Within the $45.5 Billion office supply sector, three major players, Staples, Office Depot and Office Max make up nearly $41 Billion of that total and Staples claiming one third of the market share. Thus, barriers to entry are high as these few firms dominate market share. Establishing new relationships with both buyers and suppliers to rival the existing competition is next to impossible. In fact, with Office Max as the sector's most recent addition in 2003, it is clear that gaining market share is difficult for new entrants as the company's revenues lag behind competitors by $3 Billion.
The office supply sector has customers including corporate, government, small business, and individual households. While individual households hold relatively little buying power, corporate and government business partners can have significant impact on the market environment. Product offerings between different companies vary only slightly in terms of quality and differentiation, so competitors rely on price and customer service to gain market share.
Suppliers to this industry hold less power. Since retailers offer similar costing products and services, few manufacturers can differentiate themselves. There are at least ten major competitors in the paper industry alone, for example, and on top of this the individual office suppliers themselves often carry their own line of generic product.
Also, there are a number of substitutes available to consumers. Discount furniture outlets such as Ikea offer desks and chairs for the home office. For businesses, companies like Steelcase can furnish entire buildings all under one contract, whereas an office supply outlet cannot. Major corporations often enter into purchasing agreements with the computer manufacturers themselves to order in bulk. Retail outlets such as Best Buy offer the same technology as the office suppliers, often at a very competitive price. Finally, Wal-Mart is a major...