Copyright ©2013 Pearson Education, Inc. publishing as Prenti.docx

Copyright ©2013 Pearson Education, Inc. publishing as Prentice
Hall.
Staples – 2011
Forest David
A. Case Abstract
Staples is a comprehensive strategic management case that
includes the company’s year-end 2010 financial
statements, organizational chart, competitor information and
more. The case time setting is the year 2011.
Sufficient internal and external data are provided to enable
students to evaluate current strategies and
recommend a three-year strategic plan for the company.
Headquartered in Framingham, Massachusetts,
Staples’s common stock is publicly traded under the ticker
symbol SPLS.
Staples is the #1 office supply superstore operator in the US.
selling office products, furniture, computers,
and other supplies through its chain of some 2,280 Staples and
Staples Express stores in the Americas,

Europe, Asia, and Australia. Most (about 1,900) of its
superstores are located in North America. In addition
to retail outlets, Staples sells office products via the Internet,
its catalog, and its direct sales operations,
including subsidiary Quill Corporation. Staples also provides
document management and copying services
through its retail chain, as well as promotional products. Staples
also targets customers worldwide
through its Corporate Express business (acquired in 2008).
Staples pioneered the office superstore concept
in 1986 and now has annual sales of $25 billion, ranking second
in the world in eCommerce sales. With
90,000 associates worldwide, Staples operates in 26 countries.
B. Vision Statement (proposed)
To become the world’s largest office retail store.
C. Mission Statement (actual)
"Staples Soul reflects our commitment to corporate
responsibility (8). It's a holistic approach to business
that recognizes the close connection between our financial
success (5) and our desire to make a positive
impact on our associates (9), communities, and the planet (3) by
joining together the following areas:

diversity, the environment, our community, and ethics (6). It's
how we do business—that's Staples Soul.
(proposed)
At Staples our mission is to be the total office products and
solutions provider (2) for small business, home
offices and consumers (1) by providing a broad mix of
merchandise and services (4) at everyday low prices
in an atmosphere of enthusiastic and knowledgeable sales force
(5,7) worldwide (3). By joining together
the following areas: sound business, diversity, the environment,
our community, and ethics (6,9) we strive
to be a good corporate citizen (8) while maximizing shareholder
value.
1. Customers
2. Products or services
3. Markets
Hall.
4. Technology

5. Concern for survival, growth, and profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employee
D. External Audit
Opportunities
1. Office supply sales to increase 5% as the economy improves.
2. Office products industry sales expected to increase 13%.
3. Many smaller competitors are in weak financial positions.
4. Low borrowing rates and negotiable payback terms.
5. Gift card popularity increase of 7.3% in specialty retail
during 2009.
6. Online sales increasing faster than traditional retail sales.
7. World economy is slowly on a rebound.
8. "Emerging economies" have accounted for nearly 70% of
world growth in the last five years.
9. Value of the USD decreasing by .07 in long-term over the
last five years against the EUR.

10. OfficeMax reported negative net income in 2008 and 2009
with marginally positive net income in
2010.
Threats
1. Consumers preference for environmental friendly products
and paperless society.
2. Technological problems impacting foreign operations causing
production to decrease by 6%.
3. Increase in U.S minimum wage (75% of Staples profit comes
from the U.S.).
4. Hesitance of banks to lend affects Staples’ expansion plans.
5. Political and economic turmoil in Europe.
6. 86% of companies plan to spend more on social media in
2011 for marketing and customer service.
7. Unemployment rate continues to be just below 10%.
8. Consumer spending has been flat over the last 2 years.
9. National customer satisfaction has been flat over last 2 years.
10. Office Depot and Office Max are large global competitors.

Hall.
Competitive Profile Matrix
EFE Matrix
Weight Rating Score Rating Score Rating Score
0.18 3 0.54 1 0.18 2 0.36
0.12 3 0.36 1 0.12 2 0.24
0.08 3 0.24 1 0.08 2 0.16
0.09 3 0.27 1 0.09 2 0.18
0.16 4 0.64 2 0.32 3 0.48
0.09 4 0.36 2 0.18 3 0.27

0.07 3 0.21 1 0.07 2 0.14
0.06 4 0.24 1 0.06 2 0.12
0.05 4 0.20 2 0.10 3 0.15
0.10 3 0.30 1 0.10 2 0.20
1.00 3.36 1.30 2.30
Price Competitiveness
Financial Stability
E-Commerce
Customer Service
Product Quality
Advertising
Totals
Global Expansion
Sales Distribution
Organizational Structure
Critical Success Factors
Staples Office Max Office Depot
Market share

Opportunities Weight Rating Weighted Score
0.05 3 0.15
2. Office products industry sales expected to increase 13%. 0.05
3 0.15
0.06 2 0.12
4. Low borrowing rates and negotiable payback terms. 0.05 2
0.10
during
2009.
0.03 3 0.09
0.07 2 0.14
7. World economy is slowly on a rebound. 0.07 3 0.21
world
growth in the last five years.
0.08 3 0.24
last

five years against the EUR.
0.04 3 0.12
with
marginally positive net income in 2010.
0.06 2 0.12
Hall.
E. Internal Audit
Strengths
1. Staples has an excellent pricing system.
2. Efficient e-commerce system.
3. Integrated supply chain.
4. Uniform adoption of new financial performance indicators
which helps identify trends on a more
reliable basis and does not give false impressions.
5. Staples brands account for 22% of sales with 10-15% saving

to customers.
6. Overall sales growth of 5.2%.
7. Currently operates in 24 different countries.
Weaknesses
1. Have many stores close together possibly cannibalizing
profits.
2. Over reliance of North American retail market.
3. Low sales per employee ratio compared to the industry
average.
4. Non-participation of employees in the decision making
process.(top-down management)
5. Own-branded goods will eventually cause problems between
Staples and third-party suppliers.
6. Inability to repay long-term debt.
7. High rates of employee turnover in international stores.
8. Debt of $2.54 billion is excessive.
9. North American Delivery’s business unit income rate
decreased to 8.2% from 9.0%.
Financial Ratio Analysis

Growth Rate Percent Staples Industry S&P 500
Sales (Qtr vs year ago qtr) 5.20 7.80 14.50
Net Income (YTD vs YTD) NA NA NA
Threats Weight Rating Weighted Score
and
paperless society.
0.02 3 0.06
production to decrease by 6%.
0.03 3 0.09
from
the U.S.).
0.03 3 0.09
0.04 3 0.12
5. Political and economic turmoil in Europe. 0.05 2 0.10
2011 for
marketing and customer service.
0.04 3 0.12
7. Unemployment rate continues to be just below 10%. 0.04 2

0.08
8. Consumer spending has been flat over the last 2 years. 0.04 2
0.08
0.03 2 0.06
0.12 3 0.36
TOTALS 1.00 2.60
Hall.
Net Income (Qtr vs year ago qtr) 36.00 26.50 48.60
Sales (5-Year Annual Avg.) 8.83 8.45 8.30
Net Income (5-Year Annual Avg.) 2.38 6.86 8.72
Dividends (5-Year Annual Avg.) 16.19 8.80 5.61
Profit Margin Percent
Gross Margin 26.9 42.9 39.5
Pre-Tax Margin 5.5 8.9 18.2
Net Profit Margin 3.8 5.9 13.2

5Yr Gross Margin (5-Year Avg.) 27.5 41.6 39.7
Liquidity Ratios
Debt/Equity Ratio 0.32 0.49 0.98
Current Ratio 1.6 1.7 1.3
Quick Ratio 0.9 0.9 0.9
Profitability Ratios
Return On Equity 13.8 14.4 26.0
Return On Assets 7.0 7.7 8.8
Return On Capital 10.0 10.6 11.8
Return On Equity (5-Year Avg.) 15.3 12.4 23.8
Return On Assets (5-Year Avg.) 8.0 6.4 8.0
Return On Capital (5-Year Avg.) 11.8 8.9 10.8
Efficiency Ratios
Income/Employee 17,714 25,229 126,792
Revenue/Employee 471,393 433,187 1 Mil
Receivable Turnover 13.3 30.3 15.2
Inventory Turnover 7.0 6.1 12.4

Net Worth Analysis (in millions)
IFE Matrix
Stockholders' Equity $6,944
Net Income x 5 $4,410
(Share Price/EPS) x Net Income $9,877
Number of Shares Outstanding x Share Price $10,401
Method Average $7,908
Strengths Weight Rating Weighted Score
1. Staples has an excellent pricing system. 0.08 4 0.32
2. Efficient e-commerce system. 0.07 4 0.28
3. Integrated supply chain. 0.07 4 0.28
which
helps identify trends on a more reliable basis and does not give
false impressions.
0.04 4 0.16

to
customers.
0.04 4 0.16
6. Overall sales growth of 5.2%. 0.06 4 0.24
7. Currently operates in 24 different countries. 0.06 4 0.24
Hall.
F. SWOT
SO Strategies
1. Adopt a new supply chain model abroad (S3, S7, O8).
2. Increase R&D on supply of office services & IT technologies
by 10% (S2, O6).
WO Strategies
1. Secure external funding with favorable credit rating and
excellent payback terms (W6, W8, O4).
2. Add 200 new stores in China and Brazil (W2, O1, O8, O9).
ST Strategies

1. Develop strategic alliances with suppliers (S4, S8, S3, T10).
WT Strategies
1. Focus on own-brand value pricing strategy (W2, W3, T1).
Weaknesses Weight Rating Weighted Score
profits. 0.07 2 0.14
2. Over reliance of North American retail market. 0.10 2 0.20
average. 0.04 1 0.04
0.04 1 0.04
0.04 2 0.08
6. Inability to repay long-term debt. 0.06 1 0.06

7. High rates of employee turnover in international stores. 0.07
1 0.07
8. Debt of $2.54 billion is excessive. 0.10 1 0.10
decreased
to 8.2% from 9.0%.
0.06 2 0.12
TOTALS 1.00 2.53
Hall.
G. SPACE Matrix
7
6
5
4
3

2
1
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1
-2
-3
-4
-5
-6
-7
IPCP
Defensive
AggressiveConservative
FP
Competitive
SP
Internal Analysis: External Analysis:
Financial Position (FP) Stability Position (SP)
4 -2

4 -2
6 -2
3 -5
5 -3
Financial Position (FP) Average 4.4 Stability Position (SP)
Average -2.8
Rate of Inflation
Technological Changes
Price Elasticity of Demand
Competitive Pressure
Barriers to Entry into Market
Return on Equity (ROE)
Current Ratio
Debt/Equity Ratio
Gross Margin
Inventory Turnover
Internal Analysis: External Analysis:
Competitive Position (CP) Industry Position (IP)
-3 5

-3 4
-3 4
-3 4
-4 5
Competitive Position (CP) Average -3.2 Industry Position (IP)
Average 4.4
Growth Potential
Financial Stability
Ease of Entry into Market
Resource Utilization
Profit Potential
Market Share
Product Quality
Customer Loyalty
Technological know-how
Control over Suppliers and Distributors

Hall.
H. Grand Strategy Matrix
Staples
Strong
Competitive
Position
Slow Market Growth
Weak
Competitive
Position
Quadrant III Quadrant IV

Rapid Market Growth
Quadrant II Quadrant I
Hall.
I. The Internal-External (IE) Matrix
Sales (in millions) 2010
North American Delivery $9,849
North American Retail 9,530
International Operations 5,166
Total Sales 24,545
4.0 I II III
High
3.0 IV V VI
The
EFE
Total Medium Staples

Weighted
Scores
2.0 VII VIII IX
Low
1.0
Strong Average
Weak
4.0 to 3.0 2.99 to
2.0 1.99 to 1.0
The Total IFE Weighted Scores
Hall.
J. QSPM
Opportunities Weight AS TAS AS TAS
0.05 4 0.20 2 0.10
2. Office products industry sales expected to increase 13%. 0.05
0 0.00 0 0.00

0.06 2 0.12 3 0.18
4. Low borrowing rates and negotiable payback terms. 0.05 0
0.00 0 0.00
during
2009.
0.03 0 0.00 0 0.00
0.07 2 0.14 3 0.21
7. World economy is slowly on a rebound. 0.07 4 0.28 3 0.21
world 0.08 4 0.32 2 0.16
last 0.04 1 0.04 4 0.16
with
marginally positive net income in 2010.
0.06 0 0.00 0 0.00
Increase
financial
staff by 20%

Add 200 new
stores in
China and
Brazil
Threats Weight AS TAS AS TAS
and
paperless society.
0.02 0 0.00 0 0.00
0.03 4 0.12 2 0.06
from
the U.S.).
0.03 0 0.00 0 0.00
0.04 2 0.08 4 0.16
5. Political and economic turmoil in Europe. 0.05 3 0.15 2 0.10
2011 for
marketing and customer service.
0.04 1 0.04 3 0.12

7. Unemployment rate continues to be just below 10%. 0.04 1
0.04 3 0.12
8. Consumer spending has been flat over the last 2 years. 0.04 3
0.12 4 0.16
0.03 3 0.09 4 0.12
0.12 3 0.36 4 0.48
Hall.
K. Recommendations
1. Add 200 new stores in China and Brazil at $2M each for
400M.
2. Increase financial staff by 20%.
L. EPS/EBIT Analysis (in millions)
Amount Needed: $400M
Stock Price: $15.37
Shares Outstanding: 709

Interest Rate: 5%
Tax Rate: 35%
Strengths Weight AS TAS AS TAS
1. Staples has an excellent pricing system. 0.08 1 0.08 3 0.24
2. Efficient e-commerce system. 0.07 0 0.00 0 0.00
3. Integrated supply chain. 0.07 0 0.00 0 0.00
which
helps identify trends on a more reliable basis and does not give
false impressions.
0.04 0 0.00 0 0.00
to
customers.
0.04 0 0.00 0 0.00
6. Overall sales growth of 5.2%. 0.06 1 0.06 3 0.18
7. Currently operates in 24 different countries. 0.06 1 0.06 3
0.18
Add 200 new
stores in

China and
Brazil
Increase
financial
staff by 20%
Weaknesses Weight AS TAS AS TAS
profits. 0.07 0 0.00 0 0.00
2. Over reliance of North American retail market. 0.10 4 0.40 2
0.20
average. 0.04 1 0.04 3 0.12
0.04 0 0.00 0 0.00
0.04 0 0.00 0 0.00
6. Inability to repay long-term debt. 0.06 1 0.06 3 0.18
7. High rates of employee turnover in international stores. 0.07
0 0.00 0 0.00

8. Debt of $2.54 billion is excessive. 0.10 1 0.10 3 0.30
decreased
to 8.2% from 9.0%.
0.06 2 0.12 3 0.18
TOTALS 3.02 3.92
Hall.
M. Epilogue
Many analysts believe Staples is gearing up for a takeover of
OfficeMax and/or Office Depot. Staples is
slowly taking away market share from both rival firms, but the
company would improve margins
significantly if it could reduce competition. Staples operates in
26 countries but has performed weakly
outside the USA. Staples’ China operations is likely going to
lose about $20 million in 2011, while Brazil
has seen double-digit revenue growth but zero profit. Staples is
scaling back on the European printing

business. A buyout of either OfficeMax or Office Depot would
improve Staples’ brand, add products, and
improve the firm’s economies of scale.
Europe and Australia stand out in Staples' international
operations. Contrasting with operations in other
foreign regions, all of Europe for Staples is profitable, with the
strongest performance in Germany.
Australia follows with improving Staples operations. Staples
has a goal to return $300 to $500 million back
to shareholders through its share purchasing program but many
analysts are bullish that this figure will be
exceeded and actually total $750 million. Staples has sufficient
resources to stage an exciting takeover of
OfficeMax and/or Office Depot if it chooses.
Staples actively supports Jumpstart’s Read for the Record®, a
national campaign that mobilizes adults and
children to close the early education achievement gap by setting
a reading world record. For the third
consecutive year, Staples in October 2011 hosted events in
Framingham and Worcester, Massachusetts to
give local youth the opportunity to participate in this unique
reading experience. In the last few years,
Staples has donated more than $100,000 to Jumpstart in support

of Read for the Record, and has helped
raise awareness of the early education crisis affecting millions
of at-risk children all over the world.
Investors and financial analysts believe that Staples’ rising
sales and profit can reverse 2011’s 35 percent
decline even as demand for office supplies falls. Shares of
Staples trade near a record low price-to-earnings
ratio and have lost less than rivals Office Depot and Office Max
which plunged 60 percent and 71 percent
Recession Normal Boom Recession Normal Boom
EBIT $1,000 $1,500 $2,000 $1,000 $1,500 $2,000
Interest 0 0 0 20 20 20
EBT 1,000 1,500 2,000 980 1,480 1,980
Taxes 350 525 700 343 518 693
EAT 650 975 1,300 637 962 1,287
# Shares 735 735 735 709 709 709
EPS 0.88 1.33 1.77 0.90 1.36 1.82
Common Stock Financing Debt Financing
20 Percent Stock 80 Percent Stock
Recession Normal Boom Recession Normal Boom

EBIT $1,000 $1,500 $2,000 $1,000 $1,500 $2,000
Interest 16 16 16 4 4 4
EBT 984 1,484 1,984 996 1,496 1,996
Taxes 344 519 694 349 524 699
EAT 640 965 1,290 647 972 1,297
# Shares 714 714 714 730 730 730
EPS 0.90 1.35 1.81 0.89 1.33 1.78
Hall.
in 2011.
“Staples’ stock is relatively cheap, and we’re also having year-
on-year earnings growth,” Liam Dalton,
chief executive officer of Axiom Capital Management Inc. in
New York, which oversees $1.8 billion, said
in a telephone interview. “There are other industries where
earnings are much more sensitive to the
economic cycle, and this one has less sensitivity because they
have a fairly predictable business model.”
Staples’s annual revenue has increased every year since at least
2001, according to data compiled by

Bloomberg. Net income rose 19 percent in fiscal 2011 and will
climb 11 percent and 6 percent in the next
two years, according to analyst estimates compiled by
Bloomberg.
Staples’ stock currently trades for 11.3 times reported earnings,
14 percent less than the S&P 500’s
valuation. The 22 percent discount on August 10, 2011 was the
lowest since December 2000, according to
data compiled by Bloomberg.
I would like a 8 page case analysis on Staples with the Matrix
done as well. I have attached an example of how the case
analysis is supposed to be. The information is not all correct in
that so please don't pull the information from there Also, I have
attached a Matrix that was done for a different company so you
have something to go by and know how it should be done.
Please just delete all the information in that and add the correct
Staples information. Ensure the work is plagiarism free.

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