Effect Of E-business In Office Depot

1. OBJECTIVES AND APPROACH PROJECT

OF THE RESEARCH

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

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 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 ebusiness 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).

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2. INFORMATION METHODOLOGY

GATHERING

AND

RESEARCH

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.

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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

The Impact of e-Business on “Office Depot Plc.” – Zen Mannam Page 5

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 ebusiness 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

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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

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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.

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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: The Impact of e-Business on “Office Depot Plc.” – Zen Mannam Page 9

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:

Raw Material

End Product

Production Process Mixing

Purchase Wheat Flour

Bread ready for delivery

Baking Raising etc.

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

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•

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 dayto-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 ebusiness; 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

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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.

Organization

Intranet

Front End Operations

I n t e r n e t

Back end Operations Bab

E x t r a n e t

Supplier s

Consumer s

Intranet

M o d e o f C o m m u n i c a ti o n

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.

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•

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

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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

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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:

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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.

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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 The Impact of e-Business on “Office Depot Plc.” – Zen Mannam Page 17

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:

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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 esalesHowever 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.

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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.

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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:

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Sales Per Empoyee 350,000

300,000

250,000

200,000

150,000

Sales Per Empoyee

100,000

50,000

20 07

20 05

20 03

20 01

19 99

19 97

19 95

19 93

19 91

19 89

19 87

-

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.

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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 ebusiness, 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:

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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 esales 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:

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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.

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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 ebusiness 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:

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Favourable results in all of the parameters considered

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Considerable Success in the model

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Overall reduction in the cost of operations

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Increasing investment in the e-business model

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Decreasing dependence on the offline sales sector

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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/Ecommerce (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

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