Bargaining Power Of Suppliers Case Analysis

Staples has pulled ahead of Office Depot in recent years, mostly owing to a drop in Office Depot’s margin from roughly 30% to about 24%. This drop is significant because that means less money from sales is flowing through the company to cover operating and other expenses, and contributed to problems such as those discussed with the times-interest-earned ratio. Staples, while facing slight declines in its margin, has been able to keep its gross

These suppliers have slightly more bargaining power because of the differentiation between their work. However the need for these suppliers can be eliminated if furniture manufacturers produce every piece of their products themselves. A furniture manufacturer will only outsource production of parts if it proves to be cost effective for their company. Since the price of materials is consistent market and the outsourcing of production is unnecessary, suppliers have low bargaining power in the furniture manufacturing industry.

Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.

This matrix compares the rivals of Staples, Inc. Each of these environments

The Miles and Snow typology helps determine the overall strategy of an organization with prospectors on one end of the spectrum and defenders on the other (Parnell, 2014). Attempting to determine where a specified company can be reasonably challenging but understanding the market’s maturity can help identify model approaches. Dollar Tree operates in a fairly maturity market that sells universal commodities, therefore operating under a prospective mentality would be tremendously problematic due the consumers’ attention to cost. Therefore, Dollar Tree would be placed closer to the defender side of the spectrum. The defenders assume that the market is stable and the majority of the strategic emphasis is on internal process improvements which appears to be Dollar Tree’s ploy in the past as they have been attentive to increasing their supply chain efficiency and decreasing overall product cost to ensure the longevity of their $1-dollar structure. However, the recent acquisition muddles the perceived concentration as their overall strategy has

High cost of entering new markets International growth is expensive. Entering new markets with a new brand

Office Depot and Staples, had worked so hard on making mutual agreements and knew that the FTC wouldn't hold back on any "evidence" that they found and it would be used in a negative way. Office Depot and Staples wouldn't have their reputation put at risk, and had fought hard for the injustice. Both Office Depot and Staples had stated: "The FTC unfairly uses a narrow definition of our "product" as well as who our competitors are. Staples and Office Depot together sell only 5.5% percent of office-supply products in the nation. Merging the two firms would not substantially increase concentration or lessen competition." (Market Structures paper, page

firms interact.” Currently the office supply market is saturated and the competition is tight. The leading contenders for this type of market are Staples and Office Depot, but there are many choices available to consumers looking to get the most value for office supplies. It is ironic that both Staples and Office Depot opened for business in 1986. These companies fall under a monopolistic competition structure. Staples and Office Depot maintain a high marketing presence and are recognized in the office supply industry. But because of the fierceness of the

After Conducting the SPACE Matrix the conclusion may be made that Staples in the Defensive Profile. It is wise to choose a one of the previously stated strategies that will coincide with this profile. A company in a defensive strategy is financially troubled in an unstable market. Staples is definitely in this position. They are not making enough to stay operating as they are. The industry they are in is also unstable. There are new online competitors and other issues that are making the industry

Due to the fact of price sensitivity is high, consumers are willing to consume identical product with lower price; they stand on a strong bargaining position. On the contrary, suppliers have relative strong bargaining power because the high concentration of the industry.

The bargaining power of buyers stands in a direct relationship with the bargaining power of suppliers. If the bargaining power of buyers is substantial it increases the opportunity cost of suppliers. The greater the buyers concentration the greater their bargaining power. This bargaining power is also increased in markets where the suppliers’ concentration is high. The bargaining power is also increased when the cost of switching from one supplier to another is low. In instances where backward vertical integration is possible i.e. buyers setting up their own chains of suppliers the bargaining power of the buyer increases in that their prices may become more competitive. In a market where the buyers are more concerned over quality than price their bargaining power decreases as they are less inclined to shop

The Intensity of Rivalry among Competitors in an Industry (High): Equally balanced competitors exist within the industry such as BCF and KMD; these firms also face competition from retailers and wholesalers. The growth of the industry is relatively agile in both financial and technological aspects. The intensity or rivalry is further accentuated by relatively high storage and fixed rental costs, extensive product differentiation and minimal switching costs.

When it comes to the impact of the Five Forces of Competition and its effect on the performance of Staples and Office Depot, there does not appear to be a strong threat of new entrants in the big-box retail office supply segment of the industry. It seems unlikely that anyone will want to open a new office supply store. While there is a level of service differentiation between the two companies, there is little product differentiation between the two. Likewise, there would be little product differentiation from a new competitor. The threat of substitutes comes into play between Staples and Office Depot in that both companies offer basically the same products. If the customer can’t get what he wants at one store, he can go to the other. Likewise, if the customer becomes disenfranchised with one company for whatever reason, he can easily go to the other company. There doesn’t seem to be much bargaining power of customers or suppliers. There does seems to be a strong industry rivalry which, as with most industries, is the major determinant of the competitiveness of the industry.

            Other environmental influences, such as competition, may fuel the company’s desire to create more and better products that could well determine their location and standing in the global market. Increase in the number of competitors for the same line of products may mean that there

There is clearly a difference in quality of employees hired between the two companies and it shows in the marketing and product offerings. Staples hires many employees that don’t have the sales experience even for a service/semi-department store. The employees don’t have sufficient product knowledge, education or the motivation to sell. The bottom line is that employees are not closing sales and are not up-selling the products, even though the products offered are practical and easy to use. Reuters recently stated that, “Many investors look at office-supply retailers as a barometer of economic health because demand for their products is closely tied to white-collar employment rates.” (Wohl & Cavale, 2013). This is a clear indicator that the company has to start advertising and targeting the white-collar employees and companies more, as well as doing more wholesale activities with industries and other companies.