South-Western - Management  
Staples Attaches to Chicago
Topic Strategy
Key Words Expansion strategy, industry leaders
News Story

Staples, Inc. has opened 25 stores in the Chicago area in the past year and plans to open 15 more by this time next year, a bold strategy in the home market office of Office Max Inc. The move has created 1,350 area jobs with 400 more expected. Staples earned more than $834 million last year; Office Max lost $73 million.

Staples started out in the Northeast and jumped to Southern California, covering the coasts. The company sees Chicago as its entry point to the center of the country. Staples is locating some of its stores in low-income urban neighborhoods, believing that there is a dense small-business population to cater to here. They are also opening stores in more affluent communities. Staples currently has 1,780 stores and keeps expanding. Their strategy is to focus on convenience for their customers. One method they are trying is putting fast selling products like ink for printers near the front of the store, rather than at the back.

Office Max announced in January that it was closing 115 of its stores, leaving it with about 900sites, about 45 of which are in the Chicago area. They have begun a restructuring process at Office Max that includes a rollout of a new store format meant to be more comfortable for customers. Racks are lowered to give a more open feeling and a wireless café serving coffee has been added next to the store's copy center.

Companies that operate in the box treat their employees as people who like what they do and want to do it better. They would never outsource their key functions. These companies create incentives and reward innovation within their workforce. Their employees then communicate the brand’s special value to their customers.

So far, Office Max's restructuring has done little to excite investors. Competition among Staples, Office Depot, and Office Max is fierce. Staples has the advantage of being the industry leader, with more productive stores, and an international presence. Goldman Sachs recently rated Staples stock as "outperform" and rated Office Max within cautious coverage. Analyst Matthew Fassler observed that Office Max has just begun its restructuring and could still come through with a turnaround.

Questions
1.

What strategy is Staples implementing as it enters the Chicago market?

2.

What strategy is Office Max implementing in its restructuring plan?

3.

The article mentions that there is direct competition between Staples, Office Max, and Office Depot for the same business. In your opinion, is there room for three leaders in the area? Give an example from another industry where there are three leaders in competition.

Source "Staples Attaches to Chicago," Chicago Tribune, March 8, 2006, pNA.
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