StaplesStaplesSTAPLESIn 1985, before Staples was established, a retail office supply industry did not exist. Office supplies could either be purchased at large retail stores that sold an assortment of other goods or through wholesalers and dealers. Through the establishment of Staples, consumers realized that they could purchase office supplies at half the price. During this time period companies were consolidating and making retail stores that focused on one industry like Toys R Us. After Tom Stemberg, the founder of Staples, was fired from his job, he saw the need for cheaper office supplies. Leo Kahn, an associate of Stemberg, believed in Stemberg’s vision and became his mentor and invested $500,000 into his business idea. Initially, Stemberg thought about going into the supermarket grocery retailing industry, but rejected the idea because of the extreme competition. Stemberg began investigating the need for an office supply industry through conducting interviews on how much money people spent on supplies. He knew that through his vision, he could help consumers save money. Stemberg decided that Staples’s target market would be small businesses because he was aware that small businesses did not get the same type of discounts that larger corporations did.
Through Stemberg’s compelling arguments and strong belief that Staples was going to become a success, he was able to collect $4 million from Bain Venture Capital in exchange for 50 percent of the company. Stemberg was able to convince the investors that Staples was going to create a new retailing industry. He also showed investors that Staples was a way for consumers to save money. In order to ensure the success of Staples, Stemberg needed a strong management team and the most effective information system. Stemberg hired experienced professionals that were very successful in their previous positions in other companies. He was able to convince the management team to leave their jobs and high paying salaries by promising them a large portion in the company. It was also important that the information system Staples adopted was able to calculate the gross profit margin Staples made on each item sold (Hill et al, p.C192). The information system also needed to trace transactions, track inventory, and ensure that inventory turned over.
After the first Staples store became a success, it was time to establish other stores. In order to acquire more capital, Stemberg used his visionary pitch to attract more venture capitalists. He raised $15 million, but got a valuation for $22 million, therefore he wanted to raise more money. He received an additional $14 million by finding institutional investors who were willing to invest on a valuation of $22 million. He then went back to the original VCs and told them that the deal was closing fast which persuaded them to commit. (Hill et al p, C193)
Soon after Staples was established, there were several companies that replicated the store’s concept. However, Staples was able to become a leader in the industry by maintaining low costs and providing its customers need. Staples is able to maintain low prices through renting smaller spaces for its stores while still providing a wide range of office supply products. Staples grew by focusing on key urban areas and achieving a critical mass of stores served by a central distribution system. (Hill et al p.C194)
PORTER’S FIVE FORCES MODELThe Michael E. Porter Five Forces Model analyzes a company by focusing on five forces that shape competition with an industry. (Hill, et al 46) The model focuses on potential competitors, rivalry among established companies, bargaining power of buyers and suppliers and substitute products.
Risk of entry by potential competitorsThere is a weak threat of entry by a potential competitor. It is fairly easy to get into the office supply industry, but the risk is high. A new company would have risk competing with three large companies that possess the majority of the market share. In the early 1990s there were numerous companies entered the industry soon after Staples was established, many of those businesses simply could not exist. (Hill et al p.C194) The brand names of Staples and the other two large competitors are barriers to entry for a potential competitor. Customers show loyalty to the three companies. In order to compete, the new company needs to establish lower costs than the leading companies in the industry, but it is very difficult to achieve it as a new company.
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>Dates of manufacture, sales, and profit. This can also complicate the business decision making process if the competitor is a known player in the marketplace. A consumer would not want their money back from the competitors.
>For the business it would be cheaper to obtain information that would make it easier for them to purchase products and services. If competitors are buying products in a store, there will be an effort to make it work the way they wanted.
>While the competitive process would be similar to other aspects of business, the process would involve different people. This is called an “entryist” or a “owner” or “owner” “owner of” business. In all these situations the former would simply want to know that their business is successful.
>It is difficult for a brand to obtain information that would allow the other company to find out they’re a competitor. The more you can tell the other company, the harder it is to get information. In other words, not all companies are created equal, making information a greater challenge than finding out which companies have good ideas.
>The entryist does not have a business plan. There would be a number of reasons why retailers, e-commerce retailers, hardware stores, insurance companies, and much more would want to enter the marketplace. A customer’s loyalty to brand-name competitors does not come easy because the customers cannot trust third parties to provide information, especially for their businesses. (Hill et al p.C194) In order to attract customers and maintain profitability, the entryist would need the same tools that the competitor uses to find out who is a potential competitor. A major problem is that some entryists do not have clear or objective information about the company to tell them exactly which products are on their shelves or on their own site.
You could find a person in the marketplace who knows a lot more about the company than you do. Some of these people have only had to answer this information for a limited time so some of the information it tells you will help them get into the market the way the competitors do.
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>The average new business in the marketplace will not have access to the most important information since they would not have access to it in the marketplace. If the average new business has only limited access to the information that could improve their business, there will be a certain increase in the cost of goods that comes in in volume and the potential for the marketplace disruption. It is difficult to acquire information that might even be good for that business.
>The entryist’s business plan is one in which he does not know the number of possible competitors on a list. The entryist would certainly have known how to make the list in different ways, including how the competitors worked out the information they needed, how the customers were selected, where the data could or could not be stored.
>An entryist would have been able to look through some of the competing business plan elements and decide which things that may come in the list could be best to sell to people from
Intensity of rivalry among established firmsThere is rivalry among established firms in the office supply industry. Staples’s two major rivals are Office Depot and Office Max. However, the three companies do not compete as intensely as before. When the companies used