Effect Of E-Business in Office Depot

1. OBJECTIVES AND APPROACH OF THE RESEARCH PROJECT

1.1. Reasons for Choosing Impact of e-business as the topic:

After going through the list of suggested topics provided by the Oxford Brookes

University, I chose “Impact of e-business on an Organisation” as my subject title for

my project, due to the following reasons:

Availability of Literature which I utilised to peruse published articles, books

and reports. This was my methodology of primary and secondary data

collection.

Large amount of data on e-business is available on Internet as a major part of

Internet comprises of “Dot Coms” and the public data from internet.

It is also a topic which concerns most of the business organisations today and

had influenced the way a business is conducted or planned. All the

businesses are directly or indirectly adopt e-Business , with the evolution of e-

commerce in the front end business operations.

E-business and online sales are expected to be in trillions of USD and it will

be a major field of business related studies.

Apart from the business aspect it is envisaged to be environmental friendly

way of conducting business in reducing usage of natural resources.

1.2. Office Depot as the Organization of choice

While choosing an organization, for the study, many options were considered, such

as “Barns and Nobles”, “Amazon”, “Dell”, “British Airways” etc, including “Office

Depot”. Of this Office Depot was selected as the organization for this study for the

following reasons:

Office Depot almost evolved at the same time and pace as that of the

internet, and unlike some internet players of its time it embraced Internet with

clear set of ‘real’ business objectives.

It is not a ‘pure play’ e-business model and it is built on its brick and mortar

business of supplying office and business supplies to its customers

worldwide.

It represented the optimization and integration of a variety of business

processes, using e-business principles, study of which would benefit a

student of business processes and management.

It is a leader in its business segment and received several awards for its e-

business aspects as well as its efforts to promote conservation and recycling

of natural resources as part and parcel of its business activities. It is one of

the very few organizations, which have shown the way to effectively integrate

its business goals with social goals.

A detailed research was made on the amount of information available, as it is a plc, it

has to publish a large amount of its financial information to the general public and

numerous articles were also published about the business model and performance of

Office Depot.

1.3. Objectives of the Research:

This research was carried out to study the impact of the e-business on an

organisation through a case study of the e-business model of the Office depot. The

impact of e-business is hoped to be perceived and measured directly or indirectly in

terms of performance of Office Depot as a business and in terms of its financial

achievements and parameters. In the process of the study it is envisaged to gain

personal insight and understanding of business models and processes especially the

e-business model and principles.

The Objectives include calculating, and analysing the following parameters:• Sales Growth• E-sales Growth• Proportion of e-sales growth• Inventory Turnover• Sales per Employee• Number of Employees• Gross Profit Margin

1.4. Research Approach:

The modern day business is a complex process and it consists of several internal

and external business processes, which are divided into sub-processes. Compared

to traditional business processes the e-business processes are much more evolved

and error-free. The difference in approaches of traditional business and e-business to

The Impact of e-Business on “Office Depot Plc.” – Zen Mannam Page 2

business processing is studied and presented with brief history of e-business

evolution, before attempting the main analysis of Office Depot’s e-business model.

This will serve as a background material for the main analysis.

As mentioned earlier office Depot being a public limited company, a variety of data

on its business practices and processes since its inception are available, from the

company’s website as well as business articles books and reviews by experts.

The efficacy of e-business is studied by collecting and analyzing performance related

and finance related parameters of Office Depot, which are;

Growth of physical versus virtual network

Growth of sales and percentage of e-sales

Growth or reduction of work force and annual sales per employee

Inventory turnover

Annual profits and profitability

Awards and recognitions of performance received

As data on above parameters is available prior to and after the introduction of e-

business model, it is envisaged to find out conclude and quantify, if possible, about

the positive or negative effects of e-business on Office Depot.

However the financial ratios may not completely reflect the effect of e-business on a

firm and its customers and partners. The e-business model brings about a change in

daily operations, which can be perceived as a change for the better and result in

customer satisfaction and customer retention (Barua, 2001).


2. INFORMATION GATHERING AND RESEARCH METHODOLOGY

2.1. Information gathering

The Research and analysis project required collection of relevant data on the topics

of traditional business, e-business, Office Depot and its performance and finance

parameters related to its e-business model. The topics on which relevant information

and data were gathered are as follows;

Business as activity and entity

Business process and its nature

e-Business and its evolution

Office Depot and its history

Performance and financial parameters of Office Depot

2.2. Nature of Data and information gathered

As stated earlier in this report, due to the time and geographical constraints, it was

not possible to collect primary data, in the form of face to face interviews as well as

gathering of information through survey and questionnaires.

Further to the above, information and data on most of the topics of study and

analysis mentioned as above are available through Graduate course Notes and

materials, Books, articles and reports. Due to these conditions, secondary data was

chosen as the main source for the Research and Analysis project.

However, it could be noted that all data collected from annual reports and balance

sheets from the website of Office Depot can only be considered as primary data, as

they are required to present to the public only factual data under the corporate

governance rules of transparency.

2.3. Source of Information and Data

Internet and the World Wide Web were chosen as the main source of information

apart from the books and graduate study materials available. This decision was taken

based on the fact that most of the material was available on the Net including the

official website of Office Depot.


Following sources were tapped to gather the information and data

Articles on business, e-business and business processes from Wikipedia , the

free encyclopaedia on the Net and course materials.

Articles about Office Depot performance and about its e-business models,

which are published in online business magazines.

Office Depot’s Official website was extensively used as a source to collect

information about its timeline Performance and financial parameters from

Annual reports, balance sheets.

Stock Price data from Stock market website of Nasdaq and other financial

sites on the web.

2.4. Limitations of Information and Data gathering

The Articles and reports, from which the secondary data was collected about the

background topics and about the Office Depot, may have been written under different

context, which may not necessarily coincide with the context of the study.

However, care was taken while using such data, keeping the differences in the two

contexts in mind.

No such limitation was found while using the data from the official reports and

balance sheets of Office Depot as they mostly consist of factual data.

2.5. Ethical issues faced in Data collection

The research topic did not involve any personal information or confidential

information. Further no primary data was collected through interviews with the staff of

Office Depot nor is any personal comment or controversial view gathered or reported.

Hence It is stated here that no ethical issues were faced either in the collection of

information or its reporting.

2.6. Effects and Parameters chosen to analyse the Office Depot’s e-business

ROI (Return on Investment). E-business needs material and manpower investments,

in terms of computer hardware and software, bandwidth, network and system

administrators and interface designers and content providers and their


compensations. It has to be seen what are the annual profits from online sales and

what is its ratio when compared to e-business investment. But neither the data on e-

business investment nor the operating costs of e-business are available.

As the study’s research and analysis is about the impact of e-business adaptation by

the Office Depot, it is required to study the changes in its business performance due

to the introduction of e-business. The Financial as well as performance reports of the

Office Depot did not directly apportion and quantify the effects of its e-business

model. In order to overcome this handicap indirect data that would enable the

analysis of the impact of e-business was chosen. The performance and finance

parameters thus chosen for the study are;

2.6.1. Effect on the Growth of Physical infrastructure

B2C e-business is supposed to reduce the need for physical infrastructure. As Office

Depot opens new stores world wide each year, The annual strength in number stores

is chosen as an indicating parameter

2.6.2. Effect on the work force numbers

As e-Business automates some business processes and improves the productivity, it

is supposed to have a decreasing trend on employee strength. To study this trend,

annual employee figures were collected

2.6.3. Effect on the administrative expenses

In the case of Office Depot its online sales should have a beneficial effect in the

annual sales/employee ratio. This ratio is derived from the division of annual

sales/number of employees in that year

2.6.4. Effect on overall sales growth

Sales growth can be calculated from Annual sales figures, using the ratio of

difference in sales over the previous year to the sales of previous year.

%Annual sales growth = Difference in Annual sales/Sales of Previous year

2.6.5. Effect on Inventory costs

e-Business is supposed to integrate the suppliers with the business through inventory

database using computer networks, so that up-to-date data regarding the Inventory


of various items of sales at each geographical location is available to the suppliers as

well as Office Depot. If the supply chain management through e-business is effective,

then the Inventory turnover figure should be high. The Inventory turnover is a ratio

obtained by dividing the Annual cost of sales by the average annual inventory or

closing inventory, which is indicated as

Inventory Turnover = (Cost of Sales) / (average inventory)

Higher inventory turnover indicates lower inventory costs

2.6.6. Effect on profitability

e-Business is meant to increase the profitability of a business, by cutting down the

costs and improving the sales. One indicator of this would be reported annual Gross

and net profits

2.7. Limitations of parameters and analysis

There could be a number of limitations by using this technique, some of them are:

Ratios are definitive measures

Ratios only provide the information about the financial performance but they

don’t indicate of the business is doing well or bad, that are merely data if they

are not compared if like to like

Different accounting Policies

The Source data for the ratios are from the financial statements of the

organisation, each organisation has different accounting policies depending

on the country in which they operate.

Changes in the market situation:

While comparing the ratios from one period to other, the changes in the

market conditions may not be taken into consideration, hence measuring the

performance of the company during a given time line may be misleading.

Ratios may be misleading

Under some circumstances, the ratios may be misleading or window dressed,

for instance; a company may attain the gross profit margin of 30% when

compared to 10% of the industry and 15% with its previous year. But if there

will be a huge bulk of purchase done on the next day of the year end in

regard to the transaction, for the current year, the gross profit margin will have

to be reduced in the ideal circumstances, but the companies may prefer not to

correct the error. This is done to window dress the financial performance.


Ratios may be out of date,

As mentioned earlier, the data for the ratios are from the financial statements,

the information in the financial statements may be out of date by the time it

comes to the comparison and analysing.

However care has been taken to not to fall in traps keeping in mind the limitation of

these ratios.


3. RESULTS ANALYSIS AND CONCLUSIONS

3.1. Business

Business can be defined as a set of combined activity and collection of interrelated

tasks, which accomplishes a particular business goal such as to provide goods

and/or services to customers with the view of making a profit from the goods or

service provided.

Business also means an enterprise or firm owned privately or its ownership held

through equity shares which are publicly traded. Business can also be classified

based on its primary activity of goods or service provided, such as, Product

Manufacturing, Service provision, agribusiness, Retail or Distribution, Financial firms,

Real state, Transportation, etc. (Business: Wikipedia, 2007)

3.1.1 Business Processes

In the course of providing the goods and/or service, the business organization need

perform a number of activities, such as Purchase, manufacturing, inventory

management, accounting, human resource management, pay roll, training,

Marketing, Sales, customer support etc.... Each of the activity that is performed as

part of business is termed as a business process

3.1.2 Object of a Business Process:

The role of a business process is to transform the resources into products or services

which are required by the customer with the following objectives:

(a) To increase the effectiveness of the business by providing better value to the

customer in terms of quality of goods or services offered and

(b) To Increase the efficiency of the business by producing those goods or services

at a lesser cost. Therefore a well designed business process will avoid unnecessary

activities which may not meet these objectives. (Business Process: Wikipedia, 2008)


3.1.3. Nature of a Business Process:

A business process comprises of number of sub-processes, which can be broken

down to activities, which are often performed sequentially, to achieve the business

goal.

This can be illustrated by an example of the Business Process of a bread factory:

Here the Overall business process is manufacturing bread. Purchase of raw

materials for producing bread can be termed as a sub-process and likewise the

production of bread is also a sub-process. The sub-process of production is broken

down into activities of mixing, baking, raising etc.

3.2. e-Business

e-Business or electronic Business is a common word for conducting business

processes or business transactions utilising Information technology and

Communication technologies (ICT). (Electronic Business, 2008)

3.2.1. Objects of e-Business

The objects of utilising the Information and Communications technologies (ICT),

while performing business processes are;

to improve the efficiency of business by saving cost and time in performing

the business processes

to protect the business processes from possible human error


Raw Material

Production Process

End Product

Purchase Wheat Flour

Mixing

Baking

Raising etc.

Bread ready for delivery

To integrate the business processes across business functions or

departments, which otherwise needs intense coordination and communication

between these departments while performing business processes

To avoid duplication of tasks and to save time and administrative expenses

To create, integrate, maintain and synchronize various business related

databases, which can be used by personnel from different departments, in

order to take managerial business decisions as well as to continue with day-

to-day business operations.

To provide convenient public and private web sites or other interfaces to the

customers and suppliers to promote, accelerate and complete the business

processes of sales and purchase and their related payments.

3.2.2. Components of e-Business

E-Business mainly comprises of 3 components, and they play a critical role the

operation of e-Business. They are:

Internet

Intranet

Extranet

Internet:

It is a public and wide computer network that links computers across the globe. The

data can be uploaded in a physical infrastructure called “the server” and any PC can

access the data stored in the server by certain communication links.

It plays as a means of communication with the front end operations of the e-

business; it is the medium of contact with the customers and the end users.

Intranet:

Intranet is a private computer network within an organization. It can be shared only

by the members of the organization with relevant security feature. It is generally done


by giving access to the small server within the organization where the required data

is stored. It is sometimes referred as the “a private version of Internet”

It is implemented to integrate the business processes of the company and increase

the speed of the process, effectively by cutting the cost for the end product and

eradicate any duplication in activities.

Extranet:

Extranet is also a private computer network, but it extends among the several

organizations, It is greatly used to carry out the B2B e-commerce model, and it is an

effective means of communication to share the information among the organizations.

It is generally used for back end business processes, mostly with suppliers.

Following diagram shows the 3 components of e-business and their interactions.

3.2.3 Arguments against E-Business

Inconvenience that is experienced by the organizations in the absence of the

personal representative, or individuals who may miss the experience of store

front. The inconvenience of the lack of personnel assistance can be

overcome by introducing VoIP and/or online chat facilities.

There is a possibility that the organization may over focus in the change of

the system and may end up over investing on something which is not directly

relevant to the business the company operates, which in other words termed


OrganizationBab

Suppliers

ConsumersI

nternet

Extranet

Back endOperations

Front EndOperations

Intranet Intranet

Mode of Communication

as dilution or diversion of business goals. This has no direct relation to e-

business. Business focus can be lost even without e-business

The system by its nature heavily depends on the computer systems and

networking, any failure of the computer networking temporary malfunctioning

of the server may lead to severe adverse circumstances. Technology

answers these problems in terms of back up data and servers

It may be a burden in the small sized organizations as they may lack the

necessary skills and investments, and hence are moved out due to e-

business competition. There are other instances where small and medium

businesses could compete with large corporate using e-business as a tool

and leveller. The e-business investments may be offset by the advantages

such as ability to enter the global market, lesser man-power requirement,

ease of operation, outsourcing of IT related problems and other technical

services. (Surridge, 2008)

3.3. Office Depot

Office depot is one of the largest Office consumables and equipment supplier with its

headquarters stationed in USA. It is the second largest company in the industry (Only

next to Staples), in terms of revenue. It sources office supplies and equipment from

several manufactures and suppliers and distributes the same to its corporate and

SME customers through a chain of stores located in several countries and regions all

over the world.

3.3.1. History of Office Depot: and its e-business

Office depot was established in the year 1986 in Florida, USA. It had achieved the

sales of $2 Million in the year of its incorporation, by opening 3 stores in the same

year. It has witnessed a massive growth in sales in the following year with the sales

growth of 1600% and further 288% in the year after. After a huge and the robust

growth of its sales in the first two years of its incorporation Office Depot had

successfully Issued a Initial Public Offering (IPO) in the year 1988 in NASDAQ, while

operating 26 Stores in 7 Sates and employing 1600 employees. Office depot has

gone to the IPO for second time in the year 1991 in New York Sock Exchange

(NYSE), it also crossed the $1 Billion figure in the same year, and it has entered in to

the international market by entering into the Canadian market. During the year 1994,


Office Depot has entered in to the overseas markets by opening stores in Israel and

Colombia and having a Joint Venture in Mexico. (Timeline, 2007)

In 1994, MIT had invited Office Depot along with its other suppliers to join in

experimental internet B2B site of suppliers dedicated to MIT. Office Depot could see

internet as a new channel of distribution and accepted the offer. Soon after the

success of the MIT experiment, Office Depot has established a Business-to-Business

(B2B) form of e-commerce for its corporate customers to place orders. It was a

considered as successful model as it has earned the total revenue of $60 Million per

year in the span of 3 years. It was in the Year 1996 that Office Depot had started to

operate the E-commerce strategy by investing and successfully launching a

Business-to-Business e-commerce platform with its suppliers though it did work

through during 1997 in designing the public website, It has successfully launched its

B2C public website ”www.officedepot.com in 1998. Office depot always believed that

there will be a time when the e-sales would be a major channel of sales and also

decided not to do a ‘ROI’ analysis before entering into the B2C e-Commerce.

(Berkman, 2001)

Though the exact investments for the first website are not known it is estimated that

the e-business investment in the years 1997 and 1998 was of the order of $ 10

million.( Khosrow, 2006)

1998 was a year of major change in the history of Office depot as it as also

successfully completed its merger with the catalogue company Viking Office

Products, this has led Office depot to have direct mail and delivery facility into six

more countries along with the expansion of its stores to 10 countries all together.

Also at this point it had multiple channels of sales through, stores, Mail-order, phone

order, fax and web and maintained same product pricing across all channels.

After the success of the B2C business model, Office depot had took an innovative

measure by providing the value added services in its website, such as providing free

information about running a business, it has opened a few online forums providing

useful business related links etc. This had lead to the increased number of visitors to

the site and also many users of the value added services turned brand loyal to the

Office Depot. (Berkman, 2008)


3.4. Impact of e-Business on Office Depot:

Over the period of time, Office Depot has adapted the full-fledged e-business model;

the impact of this model on the business performance can be measured with some of

the Accounting Techniques such as Ratio Analysis.

The research that has been done in order to analyse the impact of e-business on

Office depot was done on the following parameters:

Most of the Financial Information can be divided into 3 phases in order to measure the

impact of the e-business on Office Depot, They are:

Pre B2B e-commerce model (before 1994)

Post B2B e-commerce model and pre B2C e-commerce Model (1994-1998)

Post B2C e-commerce(after 1998)

3.4.1. Sales

The sales information of the company of Office Depot is represented as follows:

Analysis:


In the above chart it can be seen that there has been a gradual increase in the total

sales till the year 1994, in that year , it can be seen that there has been a slight jump

in the total sales revenue and it continued to grow in a faster pace, the graph took off

even further high after the introduction of the B2C website, especially a sharp rise

immediately and more importantly maintained the growth, this is one the favourable

impact of e-business on the Office Depot. The consistent growth may not be directly

due to the introduction of the website, but however this may also be due to the

changes made, in their business model, to sustain the B2C E-commerce model, i.e.

Office depot made some strategical changes in their supply chain management

system in order to sustain the B2C model, the change by its nature, would have been

to the value added services such as reduction in the delivery time, this change may

also have contributed to the increase in the total revenue.

Limitation:

The actual increase in the sale figure might have also been because of the different

factors such as reduction on price of more innovative models such as volume

purchase, under the own brand , but factors such as e-procurement are also driven

by the e-business model.

Other limitation is that the increase of sales may also be because of the factors such

as diversification, Office depot’s diversification into the copy and print industry is an

example

Conclusion:

It can be strongly argued that the total sales revenue had a favourable impact due to

the e-business model of the Office Depot. The increase of the sale may be due to the

improvement in the Supply Chain Management, Procurement, increased Customer

service (such as customer having the information about the available inventory,

tracking of order, Irder history, etc.), but all these factors are still impacted due to the

e-business model.

3.4.2. E-Sales

The information regarding the amount of e-sales achieved by Office Depot is as

follows:


This graph show’s that Office depot has been doing well in terms of achieving the

sales growth since its introduction of its B2C website in the year 1998. There has

been a linear growth in terms of volume. This can also be considered as an

advantage to the Office Depot because the main goal of the introduction of the

website would have been to increase the amount of e-sales as each e-sale would

save a portion of cost in processing.

Steve Zrike, a senior analyst who covers online retail for Forrester Research, confirms

that it’s an impressive conversion rate. "The fact that they’re doing this much just

through the Internet is pretty significant, given the tiny percentage of customers who

could actually get online before the beginning of 1999," Zrike says. Revenue isn’t the

only thing Office Depot is getting from the Internet. Seltzer estimates that each online

transaction is at least 1 percent cheaper to process than one that’s phoned or faxed in,

which adds up when you are talking about tens of millions of dollars in sales

(Berkman, 2008)

So taking this analysis into consideration, It can be concluded that the Office Depot

was successful in reducing the cost processing with the help of increasing the

volume of e-sales.

Limitation:


It can only be assumed that Office Depot has saved cost by increasing the volume of

sales online through the analysis made by other authors during the growing stage of

the e-business, but it may not the same during its maturity period.

Conclusion:

Assuming the analytical facts of the cost measures, and the increased volume of the

e-sales it can be assumed that the e-business activities helped Office depot in

increasing its e-sales and effectively reducing the cost of operations, and also

reaching the goal of office depot to increase the volume of e-sales.

3.4.3. Growth Of E-Sales and E-Sales Proportion

E-sales Proration and its growth can be used as an effective parameter of the

success of e-business. The following graph represents the proportion of e-sales:

This graph indicates that the proportion of e-sales (Blue line) is increasing over a

period of time, this is a good sign, as more and more business is performed through

the e-business process, leading to cost reduction in sale related processing. This

also means there will be reduced demand in investment of the physical infrastructure

of stores, and can focus more on the e-business markets, which is much cheaper to

invest in. The yellow line in the graph shows the proportion of offline sales, which is

nothing but the inverse of e-sales proportion.


The magenta colored line indicates the year-on-year percentage growth in e-

salesHowever there has been turbulence in the growth rate of the e-sales, but this

can also be due to the temporary adverse economic conditions.

Limitation:

Increase in the proportion of e-sales as to Offline sales may not necessarily mean

increase in profitability.

Conclusion:

Arguably increased proportion of e-sales is purely due to the improvement in the –

business processes.


3.4.4. Inventory Turnover

Inventory Turnover can be calculated in two ways. The Calculation Methods are as

follows:

Cost Of Goods Sold / Closing Inventory

Cost Of Goods Sold / Average Inventory

Average Inventory = (Closing Inventory +Opening Inventory)/2

Increase in the Inventory Turnover is the sign of more effective Inventory control or

Increase in the sale, both of them are heavily depended on the effectiveness of

business process.

The average inventory turnover is considered to be more accurate by some of the

analysts because it will also consider the seasonal inventory. But this may not be

relevant to Office Depot as it does not operate in a seasonal business environment.

However both the form of calculations are used below.

The graphical representation of the Inventory Turnover is as follows:

This graph represents that the Inventory turnover of the Office depot. It indicates the

ratio of inventory turnover considerably. Many analysts believe that e-business is the

only reason for sudden raise in the inventory turnover. The continued growth in the

inventory turnover also indicates that it was not just a seasonal change but it was due

to the effectiveness of the e-business approach to improve the supply chain

management. High inventory turnover indicates low interest burden of maintaining

huge inventory, provided stock out situations are not faced frequently, which in turn

maybe a cause to loose possible business.


Limitation:

Too High Inventory turnover may also be due to the inefficient inventory

management, which results in frequent stock out situations.

Conclusion:

Increase and the consistent growth in the Inventory turnover means that Office Depot

was successful in operating e-business process of inventory and supply chain

management. A study by JP Morgan In the year 2001, the inventory turnover of

Office Depot was around 7 when compared to its nearest rival Staples (Prior, 2001)

3.4.5. Sales per Employee

Sales per employee ratio provide a broad indication of how expensive a company is

to run. Though it does not give the clear indication of the running of the company, it

provides an over view of the financial health of the company. A company is

considered to be doing well, when there is a high Sales/per employee Ratio. This

could indicate:

Company is able to utilise its Human Recourse better than other companies

Or

Company is relaying more in the non Human resource, and more on the

System.

The Sales per employee ratio of Office depot is as follows:

Sales Per Empoyee

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Sales Per Empoyee


There has been very strong increase in the Sales per Employee ratio, since the

introduction of the e-business during 1998. Arguably e-business aims at decreased

dependence on the human resources. Though the growth rate has been constant the

growth in sales per employee is phenomenal. It has increased from $ 200,000 per

employee in 1998 to around $ 300,000 in 2005 after which it stagnated. This means

that with proportionately less number of hands Office depot is able to accomplish

more sales.

Limitation:

Growth in the sales per employee does not necessarily mean decrease in the

overheads as the salaries may rise due to the need of educated or skilled employees

to maintain or perform the e-business operations, apart from administrative costs due

to additional IT-support staff.

Conclusion

This clearly shows that e-business has improved the sales per employee. It also

increased the stability of the growth and never decreased, This indicates a

favourable impact on the Sales per Employee Ratio.

3.4.6. Number of physical Stores

The trend of increase /decrease in the number of stores will indicate the amount of

reliance on the e-sales and the traditional sales.

The following graph represents the number of stores operated by Office Depot over

the period of time.


This graph suggests that there has been a very consistent growth in the number of

stores operated by the office depot till the year 1998.From the introduction of the

website it can be seen that the growth rate has considerably come down , the

number of new store opened has been reduced, this means that the company has

been focusing on the increase of its operations more and more towards the e-

business, it is also a good source of data which indicates the reduces investment in

the physical infrastructure, which is always more demanding than the e-business

infrastructure.

Limitation;

This can also be due to the maturity of the market and Office depot being unable to

expand its existence in the Office equipment Supply Industry.

Office Depot may be over focusing on the expansion of e-business rather than

focusing on the increasing the market share.

Conclusion:

Isolating the Limitations, it can be seen that Office Depot is improving its e-business

operation when compared to the offline operations, the reduction in the expansion in


the number of stores and simultaneous growth in the volume and proportion of e-

sales is the indicator on the success of the e-business model of the Office Depot.

3.4.7. Gross Profit Margin

Gross Profit Margin, indicates the amount of money spent on the purchase and sale

of goods, it excludes all the overhead, it is mostly considered to calculate the

profitability of the organisation. This is also an effective yard stick for the profitability

of an Organisation.

The Profit Margin of Office Depot from 1998 is as follows:

The above graph indicated that there was a marginal fall in the profitablility , in the

first two years of the introduction of the public website. However , there was an

improvement after the perod of two years, with the steady growth in the Gross Profit

Margin, This might have been caused for the number of different reasons, such as

cutting prices to increase the markrt share, or increase cost of procurement due to

the introduction of the e-business(Which is very Unlikely), but it should also be noted

that the increase in the profitability took place only after the e-procurement % has

increased in the later stages of the introduction of the public website.

Limitation:

Gorss Profit marging only includes the expences related to the Inventory procured or

direct costs relating to the Inventory purchas and handling. It Excludes the overheads

of the Organisation.


Conclusion:

The Intial decrease in the profitability does have an adverse impact on the profitability

of the Organisation. But however,the take off of the profitability of the organisation

after the period of 2 years(when the e-procurement incresed predominently)

suggests that e-business had the benificial impact. However the range and bounds of

profit margin are from 27% to 32%, which is a small variation of around 16%

3.4.8. Number Of Employees

The increse or decrease in the number of employees does give the picture of the

requirement of the human resources in an Organisation. Treditional business

processes would heavely depended upon the Human resources, and hence the

average amount of employees doing one perticular business prossess was huge, but

due to the increse in the autonation of the business prcesses, the requirement of the

humen resourses had come down in the e-business environment.

The following Chart depicts the annual number of employees in Office Depot, since

its inception.

The Graph represents more or less the same trends that the graph on the number of

stores exhibited, indicating the strog link between numbero employees ad number of

stores, maintained by office depot. The increse in the nuber of employees was more


or leass consistant till the year 1994(Excluding 1993). The increase did continue till

1998, but the was a slowdown in recrutement of the human resources after 1998, this

might have been due to the impact of the e-business on Office Depot.It also indicats

the decrease in the number of employees in the forther years, this chage could have

mostly been due to the increase in the efficiency of the e-business processes.

Limitation:

It is unknown in the reduction in the human resource was due to the implication of e-

business or if the Office depot has outsourced some of its Operations.

Conclusion:

It is seen that e Business has reduced the dependance and requirement of human

resources. This will effectively reduce the cost of the products and services priveded

to the customers and end users.

3. 5 Over all Coclusions

It can be seen from the above that the over all impact on the organization can be

summarized as follows:

• Favourable results in all of the parameters considered

• Considerable Success in the model

• Overall reduction in the cost of operations

• Increasing investment in the e-business model

• Decreasing dependence on the offline sales sector


REFERENCES:

1. Barua, A. (2001) Managing E-Business Transformation: Opportunities and

Value Assessment.

http://misbridge.mccombs.utexas.edu/knowledge/facpubs/articles/managing_

ebusiness_transform.pdf (visited 2 September 2008)

2. Berkman, E. (2001) OFFICE DEPOT - Clicklayer Building Online Success on

Brick-and-Mortar Business.

http://www.cio.com/article/29548/OFFICE_DEPOT_Clicklayer_Building_Onlin

e_Success_on_Brick_and_Mortar_Business (visited 12 September 2008)

3. Business Wikipedia (2008) http://en.wikipedia.org/wiki/Business (visited 5

September 2008)

4. Business Process Wikipedia (2008)

http://en.wikipedia.org/wiki/Business_process (visited 5 September 2008)

5. ElectronicCommerce Wikipedia (2008) http://en.wikipedia.org/wiki/E-

commerce (visited 10 September 2008)

6. Khosrow-Pour, M. (2006) Cases on Electronic Commerce Technologies and

Applications, Hershey, IGI Publishing

7. Surridge, T. (2008) Business Analysis (ACCA P3): Lecture Notes


http://en.wikipedia.org/wiki/E-commerce

http://en.wikipedia.org/wiki/E-commerce

http://en.wikipedia.org/wiki/Business_process

http://en.wikipedia.org/wiki/Business

http://www.cio.com/article/29548/OFFICE_DEPOT_Clicklayer_Building_Online_Success_on_Brick_and_Mortar_Business

http://www.cio.com/article/29548/OFFICE_DEPOT_Clicklayer_Building_Online_Success_on_Brick_and_Mortar_Business

http://misbridge.mccombs.utexas.edu/knowledge/facpubs/articles/managing_ebusiness_transform.pdf

http://misbridge.mccombs.utexas.edu/knowledge/facpubs/articles/managing_ebusiness_transform.pdf

Documents

Effect Of E-Business in Office Depot