In 1999, Office Max planned to open 120 new superstores in the United States on top of the 150 superstores opened in 1998. Revenues had steadily climbed to $3,765 billion in 1997 while net income had grown to $89.6 million, an increase of 30 percent from 1996.
Yet, Office Max's stock price had fallen precipitously to under $10 a share by September 1998. By late 1998, analysts began attacking OfficeMax. It was showing up more poorly than competitors Office Depot and Staples. In particular, sales were lagging at its older stores, and OfficeMax warned that third-and fourth-quarter earning would not hit expectations, mostly because of heavy price-cutting on computers. Critics were quick to point out that Office Depot and Staples were not so adversely affected. Was this just a temporary aberration?
The situation was to worsen, as businesses began cutting back in a slowing economy in 2000, and office-supply industry faced an over-saturated market: too many stores form years of vigorous expansion in 1990s. (Hartley, 2005, p.326)
On July 14, 2003, OfficeMax announced that it had agreed to be acquired by Boise Cascade Corp, a big lumber and paper company. In a $1.15 billion buyouts, OfficeMax shareholders would get $9 a share, about a 25 percent premium over the current share price. (Hartley, 2005, p.327)
The deal gives Boise Cascade an important new distribution channel through OfficeMax - the nation's third-largest office supply superstore chain behind Staples and Office Depot - and an entrance into the consumer and small-business market. (Sorkin, 2003).
References- Hartley, R.F. (2005). Management mistakes and successes (8th ed.). Hoboken, NJ: John Wiley.
Sorkin, A.R. (2003, July 15). Papermaker Boise Cascade buys OfficeMax. Retrieved from https://www.sfgate.com/business/article/Papermaker-Boise-Cascade-buys-OfficeMax-2565274.php
Step 1: Initial response
Use what you have learned in this course to analyze the decline of OfficeMax in the office-supply industry to its buyout by Boise Cascade Corporation.
What alternative strategy might have prevented its decline?
Provide your specific rationale for this alternative strategy (or these alternative strategies).
Reference: Unknown (2014). Introduction to strategic management. Washington, D.C.: The Saylor Foundation.