Characterization of Innovation Adoption in Europe - Case Study Example

Name: Professor: Institution: Course: Introduction Staples Company is the largest office products producer as well as the most trusted office solution source in the whole world. Staple Inc provides expertise, services and products relating to office supplies, furniture, copy and print, break room and technology (staple.com, 2013). The company was founded by Thomas Stemberg and Leo Kahn who were long time rivals in New England in the year 1985. The idea of forming the company was developed by Thomas Stemberg back in 1985 when he was working on proposals of another business. He required a ribbon for his printer which had broken down but because it was a public holiday, all the local dealers had closed. As a result of the frustration that he got from lack of reliability of the critical supplies coupled with Thomas’s vast experience in the grocery business, an idea of starting office supplies store came to life (staple.com, 2013) . The office supplies store was opened in Brighton neighborhood, Boston in 1986 with finances from Private Equity firms. In 1991, the company opened another subsidiary in Canada which was known as Business Depot but later all the store were renamed as “Staple” (staple.com, 2013) . Staple began expanding into Europe in the following year where it opened its first store in Swansea, UK. By 2001, the company integrated its e-commerce website to all of its subsidiaries across the world. Currently, Staple Inc. has over 2000 stores worldwide. Based in Framingham, Massachusetts, United States, the company has retail stores, serving customers under its original name in United Kingdom, Austria, France, Brazil, Germany, China, Norway, Denmark, Portugal, United States, and India, while operating subsidiaries in Argentina as Office net-Staples, Belgium and Netherlands as Office Centre, Canada as Staples Canada (Bureau En Gros in Quebec), and in Italy as Mondoffice (Gardner, 2012). Staple also does business exclusively with enterprises in multiple European countries as Staples Advantage.Until now, less than half of Staple Inc. revenue comes from its online business but younger customers are increasingly buying goods such as office supplies by computer, phone or tablet (Gardner, 2012). According to Feldman, Staple is dealing with intense competition from companies such as Amazon.com and Walmart but it trying its best to defend its turf. The main customers of Staple Inc. are small businesses; the company generates much of its revenue on delivering office supplies such as printer cartridges, chairs, and paper to its customers (businesses) with fewer than 500 workers. The current strategies of Staple Inc. include; Accelerate Growth Staple Inc. which is the largest office products company as well as the second largest internet retailer has embarked on a strategic plan to accelerate growth and better serve the needs of its clients (Saville, 2012). According to Ron Sargent, Staples CEO, “We are building on the strengths that are the foundation of our success by focusing on five key priorities: accelerate growth in our online businesses; return cash to stakeholders; fully integrate retail and online; restructure our International Operations; improve retail store productivity;; and fully integrate retail and online(Saville, 2012).” For staples to achieve its vision it has increased its investment in mobile and online capabilities which is aimed at offering its customers with a differentiated multi-channel experience. Building on its success in areas like technology products, copy and print, and facilities and breakroom supplies, the company is expanding its assortment beyond office supply so as to better serve the needs of clients. To help fund these investments which are aimed at accelerating growth, staples has started a multi-year saving plan that is expected to generate pre-tax cost savings of $250 million by the end of 2015(Saville, 2012). Enhance Multi-Channel Offering To support this growth as well as address the ever changing customers need, staples has combined its Staples.com and its U.S Retail businesses under the leadership of Demos Pamerros and Joe Doody who have a deep understanding of the needs of business customers. According to Sargent, by realigning the company around its customer needs, Staple Inc. will be in a better position to take advantage of its retail store assets and unique supply chain while improving productivity and accelerating online growth (Gardner, 2012). Restructure International Operations On the other hand, Staple is undertaking restructuring activities as part of an ongoing process to improve the profitability and reduce the complexity of its Europe operations. The company has changed its leadership in its European operation where John Wilson is now the president of Staple in Europe, and also Staples plans to close 45 stores and several sub-scale delivery businesses in Europe by 2013. Staple’s Vision Statement “To be the world’s most prominent office products producer of choice well recognized by our customer for quality and customer satisfaction and an employer of choice to all employees for our outstanding core values and offering great opportunities for professional and personal growth. ” Staples mission statement Staples mission is to attract and maintain customers by offering high quality products and services at a fair profit by engaging experts and ensuring that all our products are accessible to all customers at all times through a wide global presence. The company aims at having growth, survivability and profitability by providing our goods and services at a fair profit which is not too high to exploit the customers or too low to make a loss. We will retain a sustainable profit to ensure the security of the company and ensure growth and development of Staples Inc. we will provide to all businesses a wide variety of office products on a daily basis and to both the internal and external customers, we intend to give them a satisfying and positive experience in all aspects of their transactions. To our suppliers, we will treat them fairly and build a good relationship with the suppliers so as to ensure that we are not out of supplies and that the supplies are delivered in time. To our employees, we intend to provide them with an interactive environment with shared learning and good communication in which the employees can excel. In regards to technology, the aim of our company is to adopt the best technology in the market and to change with the rapidly changing technological environment for the survivability of our company. SWOT Analysis Strengths 1) Staple Company has a good reputation as far as investing in the company is concerned. The company’s Price/ Earnings ratio has been increasing. In the first 26 weeks, the P/E ratio was 7.8 but in the last 52 weeks, the P/E ratio improved to 11.1. This is a great advantage to the company as many more companies will be interested in investing in the company. 2) Staples Company has been reporting a positive trend over the last five years as far as the net income is concerned. In 2008, the company reported a net income of 1.98 billion dollars and by the year 2012, the company reported a net income of 2.11 billion dollars (Market Watch,2012) 3) Staples company revenue has been increasing for the past five years. In 2008, the company’s revenue was at $16.37 billion and by the year 2012, the company was making revenues of up to $25.02 billion. This was a percentage increase of 22%. An increase in revenue for the company means an increase in the company capital base which makes it a strong point for the company. Weaknesses 1) Staples Company employs over 90,000 people in the world. For this reason, it spends large amounts of money in employee wages. This has lead to reduced profits or the company and reduced earnings per share. Moreover, as a result of this, very little money is left for re-investment into the company. This weakness has restricted the growth of Staples Inc for many years now. 2) The liquidity level of Staples Inc is another weakness. Its current ratio is 1.0 while its quick ratio is 0.8. this means that the liquidity of the company is very low and it is not in a position to pay short term obligations when they fall due (Forbes.com, 2013) 3) A look at the balance sheet indicates that the company’s liabilities have been increasing over the past five years which increases the gearing level of the company. The company had total liabilities of 3.31 billion dollars in 2008 and by the year 2012, the company had total liabilities of 6.41 billion dollars (Market Watch ,2012) Opportunities 1) Currently, Staples has only been able to cover 26 countries in the west. There are several emerging markets like China and India which can be great opportunities for Staples Inc to expand their operations. Expanding their operations internationally will lead to increase the profits of Staples. 2) In all countries, the rate of adoption is higher in process innovation with an average of 43% than product innovation which is 28% in European countries companies. It is therefore of paramount importance that the companies adopt innovation for survival 3) Forming a strategic alliance with pragmatic Express will be a great opportunity to Staples Company. Pragmatic Express is a company that deals with office products and is based in Russia and it offers a wide range of computer and office supplies. With such an Alliance, the company will get a unique opportunity to access more customers in areas that it would not have otherwise covered (Staples.com, 2012). Threats 1) Competition is one of the major threats that Staples Inc is facing. The cut throat competition from companies such as Walmart, Amazon.com and office max is seriously affecting the demand of Staples products. 2) Increase in use of internet has also posed a great threat to Staple Inc whereby the society is quickly replacing office manual work with use of internet. This has put the market demand of office supplies into recession which has affected Staples Company. 3) Economic slowdown is a significant threat to Staples Inc. As a result of economic slowdown in Europe and other parts of the world has led to reduced purchasing power for the clients. This has reduced the demand for the products of Staples Staple’s EFE Matrix (External Factor Evaluation) Opportunity Weight Rate Weighted Score 1 In all countries, the rate of adoption is higher in process innovation with an average of 43% than product innovation which is 28% in European countries companies. It is therefore of paramount importance that the companies adopt innovation for survival 0.11 2 0.22 2 Market expansion through diversification 0.03 4 0.12 3 Globalization 0.08 1 0.08 4 Merger with Office. Depot which would increase synergy which as both companies are doing well financially. This would lead to revenues of over $33 0.09 4 0.36 5 Strategic alliance with Pragmatic Inc which will allow the company to serve a total of 33 countries 0.13 3 0.39 6 Growth of online retail. The total market in Europe in 2012 was £143,720 million and online retailing in only three countries: France, UK and Germany accounted for 71% of the total online sale in Europe. Online pricing is a good opportunity for Staples to deal with Amazon.com which is its major competitor 0.12 1 0.12 Threats 7 The cost of labour per hour in Europe had increased with an annual rate of 2% by the third quarter of the year 2012 as compared to 1.9% in the second quarter of the year 2012 0.08 2 0.16 8 Economic downturn in Europe which has affected the demand of Staple’s products 0.08 2 0.16 9 Increased competition 0.14 4 0.56 10 New brands 0.04 2 0.08 11 Cheaper technology which has substituted manual office products 0.05 4 0.2 12 Maturing categories of products and services 0.02 1 0.02 13 New entrants 0.03 1 0.03 1 2.5 From the above EFE, we can conclude that the company has an average ability to respond to the external factors facing it. The rationale of constructing the EFE was based on how important each factor in the success of the company in the industry with the important factors getting higher rates than those that were not important and the rates were based on how the company was responding to each factor with 4 indicating that the company is responding well to the threat or the opportunity and 1 indicates that the company is not responding well to the opportunity or threat. Some factors like innovation, forming strategic alliances and increased competition are important factors if Staples is to succeed in this industry and for this reason, they have been rated the highest while factors such as the new entrants, cheaper technology and maturing products are not very important factors in the industry. The company is responding well to factors such as competition, expansion of markets, merging with other companies and cheaper technologies and that is why they are rated 4. Staple’s competitive profile matrix Staple’s Company Amazon.com Office max Critical Success Factor Weight rate score Rate Score Rate Score Brand Identity 0.16 4 0.64 4 0.64 4 0.64 Market share 0.14 4 0.56 3 0.42 3 0.42 Customer loyalty 0.12 3 0.36 4 0.48 2 0.24 Quality of the product 0.14 3 0.42 3 0.42 3 0.42 Experience 0.13 4 0.52 2 0.26 4 0.52 Customer Service 0.10 3 0.3 3 0.30 2 0.2 Adoption of Technology 0.11 1 0.11 4 0.44 3 0.33 Advertisement 0.10 3 0.3 3 0.20 2 0.2 Total 1 3.21 3.16 2.97 From the competitive Matrix, Staple Company has an overall best performance but it is not doing well in areas relating to adoption of technology. The rationale of developing matrix was based on weights and rates. The weights just like in the EEF, they are based on how important each CSF is to the success of each company in the industry. The ratings are based on how well the company is rated regarding that factor, Staples Inc is rated best as far as Brand Identity, market share and experience is concerned. It is however rated the worst as far as adoption of technology is concerned. Amazon.com is rated best as far as Brand identity, customer loyalty and adoption of technology is concerned. Office max is rated best as far as brand identity and experience is concerned. Conclusion Based on the analysis conducted above, the current strategies of Staples Inc have kept the company ahead of its competitor. It has concentrated on accelerating its growth, restructuring international operations and enhancing Multi-Channel Offering. Company’s operations are always affected by factors with the organization and without the organizations. The SWOT analysis conducted indicates the internal strengths and weaknesses of the firm and the external opportunities and threats of the firm. The company should aim at using its strengths to minimize its weaknesses and to exploit opportunities so as to minimize the threats. The EEF matrix indicates that the company has an average ability to respond to the external factors facing it. The competitive matrix conducted indicates Company has an overall best performance. References Market Watch (2012) Annual Financials for Staples Inc. retrieved on 26th February 2013 from http://www.marketwatch.com/investing/stock/spls/financials/balance-sheet Staples.com (2012) Staples, Inc. Announces New Russia Alliance With Pragmatic Express Ltd. retrieved on 26th February 2013 from http://staples.newshq.businesswire.com/press-release/corporate/staples-inc-announces-new-russia-alliance-pragmatic-express-ltd#axzz2Lvan6IuW Staple.com (2013) retrieved on 26th February 2013 from http://www.staples.com/ Gardner S (2012), Staples shifts strategy to selling more products online retrieved on 26th February 2013 from http://www.marketplace.org/topics/business/staples-shifts-strategy-selling-more-products-online Saville K (2012), Staples, Inc. Announces Strategic Plan to Accelerate Growth Forbes.com, 2013, STAPLES INC (NASDAQ:SPLS ) :Ratios and Returns. Retrieved on 26th February 2013 from http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=SPLS Moreno R & Suriñach J (2013).Characterization of innovation adoption in Europe. Press release of working paper 4.8 Read More