Case Study Description of Pricing Strategy at Officenet Staples
In mid-2005, Leo Piccioli took over as Officenet Staples (ON) General Manager knowing full well that his key challenge lay in driving ON to reach Staples' profitability requirements. He was aware that one of the reasons for ON's low profitability rested with the company's sales force. Because ON's original competitive advantage had faded and sales reps were free to set the prices, reps often granted significant discounts to their customers to win the business. Typically, 40 percent of the items in a purchase order were priced below their regular prices. In a highly competitive market and with an increasingly commoditized offering, Piccioli needed to revise the company's pricing policy. Should ON change the pricing delegation practices that were so deeply embedded in its organizational culture? If so, what kind of pricing policy should ON pursue to improve its profitability while keeping its sales reps motivated? With an industry that primarily used price (rather than non-price) competition, what could ON's management do? This case is also available in Portuguese and Spanish
Authors :: Andres Terech, Javier Jorge Silva, Maria Barale
Swot Analysis of "Pricing Strategy at Officenet Staples" written by Andres Terech, Javier Jorge Silva, Maria Barale includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that On's Reps facing as an external strategic factors. Some of the topics covered in Pricing Strategy at Officenet Staples case study are - Strategic Management Strategies, Marketing, Organizational culture, Pricing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Pricing Strategy at Officenet Staples casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, technology disruption, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, geopolitical disruptions,
wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Pricing Strategy at Officenet Staples
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pricing Strategy at Officenet Staples case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the On's Reps, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which On's Reps operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Pricing Strategy at Officenet Staples can be done for the following purposes –
1. Strategic planning using facts provided in Pricing Strategy at Officenet Staples case study
2. Improving business portfolio management of On's Reps
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of On's Reps
Strengths Pricing Strategy at Officenet Staples | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of On's Reps in Pricing Strategy at Officenet Staples Harvard Business Review case study are -
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For On's Reps digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. On's Reps has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to recruit top talent
– On's Reps is one of the leading recruiters in the industry. Managers in the Pricing Strategy at Officenet Staples are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– On's Reps has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled On's Reps to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- On's Reps is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at On's Reps is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Pricing Strategy at Officenet Staples Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of On's Reps in the sector have low bargaining power. Pricing Strategy at Officenet Staples has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps On's Reps to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Sales & Marketing industry
– Pricing Strategy at Officenet Staples firm has clearly differentiated products in the market place. This has enabled On's Reps to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped On's Reps to invest into research and development (R&D) and innovation.
Ability to lead change in Sales & Marketing field
– On's Reps is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled On's Reps in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– On's Reps has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. On's Reps has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– On's Reps is one of the most innovative firm in sector. Manager in Pricing Strategy at Officenet Staples Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– On's Reps has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Pricing Strategy at Officenet Staples HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– On's Reps is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Andres Terech, Javier Jorge Silva, Maria Barale can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Strong track record of project management
– On's Reps is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Pricing Strategy at Officenet Staples | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pricing Strategy at Officenet Staples are -
Capital Spending Reduction
– Even during the low interest decade, On's Reps has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow to strategic competitive environment developments
– As Pricing Strategy at Officenet Staples HBR case study mentions - On's Reps takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Aligning sales with marketing
– It come across in the case study Pricing Strategy at Officenet Staples that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Pricing Strategy at Officenet Staples can leverage the sales team experience to cultivate customer relationships as On's Reps is planning to shift buying processes online.
Products dominated business model
– Even though On's Reps has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Pricing Strategy at Officenet Staples should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– On's Reps has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Lack of clear differentiation of On's Reps products
– To increase the profitability and margins on the products, On's Reps needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Pricing Strategy at Officenet Staples, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, On's Reps has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. On's Reps even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Pricing Strategy at Officenet Staples, in the dynamic environment On's Reps has struggled to respond to the nimble upstart competition. On's Reps has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, On's Reps has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, On's Reps is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Pricing Strategy at Officenet Staples can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Pricing Strategy at Officenet Staples | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Pricing Strategy at Officenet Staples are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help On's Reps to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for On's Reps in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of On's Reps has opened avenues for new revenue streams for the organization in the industry. This can help On's Reps to build a more holistic ecosystem as suggested in the Pricing Strategy at Officenet Staples case study. On's Reps can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help On's Reps to increase its market reach. On's Reps will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, On's Reps can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Pricing Strategy at Officenet Staples, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– On's Reps has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– On's Reps can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– On's Reps can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Pricing Strategy at Officenet Staples suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for On's Reps in the consumer business. Now On's Reps can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at On's Reps can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for On's Reps to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for On's Reps to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, On's Reps is facing challenges because of the dominance of functional experts in the organization. Pricing Strategy at Officenet Staples case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, On's Reps can use these opportunities to build new business models that can help the communities that On's Reps operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Threats Pricing Strategy at Officenet Staples External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pricing Strategy at Officenet Staples are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of On's Reps business can come under increasing regulations regarding data privacy, data security, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for On's Reps in the Sales & Marketing sector and impact the bottomline of the organization.
Environmental challenges
– On's Reps needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. On's Reps can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Increasing wage structure of On's Reps
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of On's Reps.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– On's Reps high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. On's Reps can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of On's Reps.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. On's Reps needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Pricing Strategy at Officenet Staples, On's Reps may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Regulatory challenges
– On's Reps needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents On's Reps with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on On's Reps demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of Pricing Strategy at Officenet Staples Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Pricing Strategy at Officenet Staples needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Pricing Strategy at Officenet Staples is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Pricing Strategy at Officenet Staples is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Pricing Strategy at Officenet Staples is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that On's Reps needs to make to build a sustainable competitive advantage.
