Office Depot and Office Max Merger Article Commentary

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February 21, 2013 Office Depot/Office Max Merger & Porter’s 5 Forces On February 20, 2013, Office Depot released its earnings, and also released their plans of a merger with Office Max. This deal equals to create $18 Billion global office solutions company. It is believed that customers will benefit from unique and innovative products, services, and solutions available. Because of the changing economic environment, the two companies face many challenges in regards to Porter’s 5 forces. The biggest area that will be impacted with this merger is the rivalry among existing firms. As stated in the article, “Office supply superstores have been struggling to stave off competition from online retailers, while also dealing with the slow decline of paper products as offices become increasingly digitized.” Prior to this merger being announced, in 1997 the FTC denied a merger between Staples and Office Depot. Because of the decline in the industry, the FTC was afraid of a monopoly. Office Depot and Office Max do not present a threat of such because it results in less concentration than a merger with Staples would have. Due to the nature of the office solution industry, high sales volume is critical to the success of any business. This means that suppliers are vital to their success. Once Office Depot and Office Max merge, they will benefit from the increased number of suppliers. This merger will create the largest office supply company with 2,000 stores. However, if there are not enough suppliers to support these stores, sales will be cannibalized. While an individual customer may not have much power, the overall customer base of the office supply industry has collective power. A large company purchasing a large amount of supplies may have room to negotiate a discount, but the average consumer cannot walk into a store and demand 20% off a product. Also, there are
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