Porter’s Five Forces Analysis Threat of New Entry There are many companies manufacturing and selling office products at an International level. New entrants can find it easy to enter and establish their position In the market by basing their strategy on low cost. The market offers growth opportunities to new entrants as well Indicating low entry barriers for the firms wanting to enter into the area of office products. Therefore It can be stated that Staples Inc Is operating In an Industry where the threat of new entry Is high.
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Buyer power The bargaining power of buyers Is determined In an Industry on the basis of the Influence that they can have on the price structure of the products of a firm. In case of organizations manufacturing office related products the issue they are facing is that few of the products that they are manufacturing are easily available in the market, such as stationery items. Staples Inc is dealing with medium organizations and fortune 1000 companies as customers of their products.
They need to provide these organizations with a competitive price structure or the customers can shift to another company for the supply of office items. But the company also has an dvantage that it provides them with products that have unique designs and packaging. Therefore it can be stated that Staples Inc is operating in an industry where the customers have moderate bargaining power. Supplier Power There are many suppliers operating in the industry of office supplies and office related products. The large number of suppliers has resulted in low level of bargaining power of suppliers.
The companies that are manufacturing the office related products can select the suppliers that offer them the most suitable package. In case of Staples Inc they have strong ties with their suppliers and are taking dvantage from a network of supply parties that maintain the effective flow of raw materials being supplied to the company. Threat of Substitutes There are many companies manufacturing office related products and offering them at a lower cost than the price charged by Staples Inc for their products. This situation has resulted in moderate level of threat of substitutes.
In case If an organizations is not satisfied with the price structure offered by Staples Inc for their products, It can opt for other companies which are manufacturing slmllar products and charging less for them. Threat of Competitors The Industry In which Staples Inc Is operating In, It has many small and large scale companies. Therefore the Industry has a high level of threat of competitors. Staples Inc Is dealing with competitors such as Office Depot Inc & OfficeMax Inc (Staples Inc TOP competitors, 2011).
PESTEL Analysis Political Factors The political disturbance in US or in other countries of the world disrupts the supply and manufacturing process of Staples Inc. Other political factors such as changes in tne rules ana pollcles developed Dy OITTerent governments 0T tne world In wnlcn Staples Inc has its stores also have an impact on the profitability of the organization. Economic Factors Financial condition of a country has an influence on the price and purchase of the raw material, manufacturing of the number of products and buying behaviour of the people.
Staples Inc also faced problems due to global financial crisis. Abelson (2008) has reported that due to the economic crisis, Staples Inc had to take steps such as decreasing the rate of capital investment for manufacturing of certain products which were facing low demand due to recession. One of the products that were ompromised on during economic downturn was office furniture, as the sales of these products had declined and customers were avoiding the purchase of these items.
Social Factors Many organizations around the world have been trying to bring in changes in their set up and to participate in activities that are a reflection of corporate social responsibility. Staples Inc has also been focusing on participating in community building activities to create a positive image in the mind of the consumers. Staples Inc has been trying to share in the process of community development by providing unds for social causes and benefit of the people (What is Staples Soul, 2010).
Technological Factors Staples Inc is a supplier of computer related products and also offers after sales services related to these products to the organizations that are their customers. Technological changes and advancements enable the company to bring in necessary modifications and provide its customers with the latest version of the computer and its related accessories. Technological factors have a significant impact on the production of Staples Inc as they can not only develop new product designs but also evelop low cost manufacturing means.
Environmental Factors Many organizations around the world have been required to alter their business processes top meet the policies developed by the governments and environmental protection agencies. As stated by the annual report of the company, the “Race to the Top” strategy applied by the management of the company is a reflection of the efforts they have been putting in to obtain a competitive position in the market through effective business practices and environment friendly products (Staples, Inc Annual Report, 2010).
Legal Factors Staples Inc is currently dealing with legal issues related to the lawsuits filed by its employees with the claim that the organization has been indulging in unjust business practices. For instance the company had to manage the case in which claim was made that it was not paying the workers with over time charges (Lawsuits: Staples Inc, 2007). Along with that the company has also been dealing with the patent issues. These issues not only portray a negative image of the company in front of the public but also require capital investment by the company.