Office Max going to Spain
- Pages: 44
- Word count: 10907
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Nowadays many companies are willing to expand abroad as it provides more benefits to earn profit. Spain economy seems to be very profitable and it is a common knowledge that Spain is a wealthy European country. Moreover, its income rates are considered among the highest in Europe because the country is an excellent play to expand business in. therefore, Office Max is willing to expand its business in Spain. Financial and economic performance of the company is improving and nothing seems to threaten its financial stability. Office Max is ready to expand internationally and to gain certain market share in Spain. Actually, Spain is a country with great emerging markets and, therefore, with opportunities to succeed in highly competitive business world. The main reason of choosing Spain is that the country doesn’t have large office supply retailer and Office Max is very likely to become a company which is able to break this barrier and to meet customer’s needs.
Nevertheless, Office Max sees certain challenges as, for example, there will be necessity to re-arrange working hours because of siesta. However, it is not too difficult. One more challenge is culture as cultural differences may lead to misunderstanding and misinterpretations. Different cultures have their own set of beliefs and customs and therefore, what is considered morally right in one country may be considered morally wrong in another. It is necessary to underline also language barrier as there are four languages spoken in Spain. Office Max is gong to make its employees aware of possible cultural differences and misinterpretations. Moreover, it is necessary to be open to learning new language or to find interpreter. Furthermore, business laws differ from those in the United States and this factor should be also accounted. For example, Spain values and appreciates loyalty and friendship, and ethical rule maybe broken because of friendship. In the United States the situation is a little bit different.
Office Max proves to be strong company with stores in Europe, Mexico, Canada and Australia. In particular, the company has more than 900 stores with over 35,000 employees. In such a way the company has enough experience of expanding abroad. Company’s main competitors will be Staples operating under the name of Kalamazzo, El Corte Ingels, Alravaza, and Ofiprecios. The core strategy of Office Max will be learning carefully the market from the perspective of local Spanish people i.e. learning their habits and preferences and understanding the power of buying. Such analysis will give an opportunity to find the best place for Office Max store.
The action plan of Office Max is centered on entering the major Spanish cities – Valencia, Madrid, Barcelona, etc. Due to company’s experience, it will be possible to ensure strong presence and directly attack the market with new services and goods. Office Max is associated with the European Office Supply. It means that the company has agents in 19 European countries. Spain belongs to the United Nation and it has the same rules and regulations as the other countries Office Max has already expanded in. Office Max gained international experience from businesses in Mexico which is ex-colony of Spain. Thus, Office Max can easily understand cultural differences.
Summing up, Spain offers vast market for Office Max expanding abroad. Office Max sees no political and environment factors that may prevent expansion as the country is characterized by favorable competitive business environment. Office Max sees Spain as an excellent opportunity to sell office furniture and stationary items as the national income is very high and people can afford more things. However, it would be better for global company to start expansion from Madrid.
Module 1: IDENTIFYING GLOBAL BUSINESS OPPORTUNITIES
(Created by Ashley Cohn)
Global Business Opportunities
The environment and time is right for Office Max to expand across the world. Our finical records have been steadily improving and I feel that we are ready and able to extend our market share from just North America to International as we open up stores in Spain. Business opportunities are very plentiful overseas as many countries continue to evolve and become new places to conduct business.
Spain is a great emerging market that is filled with the opportunity to succeed. They currently do not have a large office supply retailer and we feel that Office Max can be the company to break that barrier and provide the Spanish people with a great solution to many of their work needs.
Absolute and Comparative Advantage
Spain has a good deal amount of wealth and is able to create a lot of interest with our product. They certainly will be willing to jump on board with our company as they see how successful we can be. Moving past Spain, we feel that our representation their will be so will received, that as a company, we can see our selves moving across the continent into other European countries.
When thinking about expanding any business, it is important to think about many different factors that can determine success or failure. It is easy to plan this process by performing a SWOT analysis. An acronym standing for Strengths, Weaknesses, Opportunities and Threats, the SWOT analysis is a great way to help organize and determine if the venture will be successful.
First looking at the strengths of Office Max, they already have stores in Australia, New Zealand, Europe, Canada, and Mexico. This proves that since they’re stores were successful overseas it would not be difficult to move into another country. Other strengths are the fact that there are over 900 stores already in business and over 35,000 employees. Also they are taking down stores and opening award winning “Advantage” stores. Expansion has always proved to be very successful for the company and had become something that has really helped the overall company growth.
In Spain it has been documented that they are one of the least punctual countries and their employees are known for being late. Also there would be a significant change in business hours because of their siesta, which cuts about 3 hours of the after noon out. This can be seen as a weakness because it is something that is very different than the American culture. It will be something that always needs to be thought about by the American partners. The employees and customers will know about the Spanish traditions, but it is important that all American employees involved with anything in Spain learn about the culture.
When looking at the opportunities this venture brings, it shows that there is a lot of potential in Spain. The economy in Spain has always been very profitable and it shows as Spain is a very wealthy country. They have one of the highest income rates in Europe as the country has become a very profitable place to live and to conduct business.
Finally, it is always important to look at all threats when deciding about this type of venture. One thing to remember is that the Spanish stock market reacts very closely to what happens on Wall Street. . The language barrier can also be a threat because in Spain there are four different languages that are commonly used. It is important to make sure that everyone is aware of this and will to accept that they might need to learn a new language and/or speak with a translator. Also negotiations and business laws are very different then those in the United States. Friendships and loyalty are valued very highly and sometimes ethical rules are broken or unwise decisions (from a financial standpoint) are made to save friendships.
After laying out all of the possible factors, it makes the process of discussing any problem much easier and more effective for everybody involved in the process. This is a great way to really think in depth and to predict if a problem will be successful or not.
It will be important to research about international project, to make sure that everyone in the company has an understanding about the risks involved. It is necessary to talk with the Spanish government soon after to make sure that the corporation also understands what is involved in such a large venture.
Module 2: ANALYZING INTERNATIONAL COMPETITORS
(Created by Ron Engelberg)
Spain is a very attractive destination for opening a global business, there are different companies, office supplies are a very wide market, and with different companies already established. In order to understand the different possibilities is always good to learn the buying customs of the local population and how the competition works it out.
Below are some of the examples of different companies which embrace the road in Spain:
Staples, that operates under the name of Kalamazoo. El Corte Ingles, a local company, is the major chain in Spain. Alravaza is another local company that deal with office store, but they concentrate more on major business that the general public. Ofiprecios is another possible competitor, which deal with ergonomics equipment for the office.
Office Max has a long history of entering to different countries, including Mexico in 1996. Today they operate 78 stores in the country, been a country with similar cultural environment. The approach of Office Max entering firs on the central commercial cities of Spain like Barcelona and Madrid will give them the opportunity to test themselves and correct according to the cultural trends in the area. Another competitive advantage that the company has is the strong financial backup, which not every company that wants to enter a new country has. Since Staples enter to the market and they are a direct competition in the US, they can learn from their mistakes and copy some of the operational ways. Office Max also already has partnership with the European Office Supply Association and agents 19 European countries. This partnership will help in their future operations in Spaniard territory.
The target will be to concentrate in places were the competition operates; for example Kalamazoo (Staples Company) is base in Madrid and sales everything that a customer which would like to buy an office product would have. Their website is very self explanatory, divided in different division according to the needs, there is a possibility of getting a catalog and the goods can be self assembled for example by request ( they provide the map). Also they offer a free delivery between 24hs for goods purchased surpassing the value 35 Euro.
Office Max can at least provide the same service or find a way to give something else, which the customers in Spain will see it has an advantage to buy from them and not from the classical competition.
The strategy will be to learn the market from the point of view of the local people in Spain, performing different pools regarding they buying habits, in this stores, asking different consulting firms that specialize in office supply to prepare an overview of the largest cities in Spain like Barcelona, Madrid, Valencia, etc, to understand the power of buying and their preference, to properly locate the Office Max store, and layout a plan inside the store, that fit the local needs, between others.
Taking the advantage that office max is already associated to the European Office Supply Association and has agents 19 European countries, things would be a little bit easy, since belonging to the European Union, Spain has the same basic rules and regulations has the rest of the countries. Learning from their international experiences in countries like Mexico, which is a former Spanish colony will help them to understand a lot of the cultural differences with the rest of the English speaker countries like Australia, Canada, New Zealand and the US that they operate today. After this previous planning and learning experience, the plan will be to enter to the major cities in the country, like Barcelona, Madrid, Valencia, to have a strong presence and attack directly the market that the competition has building their reputation locally, backup with the financial corporation which will help in the marketing campaigns and price low margins in the beginning.
Module 3: ASSESSING THE ECONOMIC-GEOGRAPHIC ENVIRONMENT
(Created by Claudia Horton )
Location: Southwestern Europe, bordering the Bay of Biscay, Mediterranean Sea, North Atlantic Ocean, and Pyrenees Mountains, southwest of France. Spain is slightly more than twice the size of Oregon with a total area of 504,782 sq km; Land 499,542 sp km and water 5,240 sq km.
Note: includes Balearic Islands, Canary Islands, and five places of sovereignty (plazas de soberania) on and off the coast of Morocco – Ceuta, Melilla, Islas Chafarinas, Penon de Alhucemas, and Penon de Velez de la Gomera
The Border countries are: Andorra, France, Gibraltar, Portugal, Morocco, and Morocco (Melilla). The Climate is temperate; clear, hot summers in interior, more moderate and cloudy along coast; cloudy, cold winters in interior, partly cloudy and cool along coast. The areas natural resources are adequate to supply a major construction initiative.
Major Products and Industries
Spain has a great market for office supplies and it will be successful to open an office Max in this country. The natural resources include: Coal, lignite, iron ore, copper, lead, zinc, uranium, tungsten, mercury, pyrites, and magnetite. The country counts with enough supplies to support the actual construction of the buildings and the market (customers) to support the stores.
Current Economic Conditions
Spanish economic growth has remained strong in recent times. As part of their efforts to establish conditions conducive to increased productivity growth, the Spanish authorities have made improving the functioning of the goods and services markets one of their priorities. Efficient organization of these markets is one of the essential ingredients of a dynamic economy, helping as it does to stimulate efficient static resource allocation, reduce costs and encourage innovation. In Spain, there is indeed a great deal of room to enhance competition.
Spaniards are more formal in personal relations than Americans but much less rigid than they were ten years ago. The biggest mistake a U.S. businessperson can make is to assume doing business in Spain is just like doing business in Mexico and Latin America; Italy or France would be a better comparison. Spaniards tend to be “conservative” in their buying habits. Large government and private sector buyers appear more comfortable dealing with other large, established organizations or with firms that are recognized as leaders, known brands do well. Frequent direct air service is available to major U.S. cities from Madrid and Barcelona. Both Madrid and Barcelona have good bus service between the airport and downtown. There is a good highway network linking major cities in Spain. Secondary roads are poor in Galicia and Asturias (in the Northwest). The Spanish railway system is extensive. There are high-speed trains from Madrid to both Sevilla and Málaga. Madrid and Barcelona enjoy excellent railway systems in their metropolitan areas.
The Action Plan
It will be necessary to create business relationships first; the construction part will not be a problem because the country counts with all the necessary elements. It is important to focus in negotiations and export regulations.
The Real GDP/Capita is 26.948 (as 2006) using the PPPs (Purchasing Power Parties)
Module 4: ASSESSING THE SOCIAL-CULTURAL ENVIRONMENT
(Created by Todd A. Stiles )
Spain is one of the oldest world empires. Dating back to the 16th and 17th century, Spain was revered as the most powerful nation in the world. But as in many cases that position was lost over time and the country gradually succumbed to civil war and economic problems until 1975. Spain became a democracy and focused its economic efforts into become one of the leading economies in modern Europe. The modernization of Spain has seen dramatic economic growth and is punctuated with Spain joining the European Union in 1986. Based on the most recent census information the population of Spain is approximately 41 million people. That population is heavily weighted toward wage earners ages 15 to 64 making up 67.8% of the population. The remaining population includes 17.8% over the age of 65 and 14.4% under the age of 14. Similar too much of the population in Europe, the median age is 40. Based on the most recent census from 2007, the birth rate and death rate have remained fairly equal. The population has been pretty much maintained with immigration of 1 per 1,000. The birth rate follows the same trend of 1.29 children born per bearer. Spaniard’s enjoy a life expectancy of almost 80 years. Also the literacy rate that includes all people over the age of 15 that can read and write is very much inline with other European countries at 98%. (CIA)
Spain is a very proud country. Its long standing traditions and history have evolved into a solid democracy and a very stable economy. Today, the ethnic breakdown for the population is largely a composite of people with Mediterranean and Nordic backgrounds. Over 75% of the population speaks Spanish as the formal language, while a few other languages like Catalan and Galician are also found in regional areas. (CIA)
As we know in our current time, religion drives much of the happenings on a global basis. It is key to note that over 95% of the Spanish population is Roman Catholic. That association can be traced back as far as the Roman Empire. Most of the normal holiday celebrations associated with the Catholic religion is celebrated in Spain, much the same as they are in the United States. (CIA)
Informal Trade Barriers
Spain has continued to report a fairly strong economy in light of the current stagnating situation in Europe. The country in large part has been modernized and continues to maintain a 3% growth rate. How there are lingering concerns regarding trade and illegal immigration with the UK and Morocco. While the Spanish economy appears consistent there are lingering concerns regarding the housing market, global competitiveness, and the poor overall performance of the European Union. (CIA)
In general the Spanish population carries low debt with less that 20% of the population operating below the poverty line. Much of the Spanish economy is based around service type businesses (64.6%). Based on the fact that the economy is currently holding with a steady growth plan and relatively low unemployment we would assume that OfficeMax would be able to provide a quality solution to support current business activates throughout the country. The initial action plan should to focus on the largest population centers, Madrid, Barcelona, Valencia, and La Coruna to establish country presence. Expansion would depend on volume and revenue from these primary centers. (CIA)
Module 5: ASSESSING THE POLITICAL LEGAL ENVIRONMENT
(Created by Lucy Zubek )
The Spanish Political System
The Spanish people are governed by a Constitutional Monarchy, which makes it a “Kingdom” ruled by King Juan Carlos I since 1975. The incumbent Prime Minister is Jose Luis Rodriguez Zapatero. By virtue of the Constitution, the King nominates the President who stands as the chief of the executive branch of government. The legislative branch is made up of a bicameral structure similar to the American Legislative model, where the Congress of Deputies Coexists with the Senate. Spain has three main parties and several other regional parties, each with varying trade/business interests. The main parties include the labor-leaning Spanish Socialists Worker Party (PSOE), the Popular party (PP) and the United Left (IU) Coalition. The regional parties are the Convergence and Union (CIU) based in Catalonia and the northern Basque Nationalist Party (BNP) hailing from the Basque country or Pais Basco.
The Judicial branch is perpetually confronted with constitutional issues, yet there is evidence that it has made trade-friendly decisions in their jurisdiction. A typical Spanish Judiciary is composed of an interesting range of municipal, regional, provincial and territorial courts, all headed by a supreme tribunal (www.dfat.gov.au).
Since the re-institution of democracy after Franco’s Regime, progressive government officials have strived to introduce reforms in Spanish foreign policy. A significant indicator of these efforts is the key membership of Spain in the European Union. Assuming that the country is a major influence in European affairs, an OfficeMax base in Spain will be an effective staging area for future expansions into other member countries of the EU. It can prove an advantage for OfficeMax if the continental political system of the European Union would allow Spanish-based American firms a grip on European market share.
International Economic Policy
Online country profiles suggest that Spain has been performing a major role in the international economy of the European Union ever since the beginning of its membership. The country has much to offer, not to mention its fairly large educated population and land area. This means a strong Spanish capacity to offer skilled labor for foreign investors like OfficeMax and an almost unlimited land base for development. The country benefits also benefits from the EU, as it conforms to the regulated progressive trade and currency mechanism, the Euro. Beyond Europe and Latin America, the Spanish Government has strong economic ties with the United States (home base of OfficeMax), as evidenced by its membership in the Organization for Economic Cooperation and Development (OECD) where the U.S. is a key player in economic cooperation, making Spanish American cooperation a minute challenge.
Formal Trade Barriers
The regulatory laws set in by government sometimes impede the successful execution of business, especially when there is a franchising of business into another country as intended by the OfficeMax to introduce its business into Spain. The cultural difference from the organization’s parent’s home and the environmental factor and regulatory framework in place tend to constitute barrier to effective operation.
The stability level of operating business in Spain has lead to firms producing similar products. This has lead to low turnover for many firms, and thus threatening the survival for new entrants into the Spain business environment. According to Thurik & Verheaul (2002, pg 6), “The stability of the managed economy in Spain resulted from a homogeneous product demand, resulting in low turnover rate…the entrepreneurial economy is characterized by high degree of turbulence. Many new firms are started each year and only a subset of these firms survives for any length of time”. Thus, the demand of product in Spain is similar thereby leading to organization producing similar goods, these leads to low turnover among the competing firms, thereby threatening the existence and survival of new entrants such as OfficeMax.
If Spanish foreign and economic openness seem fairly greasy, the Spanish Tax System can warrant considerable concern for expansionists like OfficeMax. The tax structure of heavily charging foreign investors poses a huge obstacle for operation in the country. “Several institutional factors discourage expansion or incorporation of established Spanish firms, these include finance and taxation” (Ibid, pg 15). The system’s complexity is a remnant of the Franco Government which made a protectionist tax policy to shield local industries from foreign investors, which can deal a financial challenge to OfficeMax.
Promoting Global Business
The neo liberals stands of international organization such as the International Monetary Organization (IMF), World Bank, and the United Nations various agencies on international trade has supported the free market operation globally. In contemporary times, those communist and socialist states that hitherto operate a close economy as now beginning to adopt the free trade doctrine of the neo liberalists. This stand will go a long way in promoting international business; as free entry and exit would exist for international business operators. Furthermore, the sourcing of skillful labor and cheaper and qualitative raw materials are further enhance by comity of nations that have embraced the free trade doctrine, of which Spain is a member. The International Labor Organization (ILO) promotes the enhancement and available skillful labor for the advantage of international business. All these are merits that would promote the operation of OfficeMax as an international organization franchising its operations to European country like Spain.
Globally, the need to safeguard the interest of inventors, granting them patent rights, and copyrights to works originally done by authors are taken seriously. The Abogado Group of Spanish lawyers stated the recent government implementation of the Community Directive of protecting Intellectual Property Rights both for Spanish and non-Spanish citizens. This is a formal structure that would go a long way in aiding the implementation of protecting the rights of industrialists’ products and individual works. The Directive encompasses individual and industrial rights, which makes a protective trade environment advantageous for OfficeMax’s industrial designs against piracy and unlawful imitation. However, it is still unknown as to how balanced the implementation would be between Spanish and Foreign firms, yet IP laws in Spain may not hamper the transfer of industrial technology as a social benefit to the Spanish people.
The mission of OfficeMax in venturing into operation in Spain is to capture the largest market share of suppliers of office stationeries and to operate the largest stores across major cities in Spain in supplying office equipment and stationeries. Thus to successfully attain these set targets the organization would utilize those identified benefits in the political and economic environment in pursing the expansion of the organization business and operations. Hence, with the interest of the Spain government at attracting foreign direct investment into the country, OfficeMax will utilize this opportunity in opening stores in major business cities across Spain. Thus, the organization’s stores would first be stationed in commercial centers in Barcelona, Madrid, Valencia. When the organization has gained its feet in Spain in another 3-5 years more stores would be established in other centers that are assessed to be more feasible and lucrative for the industry.
In order to adequately curtail the barriers from operating trade business in Spain, especially as it affects the industry which OfficeMax operates, the organization will maximize the benefits associate with the internal organization culture OfficeMax operates in with those already established culture expected of business operation in Spain. Furthermore, on regular basis research would be conducted to see how best to operate so as to adequately adapt to the dynamic environment pertaining business operations in Spain by seizing opening opportunities.
Product differentiation would be embarked by the organization by stocking office stationeries and office equipments of the highest quality. This would be a basis of curtailing the low demands brought about by homogenous demand pattern in the country that leads to low turnover for firms.
The tax situation is complex but can be learned and resolved to OfficeMax’s advantage. In its venture to establish operations in Spain, OfficeMax will have to relish the political and economic opportunities. Possible obstacles may include stiff competition with local Spanish firms protected by their tax system. However, the opportunities include the huge Spanish population with rising purchasing power, therefore an ever-growing market. The rising economy of the European Union will make a Spanish base an effective jump-off point for penetration into other growing European markets. Having passed the strict economic regulations of the European Union indicates a sound Spanish financial sector with well-established infrastructure. OfficeMax should take advantage of this newly trade friendly government in Europe while skirting through the protectionist tax system. The benefits outweigh the risks. Thus, the plan here is to engage in regular tax payment and make the organization to be in the good books of tax collecting agencies in order to operate effectively with no stoppage in operational and expansion plans of the organization.
Module 6: SELECTING A GLOBAL COMPANY STRUCTURE
(Created by Barry )
Office Max seeks to opens new stores in the country of Spain to provide office supplies and stationary for local consumers. With the addition of stores in prized locations, hopefully we can market office supplies so consumers might have more choices to choose from. It is our desire to employ local imported and domestic economic resources to achieve this goal. Our stores will provide consumers all the necessary items for a work or home office and for supplies for kids. It is also our desire to maintain a permanent presence in the country to ensure to capitalize on the long-term growth of office furniture and office supplies. We also need to make sure that we manage to interpret the currency exchange compared to other currency. This was we can make a profit and cut losses.
Entry will be gained through negotiations with the US State Department, the World Bank, and the appropriate Spanish administrative bodies as part of the expansion process of office furniture and supplies in the host country. Knowing the inner workings of how business is done in Spain would be helpful and ensure that all local codes are adhered to. Hopefully, with their help, the transition will be smooth and our expansion will be able to hit the ground running. We will ensure that enough of our capital will be set aside to ensure the continual growth of this expansion.
In order to maintain control over costs, and to ensure the viability of our first extension into a host market, we will remain largely centralized with all proposals and bids processed cooperatively with the extension entity. Future growth in the market may call for a review of the structure in the long-term, but for now business approval decisions and major purchases will be approved through a central corporate entity. Once the expansion is completed, we will begin to setup district offices that report to the corporate office to manage the new stores in Spain. This will keep management locally and help with dealing with customer service and store issues.
The best way to make a strategic alliance will be to make every effort to partner with local vendors, local suppliers, and competitive entities in the region. Our primary competition includes local independent suppliers located in this country and in other countries in the region. These alliances with similar companies can be helpful because they can set up standard pricing that all can go along with. The lack of capacity in the region makes the concept of partnering relationships and co-ops very attractive.
The Action Plan
Our business operations into Spain will remain an extension of our US operations the stores until expansion in other countries can be realized. Our mission statement is to provide the Spanish community quality office supplies at competitive market prices, while providing critical community support by providing jobs and acting responsibly within the environment. Our objectives are to establish a long-term presence in Spain through building the Office Max brand throughout the country.
Module 7: FINANCING SOURCES FOR GLOBAL BUSINESS OPERATIONS
(Created by Ashley Cohn )
The Spanish market is ready for an office supply company to establish themselves their and they are willing to invest in us. Not only is the market strong, but it is filled of individuals/businesses that will accept us as a company because of our willingness to contribute to the country. Our goal as a company is to become a part of the Spanish way of life. We want to adapt our views to the Spanish culture so that we are able to become their answer when they have office supply needs.
We feel that Office Max will be able to support it’s self during this venture and by seeing them succeed other investors will want to buy into our philosophy and want to be come part of us. We are willing to offer franchising opportunities to potential investors who would want to join the way that we conduct business.
The expansion opportunity of Office Max to Spain is a great way to turn around business. Some of the recent financial numbers for the company have been lower than past years, however now is a perfect time to bring the company to a new and emerging market. Overall revenue has dropped from about 13,000 million in 2004 to about 9,000 million in 2006. However, the gross profit has stayed relatively constant. They are really in the position to make a move that will improve their company from a financial standpoint.
Looking at their balance sheet reports, Office Max has gain a significant amount of cash from 72.2 million from 2005 to 282.1 million in 2006. Their overall long term debt and liabilities have also dropped, re-enforcing that they are in the financial situation to make a move that will help them with their long term goals.
The timing for this expansion is just right. Our finances are turning around and the move over to Spain will help create more overall profit. The Spanish market is very strong currently and their really isn’t a strong competitor in the office supply market currently. We think that because of our research and preparation that we can become an institution in other markets besides the United States and as in this case, Spain.
Module 8: CREATING A GLOBAL MIS (MANAGEMENT INFORMATION SYSTEMS)
(Created by Ron Engelberg)
Global Information Needs
As we learn over the course, even that technology may be available in different part of the world, the culture of the place is stronger than the technology can change some of the habits of buying, and the best way to introduce this technology is by adapting it to the local culture. Spain has very conservative history, and is very similar in certain ways to the Latin American culture since they are the mother land.
Those things need to be taken into consideration while talking and penetrating a market like Spain. Use the tools that technology allows us to improve compatibility, better product flow, and fast delivery which in the end will improve customer service satisfaction.
The cost of the goods will be critical in Spain, especially when penetrating a new market, so technology should be use to easy transportation, short the delivery time, reduce costs and time.
Global Information Sources
Internet is part of our life in almost every corner of the planet, and Spain is not the exception, B2C should be exploded has well has B2B, so the target of people would rapidly increase the sales of the chain. People love the experience of buying online and getting their goods on the door fast and for free. Customer trends in these areas, should be evaluated via consult companies that operate in Spain to better understand their buying customs.
But because the conservative use of their culture, a very well layout of the place should be consider, taking the advance technology and software to allocate every resource, because the people would be putting attention to those details.
Price would be one of the most important things when entering a new market, and attracting customers in Spain differentiating from the competition, sales and different offers that the competition can’t offer will attract people to the store.
Fast delivery and keeping the word that if we said 24hs like we learn from Staples (Kalamzoo), we can compete with them, and at least give the Spaniard customers the same experience and credibility like the competition.
Technology for Managing Information
Information technology is one of the key factors in the placement of a new business in the magnitude of Office Max in a modern country like Spain. The increasing global interdependencies and the accelerating pace of change demand more flexible and adaptive organizations. Malone and Smith (1984) have defined organizational flexibility in terms of “vulnerability” and “adaptability.” Effective implementation of IT would decrease vulnerability by reducing the cost of expected failures and enhance adaptability by reducing the cost of adjustment. There is a lot of information especially with the wide arrange of products that Office Max offers, and these changes with the help of the technology will bring to a structural change, taking more profit of the information that is managed. One of the example that can be taken is Wal-Mart, which has a super computer, that store all the information and can learn the buying customs of customers , per product and time of the day, something that Office Max can use to learn in a faster way the trend of the local market.
Take the necessary steps and copy the models that Office Max already has in use in different parts of the world, especially the US. They already rely on a technology that they IT department, engineers and managers are familiar with. Because they will not be in Spain, proper training of the qualify personal with the technology that the US subsidiary uses, with a combination and help of the Mexican Office Max subsidiary can enhance the learning, breaking cultural barriers mention before.
Module 9- IDENTIFYING HUMAN RESOURCES FOR GLOBAL BUSINESS ACTIVITIES (Created by Claudia Horton)
It will be necessary to hire bilingual employees, English/Spanish, that can be locals or Americans, for the management positions. We agree to this because: 1) Spain and the United States both have qualified people to fill these positions and 2) because it will help to avoid language complications with the headquarters. This will also apply to regular employees, at least to some of them, this way customers that speak either language can communicate their needs.
Training and development
Being OfficeMax one of the top three office products companies in the world, we will need to train our managers and employees that are not locals to be aware of the Spain’s culture, because our people is what makes us different. All our personnel will be evaluated on the different skills necessary to perform the assign job. Our development will be based in our corporate key principles; B Happy, B Memorable, B Positive and B Present.
Performance appraisals will be performed by management, keeping a great deal on ethics and in compliance with legal, regulations and company policies.
The independent performances will be sent to headquarters to be evaluated and approved.
Managers and employees will be given incentives, such as limited of internship opportunities for students actively pursing undergraduate or graduate college degrees. Employees will be preferred for positions before having other applicants. The national and the United States holidays will be adhered to ensure employees satisfaction and to respect both cultures beliefs, which are really similar. Sick, personal, and pregnancy leave will be given, as medical and dental benefits.
At headquarters in the United States, Human resources will work on finding and interviewing employees and non-employees that have the qualifications and willing to relocate to the new offices in Spain. Relocation packages will be provided for those who get choose for the different positions. All employees will be provided with a manual with the company policy, regulations, schedules and code of ethics. These manuals will be created in English and Spanish. The Human resources manager at the Headquarters will be in charge to find, train and support the Human resources managers pointed for the different locations in Spain, to ensure the company policies and administrative functions will be covered accordingly. In addition, a pay policy will be created for all new positions that will be considered necessary for the new locations.
Module 10 – MANAGING INTERNATIONAL FINANCIAL AND BUSINESS RISKS
(Created by Todd A. Stiles)
Economic and Financial Risks
The Spanish economy has continued to expand and grow since the Spanish Civil War ended in 1939. Now operating as a democracy Spain has boasted a strong economic position as part of the European Union. Today, tourism dominates much of the Spanish economy, accounting for 60% of the overall economy with industry (35%) and agriculture (5%) rounding out other business classes. The largest economic or financial risk is a major decrease in tourism. That could be greatly affected as the world economy changes. Specific examples can be seen in both the US and EU that currently is struggling with inflation and recession. Those factors serve to put more pressure on individual consumer expanses thus driving down the ability to travel to primary tourist location like Spain. With over 60% of the economy being driven by tourism, the effect of slowed growth in other parts of the world could be seen locally in Spain. (Language Crossing)
Additional fluctuation of the Euro will put more pressure on OfficeMax to watch closely the change in world financial markets. (ADD MORE DATA)
Social and Cultural Risks
With over 60% of the Spanish economy revolving around tourism, it illustrates the need of their economy to accommodate multi national business and services. The integration of OfficeMax into the countries economy will be looked at favorably because is a US based company and many tourists will recognize the brand name based on its popularity in the US. Transition of naming conventions should be easy based on the heavy influence of the Spanish language in the US.
Political and Legal Risks
Political and legal risks are very low in Spain. The economy operates very much like the US. Specific attention should be paid to licensing and labor laws. Examining country laws and regulations prior to establishing a business presence will ensure that no local issues might arise.
Entrance into the Spain by OfficeMax should be fairly easy once the review is completed to ensure the company is aligned with all laws and business ethics. Translating company products and services to the country specifications and ensuring that there are not problems with the flow of goods from distribution to store front should ensure a seamless transition to the local business and consumer market.
Module 11 – PRODUCT AND TARGET MARKET PLANNING
(Created by Lucy Zubek )
OfficeMax deals with a wide range of products and services that would address the need of the country’s growing office-based workforce. These products and services are mostly served to other business organizations, but can also be provided to customers through retail. The product range includes office furniture, computer supplies, stationery, folders and files among other items. The products are aimed at increasing the potential productivity of clients in their work places, reducing their total cost of procurement, and increasing their efficiency in the long run so as to provide maximum service satisfaction. OfficeMax offers its customers the best office supplies and equipment in the market, with an excellent range of options unequaled in the industry (http://www.officemax.com). Services are offered with the customer satisfaction as top priority.
Branding and Packaging
The Spanish workforce is well used to the European design of a workplace and its attributing elements, consisting of a flavor of Spanish and French fashion and functionality. With the aim of introducing an American taste of office functionality, OfficeMax will establish its brand as an effective American alternative to the old European workplace. The company and its products shall maximize its packaging of the unique American minimalist office style and prove it to be the best in providing 21st century ultramodern functionality deserved by a hardworking Spanish labor force.
Innovative packaging of product on the shelves would be displayed to differentiate the product package from other traditional ways of operating. This will be done in attractive wrappers. The branding of product for the firm will not apply here, since the firm would be engaged in storing products of different brand names so as to give buyers the advantage in enjoying the choice of variety of products.
Product Life Cycle
The products’ place in the Spanish Product Life Cycle is anchored on the company’s unique American style packaging. The product life cycle of a commodity shows how the introduction of such product into the market, its growth and subsequent demise due to extinction or out of vogue. Unfortunately, OfficeMax will have to be inflexible in facing changes and innovations for its products, due to the uniqueness that defines the brand. Thus, an ever-changing product line will not be applicable.
However, the fact that OfficeMax is not a manufacturing firm that process products, but one that sell office equipment, furniture and stationeries at wholesale and retail rate from its several stores. Thus, product life cycle will not apply to the firm operation style, since it is a middle man distributing different brands of finished goods from the stores the organization operates.
The target of OfficeMax’s products and services are the firms and individuals who need office supplies and equipment in the working corporate offices, situated in the Spanish urban centers. This working population in Spain is deemed huge compared to other European countries; its purchasing power is growing with the strengthening of the Euro against the dollar. Furthermore, the GDP has grown into a high $1.4 trillion economy while keeping inflation at 2.4% of consumer price. Consumerism is expected to grow with a sound financial sector, which translates to more loans available for investments capital, more firms established, all needing new office equipment and supplies each year. With these indicators, the office procurement sector will increase in size, providing OfficeMax with excellent opportunities to serve the large Spanish Market. Despite the tax structure, the government encourages investment by offering economic incentives to foreign investors (http://www.officemax.com).
The targeted market for OfficeMax in Spain is organizations both private and public who runs departmental offices and those that operate as single apartment offices. Thus, both large and small scale offices in the public or private sector, residing in urban centers in Spain will constitute the market for which OfficeMax stores would target. However, supplies would be made to offices residing in the countryside or rural areas when demands are made.
With these conditions, OfficeMax will directly engage the growing market by establishing contacts with government procurement agencies in the public sector, and procurement clearinghouses in the private sector. The OfficeMax Company will package itself as the main procurement hub in every geographic business district in each Spanish City, thus effectively targeting the urban office sprawls. A geographically-structured strategy of market penetration enables OfficeMax to ensure that no urban office is left out in its offer of the widest range of office supplies and equipment.
Module 12 – DESIGNING A GLOBAL DISTRIBUTION STRATEGY
(Created by Barry McField )
Distribution will be difficult primarily due to the introduction of new office goods that most Spaniards do not necessary need. However, once a primary base of operations is established, the company can proceed with looking for locations suitable for store locations. Property is readily available and there is an abundance supply of energy needed to run the stores. Property should be easily to procure for the development of future stores. The property should be an “off the plan” property because it would cost less. “Off the plan” property can also save money because we can have the developer build to property to suit.
Distribution barriers include the process of going through Customs with the supplies. Plus this is also a new area for our stores so we would have you the locals as much as possible to get around since we are not natives of Spain. Being able to keep our stores stocked will be one of main our main priority. With 9/11 and the bombings in Madrid, security is very tight. So we need to ensure that we have our books in order so not to as raise a red flag once a shipment is received.
International intermediaries include the US State Department, US Government, the Spanish government and local city government. These officials will help if any problems persist with our expansion.
The distribution channel should not present any problems due to location of the stores. Most items can be delivered by truck or plane, making it easier to keep items in stock. Also, in the future as we expand to other areas, we can get needed items from other stores. This can cut down on lead-time and supply a customer with a need an item that was otherwise out of stock.
Module 13 – PLANNING A GLOBAL PROMOTION STRATEGY
(Created by Ashley Cohn)
Being such a large and successful company in the United States, we want to take some of that momentum and apply that to our new operations. One big way to accomplish is to promote our stores with large and festive grand openings. The idea of this is to create a large buzz as the residents of the community see the progress of the store. When the store is ready to open, we will offer great one-day deals to draw people into the store. We plan to serve refreshments and even supply the customers with more coupons that can be used at a later date to draw them back to the store.
The business environment in Spain is a lot different then it is in the United States. By having customary dinners with influential people and potential customers, we can really build our message of how we treat our customers and our business. Another thing that is important to factor in is religion. About 50% of Spain practices Catholicism, which is something to always be aware due to the fact that religion is taken seriously by many people. Time is very important from a communication aspect. In America, time is of the essence and taken very strictly. Being a minute late for an important meeting could cost you your job. However, in Spain this is not always the case. In fact, it is common to be between 15-20 minutes late for appointments, as they do not take time very seriously. This also factors into business negations as Spaniards don’t like to rush this sort of thing. They prefer to watch and wait for things to develop before agreeing to any sort of a business deal.
The Spanish market is a good plan to launch both television and radio. Research has found that 98% of people in Spain have televisions and 95% have radios. This proves that this market can be benefited by running both television and radio advertisements. The censorship laws in Spain are not as heavily monitored as they are in the United States, so we will have a lot of different ways to bring our message to the Spanish people.
The Spanish culture is very big with dinner meetings. They are something that has been a tradition for many years in Spain. I would propose to have dinner meetings to prove that we are willing to acclimate ourselves with the Spanish customs. This is a great way to make our first impression a strong one with the Spanish people. We need to make sure that we choose the proper environment to talk about business so that we do not alienate anyone. The Spanish people value friendships very highly and base many of their business decisions on whom they know.
Communication is very important to anything in life. However, when trying to conduct business in a new environment it becomes even more important. Everyone interprets things differently, so we need to be aware of what we say and how we say it. As a corporation we want to make our message as clear as possible, but we want to do whatever we can so that we treat everyone in Spain as our friends.
Module 14 – SELECTING AN INTERNATIONAL PRICING STRATEGY
(Created by Claudia Horton)
The Economic Environment
We will be concentrated on the Cost Analysis, by including the fixed and variable costs associated with opening our new stores. We also have to study the factors that will help us to stay competitive in an already open market and be sure we will be profitable.
The market-based economy, with primary reliance on private enterprise, provided the population of over 40 million with a high standard of living. The economy grew during the third quarter at a 2.4 percent annual rate. The annual inflation rate was 3 percent at year’s end. Unemployment decreased to 11.0 percent by November. Wages generally kept pace with inflation.
Taxes on businesses are: Social Security, Corporate Income Tax, Tax on Interest, Property Tax, Fuel Tax, Environmental Tax, Insurance Tax, Transport tax, VAT (Value Added Tax).
Spain has one of the lowest percentages of workforce on minimum wage. For comparison, the federal minimum wage in the USA was 753 euro per month in January 2006, and 1.4% of employees received the minimum wage, while in the employees received 0.8.
Spain has a population 40,448,191 (July 2007). It is a good size population, but there is competition, Spain already has companies that offer office supplies, we will make sure we will be a strong competitor when opening the stores. The demand for office supplies is inelastic.
Office supplies are not a new market or industry in Spain. There are already companies that offer these products. It will be really important for the start and growth process of our company to sell the idea to the country that our company is the best, with the best products. We will also want to create a mechanism to get answers from our employees and customers on how can we be better. By targeting the right people, after we have put all the data together and analyzed the market, we need a concise and clear approach to the population in order to get the market we are looking for to be successful.
Module 15 – DETERMINING ORGANIZATIONAL FINANCIAL RESULTS
(Created by Todd A. Stiles )
OfficeMax provides a wide range of office relevant products. OfficeMax utilizes a model that is very similar to Home Depot; OfficeMax stores are largely a store front for manufacturer’s products. In that case OfficeMax provides branding, marketing and as store front for many different client products. By do this OfficeMax does not own the inventory, it simply ensures that customers are familiar with the brand name of were they can find any and all items for the business, home business, or personnel office needs. Based on the breakdown of industries in Spain, OfficeMax is well equipped to provide cost based competition against in country competitors. The warehouse strategy ensures that OfficeMax can minimize startup costs and scale quickly to meet additional market demands.
Operating Costs (including Start-Up Costs)
Entrance into a foreign market is expensive. Labor costs in Spain are similar to most other European nations and not much different than the US. Spain has recently undergone some difficulties regarding the inequity between the wages paid to male versus females. Equality has not taken center stage in Spain and will continue to be adjusted over the next few years.
When evaluating the Spain market, we discovered that Madrid and Barcelona are the largest business centers in Spain. Our strategy during year one would be to deploy 2 to 3 store locations in each city. A distribution system will be required that can be support by both seaside and airline deliveries. Our recommendation would be to locate this site in La Coruna. This port will allow easy distribution to Madrid and Barcelona. OfficeMax will launch media and web based marketing to businesses and consumers throughout Spain. OfficeMax will promote the ability to shop online and have any of their products delivered to your doorstep. Based on the population of Spain, the maximum deployment of stores throughout the country will likely be in the range of 15 to 20 stores. This strategy coupled with the OfficeMax delivery system should provide a successful strategy for market entry.
(Start up Costs – Chart)
Based on market startup costs, manufacturer inventory, and strong marketing to support delivery and web purchasing, we think that OfficeMax will reach profitability very quickly in the Spanish market. Entrance costs may increase due to foreign impacts, but in general the markets in Spain is not that much different to the US. The biggest impact to track closely is the difference in value of the US dollar and the Euro. Changes in currency value will affect overall profitability. Corporate income tax in Spain is 35%. This is lower than the current tax rate in the US, which is 39.3%. (Corporate Income Tax, 2006)
Based on the findings of this report, we believe that OfficeMax should proceed with expanding its operations into Spain. The market is very similar to the US market and immediate results should be seen if the entrance plan is followed. This strategy includes the development of store locations in Madrid and Barcelona, establishing an onshore distribution center, and launching an advanced web purchasing system that will allow customers to order products that can be delivered to their door. Success in the Spanish market can open the door to many other countries in the European Union.
MODULE 16- MEASURING INTERNATIONAL BUSINESS SUCCESS
(Created by Lucy Zubek )
OfficeMax is the leading company offering office products and services to businesses as well as to retail consumers in the United States. Offering the biggest range of business office supplies demands high expectations for company success efficiency especially in its overseas operations. A base in Europe is expected to gain a high performance rating through engaging a growing market of office procurements. Extending operations in Spain must generate financial benefits both to the company and the Spanish people.
Financial and Economic Benefits
Since OfficeMax will locate in an emerging office market, financial benefits will be measured in increased sales in the first year of operations. It is expected that the firm will realize a maximum sales potential for all categories in its range of products, and all items shall be sold out fast. The goal is to produce a Spanish sales base of 50% of U.S. sales figures. The company shall deal give economic benefits to the Spanish market as well, due to the provision of increased diversity in office products and services available in the market. A diversified procurement market means better consumer choices and increased satisfaction. The financial environment in Spain OfficeMax is set to increase its sales turnover with a great deal due to better availability of capital for expansion. The banking sector is well developed and competitive which is a condition that will foster growth of operations increasing the sales and consequently, profit. Potential economic incentives for investors include financial subsidies, preferential access to credit, bonuses and incentives for living and training workers, low interest loans among others. Tax deductions may possibly be offered along with exemption incentives.
Spain’s close ties with the European Union will make a viable European headquarters for OfficeMax. The optimum state of foreign relation with many European countries will enable the firm to easily extend influence across the continent and gain penetrative action into other emerging markets. Operation will be greatly favored in Spain due to recent trade policy allowing 100% foreign owned companies to operate in the country. Further liberalization of speculative capital movement in the country has been started and underway.
Social Costs and Benefits
The population of about 41 million will enjoy a larger and more diverse market in its procurement industry. Office administrators will have better choices for obtaining “office infrastructure” with competing lower cost per item. OfficeMax will also introduce better technology in the ergonomics aspect Spanish office equipment, thereby improving human efficiency and comfort. This technology can be transferred and adopted by local Spanish firms similar to OfficeMax. Establishment of operations in Spain will also benefit the Spanish people by offering them more employment through procurement hubs in the major business districts.
The benefits to be derived from the operation of OfficeMax in Spain further include the reduction of bureaucratic red-tapism; where delay is observed in decision making for public offices and those from large private organizations. Most times the lack of stationeries, and good office equipment have contributed to delay and bureaucratic bottlenecks. This will be drastically reduced with the operations of OfficeMax adding to social benefits of the people.
Furthermore, the creation of variety of products would lead to satisfying customers in their demands for quality and varied products.
The probable social cost is the demand for office people to adjust to the new American product line and services. In this regards, the need for the Spaniards office holder to adapt to new office operations system resulting from difference in stationeries and office equipments from the product line of OfficeMax is a task that requires to be carried out. Furthermore, the social cost to be incurred from operating a differentiated product line by OfficeMax in Spain, is the need for some organization to overhaul their office furniture and equipments to incur the extra cost for buying quality ones from the stores of OfficeMax. At the short run this would be an extra cost for this category of firms, but at the long run the benefits will supersede the cost in changing over to qualitative products in stock in OfficeMax stores.
The factors indicate that Spain will provide a lucrative opportunity for OfficeMax to expand its operations and operate profitably, while providing social and economic benefits to the working population at the same time. The major interest taken in expanding operations in Spain is about penetrating the whole European Market. Establishing a Spanish base is only the means to achieve a firm hold on other European states through the European Union. OfficeMax must take steps to go beyond Spain to take advantage of the growing power of the Euro and the emerging European consumers from Turkey, Romania etc. Spain is a tagging area for success. Based on the results of this feasibility study, the researchers are unanimously recommending OfficeMax to enter and engage the Spanish Market.
Based on the aforementioned evaluation of the different environments and their assessment it is recommended that OfficeMax enter into Spain’s market to take advantage of the ample opportunities, amidst the challenges that would be overcome for its effective operations.
(Created by Barry Mcfield)
Spain’s established office furniture and supplies industry offers a sizeable market for an Office Max expansion. Local political and environmental factors do not pose significant barriers to entry, and are mostly conducive to a competitive business climate. Analysis of Spain’s demographics and income favor long term demand for office furniture and stationary items. Based upon projected financial gains, it is the recommendation of this global business plan to expand our market reach into Spain, beginning with a test market in Madrid. Upon the boards approval, financial and human resources will be allocated to implement the proposed Spain expansion to initially entail several retail locations and an Internet presence.
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