quarter, the company opened 4 new stores and closed 14 stores, including
closure of their remaining 10 stores in canada. During that quarter, Office Depot remodeled 5 stores and relocated 4, successfully reducing the square footage in those 9 locations
by about 30 percent on average. the company’s north american retail segment reported
operating profit of $15 million in the second quarter of 2011, compared to $9 million the
prior year.
Office Depot’s north american Business Solutions Division (BSD) reported second quarter
2011 sales of $803 million, down 2 percent versus the same period last year. Positive sales
growth was reported though in seating and cleaning and breakroom supplies. However, paper
sales declined as did ink and toner sales. Second quarter sales in texas and Florida were better
than the overall BSD rate, but sales in california stores was worse. Second quarter operating
profit for BSD was $45 million, up significantly from the $14 million reported in the same
period one year ago.
the company’s international division reported second quarter 2011 sales of $827 million,
an increase of 6 percent compared to the prior year in U.S. dollars and a decrease of 5 percent
in constant currency. these results include the negative impacts of the company divesting its
stores in Japan, israel, and india in 2010 and the positive impact from acquiring Svanströms in
Sweden during the first quarter of 2011. geographically, BSD sales in France were relatively
flat compared to the prior year, while the U.K. and germany reported small declines in
sales. company stores in asia reported high single-digit growth in the second quarter. the
international division reported operating profit of $13 million for the second quarter compared
to $19 million the prior year. Office Depot de Mexico reported sales of $272 million and net
income of just over $14 million in the second quarter of 2011.
CASE 9 • OFFICE dEPOT, InC. — 2011
if you are interested in purchasing a tablet computer, Office Depot stores currently offer
8 tablets with complete accessories: the HP touchPad, the aSUS transformer, the BlackBerry
Playbook, the toshiba thrive, the acer iconia, the Lenovo ideaPad, the ViewSonic g-tablet and
the Velocity Micro cruz.
History
the first three Office Depot stores opened in 1986 in Florida with company sales of $2 million. By its 10th anniversary, Office Depot had 570 stores in north america, $6 billion in sales,
and 31,000 employees. When it reached its 20th year, Office Depot had 50,000 employees,
sales of $15 billion, and accolades as “Humanitarian of the Year” and one of america’s top
corporations for women’s business enterprises for the fifth year. Office Depot’s corporate
social responsibility continued to grow and in april 2011, Office Depot partnered with Local
governments for Sustainability USa (icLei) to launch the 2011 green Business challenge.
Office Depot is a very “green” company, as indicated in exhibit 1. all that is the good news.
the bad news is that Office Depot is an unprofitable company competing in an unprofitable
industry.
Vision/Values/Ethics/Mission
as provided in exhibit 2, Office Depot has a five-point vision statement. to fulfill this vision,
Office Depot has a values statement as given in exhibit 3. the company has a one-sentence code
of business ethics, as follows: “We earn the trust and confidence of associates, customers, suppliers and shareholders by being open, honest and truthful in all that we do.” Office Depot does
not have a written mission statement, but two analysts recently suggested the mission statement
provided in exhibit 4.
EXHIBIT 1 Office Depot’s 2010 “Green” Accolades and Accomplishments
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Launched “recycling rules” program to reward schools
recognized as america’s greenest large retailer in Newsweek magazine’s annual
green ranking
named “Best new Product” award winner with Lil’ Drug Store Products by Convenience
Store News
Showcased 40 new “green” initiatives in honor of the 40th anniversary of earth Day
awarded LeeD gold certification for existing Buildings for corporate headquarters
announced nationwide rollout of United States Postal Service offerings
Opened first LeeD for commercial interiors registered retail store
announced Forest Stewardship council (FSc) certification of Office Depot® green™ 30%
recycled envirocopy™ Paper
Selected as one of america’s top corporations for Women’s Business enterprises by the Women’s
Business enterprise national council (WBenc) for the ninth consecutive year
recognized as a top company Dedicated to the advancement of Women by national association
for Female executives (naFe)
appointed one of the top Organizations for Multicultural Business Opportunities for 10th
consecutive year
celebrated successful second season as sponsor of tony Stewart, driver of the no. 14 Office Depot
chevrolet in the naScar Sprint cup Series™
Launched greener Shipping solution for business customers
teamed up with Lexmark and Operation Homefront to provide military families with free printers
released second annual Historically Underutilized Businesses (HUB) catalog
announced new partnership with national intergovernmental Purchasing alliance
Launched “Document Shredding While You Wait,” an in-store shredding service
Became an energY Star® commercial Buildings Partner
Source: www.officedepot.com.
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498
STRATEGIC MAnAGEMEnT CASES
EXHIBIT 2 Office Depot’s Vision Statement
Delivering Winning Solutions that inspire Worklife™
• Delivering—Our actions speak louder than words. We are accountable: doing what we say we’re
going to do—efficiently and on time.
• Winning—We act with confidence. We’re proud to win. We push ourselves to greater heights.
and we don’t settle for less than being the best.
• Solutions—We listen to our customers and understand their needs. We offer products, services
and innovative thinking that enable our customers to achieve success.
• Inspire—Our inspiration is contagious and enables us to unleash creativity to help people achieve
their goals. Our motivation and enthusiasm inspire others to succeed.
• Worklife™—We combine our energy for work with our passion for life — creating a fuller, more
enriched lifestyle. We share the desire to maximize human potential to achieve personal dreams.
Source: www.officedepot.com.
EXHIBIT 3 Office Depot’s Values Statement
•
•
•
•
•
Integrity—We earn the trust and confidence of associates, customers, suppliers and shareholders by
being open, honest and truthful in all that we do.
Innovation—With a culture of creativity and a thirst for intelligent risk-taking, we aspire to do what
has never been done.
Inclusion—We approach all opportunities and challenges by respecting the diverse thoughts,
beliefs, backgrounds, cultures and energies of all associates, customers and suppliers.
Customer Focus—We fuel our customers’ dreams by anticipating and listening to their needs
and passionately delivering on our promises. Failure is not an option, as we promise to “wow”
on recovery.
Accountability—We are responsible for achieving and sustaining unprecedented results that create
extraordinary value to our shareholders, customers, and employees.
Source: www.officedepot.com.
EXHIBIT 4 A “Proposed” Mission Statement for Office Depot
Our mission at Office Depot is to be a global, leading innovator as a supplier of office products and
services for consumers and businesses of all sizes while creating a positive impact on the environment.
We continually strive to deliver our customers favorably-priced products, beneficial services, and the
latest in digital imaging and printing technology. We will earn the trust of our stakeholders by being
open, honest, and faithful in all that we do. We will also be responsible for achieving and sustaining
unprecedented results that create value to our customers, employees, and stakeholders through personal
commitment, sensible thrift, collaboration, and shared leadership.
Source: Used by permission of ryan Sealey and terrence Jones.
Office Depot even goes on to explain that they not only follow the letter of the law, but the
spirit of the law as well. they clearly state that they are responsible for knowing the law, rules,
and regulations in each venue in which they conduct business and that all employees should
strive to not only uphold same, but avoid even the appearance of questionable conduct.
Internal Issues
Business Segments
Office Depot operates in three divisions or segments. the first, the company’s north american
retail division, sells an assortment of merchandise, such as general office supplies, computer supplies, business machines and related supplies, and office furniture under various labels, including Office Depot, Viking Office Products, Foray, ativa, Break escapes, niceday, and Worklife
through its chain of office supply stores. it also provides printing, reproduction, mailing, shipping, and other services, as well as personal computer support and network installation service.
this division operates 1,147 office supply stores in the United States and canada.
CASE 9 • OFFICE dEPOT, InC. — 2011
The company’s second division, North American Business Solutions, Division (BSD) sells
nationally branded and private-brand office supplies, technology products, furniture, and services
to small- to medium-sized customers through a dedicated sales force, catalogs, and the Internet.
The company’s third division, International, sells office products and services through directmail catalogs, contract sales forces, Internet sites, and retail stores using a mix of company-owned
operations, joint ventures, licensing and franchise agreements, alliances, and other arrangements.
Office Depot sold office products to customers in 53 countries in North America, Europe, Asia,
and Latin America. This division operated, through wholly-owned or majority-owned entities,
97 retail stores in France, Hungary, South Korea, and Sweden and participates under licensing and
merchandise arrangements in South Korea, thailand, india, israel, Japan, and the Middle east.
Financial performance data for Office Depot’s three divisions is provided in exhibit 5.
notice all the negative numbers that indicate falling revenue and profit totals.
Management
neil r. austrian is Office Depot’s chairman and ceO. Mr. austrian’s top management team,
which oversees more than 50,000 employees, is illustrated in exhibit 6. exhibit 7 reveals yearend 2010 information about the 1,147 Office Depot stores in the United States and canada and
the 97 company stores outside north america.
Finance
Office Depot lost less money in 2010 than in the prior two years but continues to lose money every
quarter in 2011. the company’s income statements and balance sheets are provided in exhibits 8
and 9 respectively. as indicated in exhibit 10, Office Depot has an extensive information system
EXHIBIT 5 Office Depot—Performance by Division ($ in millions)
OFFice DePOt’S DiViSiOn inFOrMatiOn
North American Retail Division
0
Sales
% change
Division operating profit
% of sales
Fourth Quarter
2010
2009
$1,234.3
$1,262.8
−2.0%
−9.0%
$16.2
$2.2
1.3%
0.2%
North American Business Solutions Division (BSD)
Fourth Quarter
0
2010
2009
Sales
$797.8
$821.1
% change
−3.0%
−11.0%
Division operating profit
$37.1
$21.3
% of sales
4.7%
2.6%
year-to-date
2010
2009
$4,962.8
$5,113.6
−3.0%
−16.0%
$127.5
$105.5
2.6%
2.1%
year-to-date
2010
2009
$3,290.4
$3,483.7
−6.0%
−16.0%
$96.5
$98.2
2.9%
2.8%
International Division
0
Sales
% change
% change in local currency sales
Division operating profit
% of sales
Fourth Quarter
2010
2009
$929.9
$982.0
−5.0%
2.0%
0.0%
−6.0%
$20.6
$63.8
2.2%
6.5%
year-to-date
2010
2009
$3,379.8
$3,547.2
−5.0%
−16.0%
−2.0%
−9.0%
$110.8
$119.6
3.3%
3.4%
Division operating profit excludes charges from the division performance, as those charges are evaluated
at a corporate level.
Source: Office Depot, Inc. Form 10K, 2010.
499
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STRATEGIC MAnAGEMEnT CASES
EXHIBIT 6 Office Depot—Top Executives and Organizational Chart
Chairman and
Chief Executive Officer
Neil R. Austrian
President, North
American
Retail Division
Kevin Peters
Executive
Vice President &
Chief Financial Officer
Mike Newman
President, North
American Business
Solutions Division
Steven M. Schmidt
Executive
Vice President,
Human Resources
Daisy Vanderlinde
ExecutiveVicePresident, Global
E-Commerce
Monica Luechtefeld
President,
International Division
Charles E. Brown
Executive
Vice President,
General Counsel
Elisha D. Garcia
Source: www.officedepot.com
EXHIBIT 7 Office Depot Store Data
13 weeks Ended
dec. 25, 2010
Store Statistics
United States and canada:
Store count:
Stores opened
Stores closed
Stores relocated
total U.S. and canada stores
52 weeks Ended
dec. 26, 2009
3
6
4
1,147
2
8
1
1,152
north american retail Division square footage
average square footage per store
27,559,184
24,027
28,109,844
24,401
international Division company-owned:
Store count:
Stores opened
Stores closed/deconsolidated
Stores acquired
Total International company-owned stores
1
45
–
97
1
2
–
137
dec. 25, 2010
dec. 26, 2009
17
22
6
1,147
6
121
6
1,152
7
47
–
97
4
29
–
137
Source: company documents.
EXHIBIT 8 Office Depot’s Income Statements (in thousands)
Period Ending
dec. 26, 2010
dec. 26, 2009
dec. 27, 2008
Total Revenue
cost of revenue
$11,633,094
$8,275,957
12,144,467
$8,752,283
14,495,544
$10,489,785
3,357,137
3,392,184
4,005,759
–
3,343,133
–
3,631,014
–
4,065,836
gross Profit
Operating expenses
research Development
Selling general and administrative
CASE 9 • OFFICE dEPOT, InC. — 2011
Period Ending
nonrecurring
Others
total Operating expenses
Operating income or Loss
income from continuing Operations
total Other income/expenses net
earnings Before interest and taxes
interest expense
income Before tax
income tax expense
Minority interest
net income from continuing Ops
nonrecurring events
Discontinued Operations
extraordinary items
effect of accounting changes
Other items
Net Income
Preferred Stock and Other adjustments
net income applicable to common Shares
dec. 26, 2010
51,295
–
3,394,428
dec. 26, 2009
26,175
–
3,657,189
dec. 27, 2008
1,484,964
–
5,550,800
(37,291)
(265,005)
(1,545,041)
39,114
1,823
58,498
(56,675)
(10,470)
1,582
(44,623)
19,481
(245,524)
65,628
(311,152)
287,572
2,259
(596,465)
35,744
(1,509,297)
68,286
(1,577,583)
(98,645)
–
(1,478,938)
–
–
–
–
(44,623)
(37,113)
$(81,736)
–
–
–
–
(596,465)
(30,506)
$(626,971)
–
–
–
–
(1,478,938)
–
$(1,478,938)
Source: company documents.
EXHIBIT 9 Office Depot’s Balance Sheets (in thousands)
Period Ending
dec. 26, 2010
dec. 26, 2009
dec. 27, 2008
Assets
current assets
cash and cash equivalents
Short-term investments
net receivables
inventory
Other current assets
$627,478
–
963,787
1,233,657
203,020
$659,898
–
1,121,160
1,252,929
172,342
$155,745
–
1,451,927
1,331,593
183,122
total current assets
Long-term investments
Property Plant and equipment
goodwill
intangible assets
accumulated amortization
Other assets
Deferred Long-term asset charges
3,027,942
–
1,157,013
19,431
21,840
–
309,892
33,319
3,206,329
–
1,277,655
19,431
25,333
–
279,892
81,706
3,122,387
–
1,557,301
19,431
28,311
–
540,796
–
Total Assets
4,569,437
4,890,346
5,268,226
$2,271,077
72,368
–
2,343,445
$2,368,360
59,845
–
2,428,205
$2,433,812
191,932
–
2,625,744
Liabilities
current Liabilities
accounts Payable
Short/current Long-term Debt
Other current Liabilities
total current Liabilities
(continued)
501
502
STRATEGIC MAnAGEMEnT CASES
EXHIBIT 9 continued
Period Ending
Long-term Debt
Other Liabilities
Deferred Long-term Liability charges
Minority interest
negative goodwill
Total Liabilities
Stockholders’ Equity
Misc. Stocks Options Warrants
redeemable Preferred Stock
Preferred Stock
common Stock
retained earnings
treasury Stock
capital Surplus
Other Stockholders’ equity
Total Stockholders’ Equity
Total Liabilities and SEquity
dec. 26, 2010
dec. 26, 2009
dec. 27, 2008
659,820
–
514,218
479
–
662,740
–
654,851
2,827
–
688,788
–
585,861
4,883
–
$3,517,962
$3,748,623
$3,905,276
–
355,979
–
2,831
(634,818)
(57,733)
1,161,409
223,807
–
355,308
–
2,807
(590,195)
(57,733)
1,193,157
238,379
–
–
–
2,808
6,270
(57,947)
1,194,622
217,197
695,496
786,415
1,362,950
$4,569,437
$4,890,346
$5,268,226
Source: company documents.
EXHIBIT 10 Office Depot’s Public Websites Outside of North America
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
austria:
Belgium:
canada:
china:
costa rica:
czech republic:
el Salvador:
europe:
France:
germany:
guatemala:
Hungary:
ireland:
israel:
italy:
Japan:
Luxembourg:
Mexico:
the netherlands:
Poland:
Slovakia:
South Korea:
www.officedepot.at and www.vikingdirekt.at
www.officedepot.be (Dutch), www.office-depot.be (French);
www.vikingdirect.be (Dutch) and
www.viking-direct.be (French)
http://www.officedepot.ca
www.officedepot.com.cn and www.officedepot.cn
www.officedepot.co.cr
www.officedepot.cz
www.officedepot.com.sv
www.officedepot.eu
www.officedepot.fr, www.office-depot.fr, and www.vikingdirect.fr
www.officedepot.de, www.viking.de, and www.techdepot.de
www.officedepot.com.gt
www.officedepot.hu
www.officedepot.ie and www.vikingdirect.ie
www.officedepot.co.il
www.office-depot.it and www.vikingop.it
www.officedepot.co.jp
www.officedepot.lu (French) and www.viking-direct.lu
www.officedepot.com.mx
www.officedepot.nl, www.techdepot.nl, and www.vikingdirect.nl
www.officedepot.pl
www.officedepot.sk
www.bestoffice.co.kr
CASE 9 • OFFICE dEPOT, InC. — 2011
•
Spain:
Switzerland:
•
United Kingdom:
•
www.officedepot.es and www.vikingdirect.es
www.officedepot.ch (german), www.office-depot.ch (French),
www.vikingdirekt.ch (French), and www.viking-direkt.ch
(germany)
www.officedepot.co.uk, www.viking-direct.co.uk, and
www.techdepot.co.uk
Source: www.officedepot.com.
that links each store in the global network. the company utilizes websites in 40+ countries outside of north america. each website provides extensive service offering all products and many
payment methods.
Competition
Staples
Headquartered in Farmingham, Massachusetts, Staples is the largest office products supply
company in the world with about 2,240 stores in the United States, canada, Belgium, Denmark,
germany, ireland, the netherlands, norway, and other countries. the company also operates
125 distribution centers and sells products through a catalog, its website, and a sales force.
Staples’ sales for 2010 increased 1.1 percent to $24.5 billion. cost controls helped push
operating income up 13.8 percent to $1.6 billion, and net income jumped 19.4 percent to $881.9
million. However, the company’s operating cash flow fell nearly 31 percent due to 1) the need
to spend to rebuild inventories and 2) higher receivables, meaning the company was less able to
collect payment from customers. exhibit 11 compares Staples to Office Depot.
OfficeMax
Headquartered in naperville, illinois, OfficeMax operates 44 distribution centers and just over
1,000 office products stores in the United States, Mexico, canada, australia, new Zealand, and
Puerto rico. OfficeMax’s first-quarter 2011 net income fell to $11.4 million, or 13 cents a share,
from $24.8 million, or 29 cents a share, a year earlier. Sales that quarter fell 2.8 percent to $1.86
billion. Sales at OfficeMax’s contract segment, which caters to business customers, fell 3.9 percent.
Same-store sales fell 1.2 percent.
OfficeMax has begun to sell additional goods to business customers, such as furniture and
cleaning products, as well as print services to offset declines in the traditional office product
category. the company plans to close 15 stores in the United States in 2011 and has seen its
stock price drop continuously to below $10 per share. Mexico is a bright spot for OfficeMax as
the company plans to open nine stores in that country in 2011 compared to closing nine stores in
the United States.
EXHIBIT 11 Office Depot’s Competitors
Office Products Companies
Office depot
$Market cap:
1.18B
#employees:
40,000
%Qtrly rev growth:
−3.40%
$Revenue:
11.63B
%Gross Margin:
28.86%
$EBITDA:
247.32M
%Operating Margin:
0.34%
$Net Income:
−81.74M
$EPS:
−0.30
Source: Company documents.
Office Max
1.10B
19,000
−2.40%
7.15B
25.87%
266.45M
2.32%
68.63M
0.79
Staples
14.86B
52,919
0.10%
24.55B
30.15%
2.13B
6.65%
881.95M
1.21
wal-Mart
187.06B
2,100,000
2.40%
421.85B
25.26%
33.18B
6.06%
15.36B
4.46
Industry
259.52M
2.85K
4.30%
442.08M
35.82%
29.49M
6.24%
N/A
0.17
503
504
STRATEGIC MAnAGEMEnT CASES
The Future
the big three office supply firms, including Office Depot, operate very similar business models,
which means the firm with the best strategic plan and operational efficiencies will ultimately
survive. there exists very intense price competition among the big three firms, and secondary
firms such as Wal-Mart, Kmart, and target are always vying for additional market share. Online
competitors are also taking market share from the big three. Maybe the big three should diversify away from selling traditional office products or move more aggressively toward becoming a
mostly online business, or focus more on South america or africa.
Maybe the big three office supply firms should focus more on emerging economies and
global expansion. For example, Staples just formed a new strategic alliance with one of the leading Swiss office products companies, Büro Schoch Direct ag. Within Switzerland, Staples and
Büro Schoch Direct will work together exclusively on international accounts and collaborate to
exchange best practices. Maybe Office Depot could emulate OfficeMax’s success in Mexico.
celebrating 25 years as a leading global provider of office supplies and services, Office Depot
received the corporate Business achievement award from the U.S. Postal Service (USPS) at the
national Postal Forum held May 1–4, 2011, in San Diego, california. Office Depot was honored
for its commitment to a successful business partnership with the USPS, offering postal services
and products within the company’s retail store locations nationwide. through this partnership,
Office Depot became the first national retailer to offer USPS shipping products and services at the
same prices as the post office. Services offered in every Office Depot include: Priority Mail Flat
rate Service; Priority Mail Service; express Mail Service; First-class Mail Service; and stamp
purchases in books or large coils.
Office Depot recently teamed up with 3M and naScar stars tony Stewart, driver of
the no. 14 Office Depot/Mobil 1 chevrolet, and greg Biffle, driver of the no. 16 3M Ford, to
offer the exciting possibility of a $1 million payday for one small business owner through the
“Official Small Business of naScar, courtesy of Office Depot” sweepstakes. Do you think
this marketing expense will be worth the money Office Depot is spending?
Prepare a three-year strategic plan for Office Depot’s CEO Neil Austrian.
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