Problems With Staples And Office Depot Merger

As the firm manager for staples, I believe that there are a lot of problems with Staples and Office Depot merging together. The problems that Staples is facing range from Profits, Supply and Demand to price changes. I will talk about a lot of topics, but these three will be the main focus. Fixing those three topics are the most important, because getting a solution will make it possible for Office Depot and Staples to merge together. The consequences we are facing are that the merge will end the competitive battle between Office Depot and Staples, and leave staples to have control of the whole office supply market. Another consequence is that people believe we will have the opportunity to raise prices whenever we like, which would change
how people look at office supplies. By having the office supply market, consumers expect prices to increase which could turn office supplies into more of a luxury instead of a necessity. The last problem that Staples faces is that the current competitive triopoly markets will turn into duopolies with Staples and Office Max, with Staples being the only superstore monopoly. By turning into a monopoly, other stores will either benefit or fall depending on how consumers adapt to the ever-changing market.
Problems
Economics will become a factor into people’s decision making because they will change with the merge.
Resources will be available, but prices will go up and that will make money scarce for consumers to spend. Consumers will not want to spend ten to twenty dollars on a simple office supply and that will factor into all of their decision making and process. People will not be talking about scarce resources anymore, as they will be talking about scarce income. Economics will change with the merge, and it will affect producers and consumers. This will look bad on Staples because profits will be problematic for consumers, and beneficial for producers. Profits become trouble due to the fact that Staples and Office Depot should be able to make a lot due to the fact that they will be able to control the whole office supply economy. This benefits them, as “Staples prices and profit margins are lowest in markets where it competes with Office Depot” (Page 2) and could make or break the economy depending on how Staples and Office Depot use it. If they use the profits to continue to make more money, office supplies will become too expensive and turn into a luxury. This will be a problem as it will change office supplies from a inferior good to a normal good. and hurt the consumers. Consumers will have less money, and this could hurt the whole market equilibrium. It would be as problematic as the stock market crashing, because consumers depend on office supplies for school and work.
Profits would be too big of a problem for the government to handle, which is why the merge could be a problem.
Markets are very important, because Consumer-Producer rivalry would be the most affected.
Consumers would not be able to negotiate with producers anymore, because the producers would have all the leverage. The consumers would have to waste more money to go somewhere else, which leads to a loss in time and money. Producers could still lower prices, but it would be up to them. Consumer-Consumer rivalry would be able to survive, but it would result in office supplies increasing into an insane price. This would then lead to office supplies becoming an luxury good. Producer-Producer rivalry would not be able to exist, because Office Depot and Staples are already the two biggest supply stores. OfficeMax is third but would not be able to compete with the merge of Office Depot and Staples. Markets are an essential part to any
good.
There will be a supply and demand problem due to the fact that “Staples has almost 500 stores and Office Depot has more than 500 stores nationwide; they compete head-to-head in 42 metropolitan areas across the country” (Page 1). If Staples got their hands on the other 500, they would have 1000 office supply stores and no real competitor other than OfficeMax, whom was much smaller than the other two. Staples would either benefit or suffer from having all these stores. Staples would benefit from being able to increase their prices in every store, because people prefer to buy things from one store at once instead of going to multiple. With that in place, prices would be increasing and demand would increase since people didn’t really have any other options to go to. Supply would also increase, but the sellers would be able to convince the producers to lower their prices since Staples and Office Depot were there two biggest buyers. Now that they weren’t competing against each other, they could sway the producers to lower their prices or they would find another producer. The possibility of the merging suffering would be from Staples having too many supplies in there, and not enough demand. If only half their stores were able to sell their goods, it would lead to them possibly selling their supplies cheaper. Of course this is only a hypothesis, because Staples would still have control of the whole market, and wouldn’t need to lower their prices unless they needed to match the pries of new competitors trying to get into the market or if they were trying to get rid of the amount of stores they had. There are too many possibilities with supply and demand to imagine, which makes it hard to figure out the best solution to their problem. Goods will be more expensive, and substitutes will be needed even more now. Substitutes will have to come from other stores, because there is no reason for Staples and Office Depot to sell substitutes. There wouldn’t be any more inferior goods also, because people would still have to buy the goods whether or not their income changed. Normal goods will also change, because supplies are more of a necessity instead of a normal good. There wouldn’t be a description of office supplies anymore if there was only one store. Price changes are very important as they would be a dramatic factor in the open market. Prices would change due to Staples having 1000 office supply stores in the U.S. Other stores would not want to compete with them, and so Staples would be able to dictate the prices for every store based on their location and the amount of people that shopped at Staples. There is proof that prices would change, because as stated in the report “based on the defendants pricing behavior--showing that this merger likely will lead to substantially higher prices for consumers” (Page 2). The 42 metropolitan areas would most likely be the most affected as they would see an increase in their office supply prices with only one monopoly in each area now. The price change would also raise the equilibrium and imbalance it due to the fact that people were paying high prices for inferior and normal goods. Price changes like these, is what leads to a recession and was too dangerous for the government to allow. Consumer’s behavior was affected by the price changes as they had to pay more to buy office supplies. If Consumers didn’t have a second option like Office Max nearby, they would have to buy the supplies from Staples. Consumers were more likely to buy from Staples then go to another store and look for supplies. This was because they didn’t want to waste more time to go to stores to find every office supply they need, when one office store would have it all. This was stated in the report as “through office stores offers consumers a unique combination of convenience, selection and price therefore is the appropriate relevant product market” (Page 3). Time is money, and we don’t have enough of it for people to spend 5 hours looking for office supplies, when they could be spending that time earning money. Consumer’s did not have a reliable secondary option if the two stores merged, due to the fact that Office Max was a little brother in comparison to Office Depot and Staples, since Office Max could not match Office Depot and Staples in the amount of stores they had throughout the U.S.A.
Solutions