Office Depot

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  • Topic: Office supplies, Retailing, OfficeMax
  • Pages : 20 (7355 words )
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  • Published : November 5, 2012
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[Comprehensive business Analysis: Office Depot]|

Background
Office Depot was founded in 1986 by F. Patrick Sher, Stephen Dougherty and Jack Kopkin in Boca Raton, Florida. The three envisioned a warehouse style store that could offer office supplies at discounted prices. The first store was opened in October in Fort Lauderdale. It was immediately successful and before the year was over, two more stores were opened in Florida. While Office Depot was one of the first companies to tap into this new market, they were not the only ones. Rivals, Staples and Office Club, both opened their first stores within three months of Office Depot. All had the same basic strategy: Buy products directly from manufacturers rather than wholesalers and offer them at lower costs than conventional retailers. Each company was started in a different corner of the country and each found the market to be promising. It was soon obvious to Office Depot that this market had a lot of potential, the next step was growth. In 1987, seven more stores were opened in Florida and Georgia. Unfortunately, CEO Pat Sher was unable to see the company grow to what it is today. He died of Leukemia about a year after the opening of the first store. He was soon replaced by David Fuente and the company continued its growth. Fuente’s plan was to open as many stores as quickly as possible. He did not want to wait around and see how things played out. So far, all of the stores had generated profits, so he wanted to establish as much dominance in the market as they could before imitators could establish themselves. The next year the company expanded into Kentucky, North Carolina, Tennessee and Texas. Then in 1989 and 1990 the company opened at least 50 new stores each year. In 1988, the company went public and had an initial offering of 6 million shares at $3.33 per share. The company was the first of the three main competitors to turn a profit for three consecutive quarters. Much of that had to do with the fact that the Office Depot stores were really just huge warehouses with products stacked either on the floor or on steel shelves. Not much attention was put into decorations or flashy advertising. Instead the stores were kept simple yet functional and low commercial rents in the South, where most of the stores were located, helped keep overhead costs low even though the stores where quite large. By the end of 1990 Office Depot had 122 stores in 19 states. The company was expanding rapidly and with new companies, OfficeMax and BizMart, entering the industry, competition grew stronger. 1991 saw the merger of Office Depot and Office Club. Office Club stores were primarily located in the western states, an area Office Depot had yet to target. This merger gave Office Depot immediate access to that specific market area. In addition to the 59 Office Club stores, Office Depot opened 57 new stores and recorded sales of $1.3 billion. In 1992 Office Depot began to shift more of its focus towards the sales of computers and other electronics. Store layouts were redesigned to accommodate more machines such as printers and copiers. Also the company acquired the Canadian company, HQ Office International. This was Office Depot’s first move to expand internationally. Office Depot also began to look for ways to attract larger businesses, when previously most of the company’s customers were businesses with 20 or fewer employees. Contract stationers were hired to attract larger corporations. In 1996, Office Depot agreed to be acquired by Staples, the industry leader. However, the Federal Trade Commission (FTC) deemed that this buy out would give Staples too much price control in many metropolitan areas. The two companies were numbers one and two as far as market share went and by removing one, too much power would be given to the other. The FTC sued to stop the deal and in 1997 a federal judge granted a preliminary injunction to block the deal. Both companies would have to...
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