A de-globalisation of the office products industry?

    De-globalisation is changing the face of the OP industry.

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    Everyone knows that the digital age is having a profound impact on everything we do, whether it is in business or in our personal lives. The issues for the office products industry have been spelled out by many, including this author. So when Office Depot and OfficeMax announced – almost a year ago – that they were planning to merge, the first thought that came to mind among more than a handful of industry veterans was whether this was an appropriate response to the market circumstances of the day.

    By the early part of 2009, it had become obvious that nimble, smaller entities – manufacturers and resellers alike – had discovered and introduced new capabilities that allowed them to survive and prosper regardless of the growth and perceived power of what had become known as the global players. While the global players were building out increasingly complex value chains, and labour costs between high-cost countries and low-cost countries (i.e. China versus the USA) started to re-balance at a rapid clip, some regional and local players managed to thrive in the pursuit of very different business models.

    Importantly, today’s market fundamentals are very different from those prior to 2008. Energy costs in the US are lower than they have been in years. The US is well on its way to becoming energy independent by 2020, a goal that had eluded this country for decades. Total costs of labour (including the benefits of robotics) have already in many cases swung in favour of the US, and business models designed with short value chains in mind are on the upswing.

    On the heels of these changing market fundamentals, today we are witnessing an interesting phenomenon that seems to be pointing in the direction, not of globalisation but of de-globalisation. Several companies in the office products industry appear to be pursuing a strategy of decoupling their international operations.

    There is no doubt in my mind that these changing market conditions pose challenges, but also unique new opportunities for business models of all sizes and shapes. While talk of full-throat de-globalisation may be premature, the phenomenon of globalisation as it was cultivated from the 1990s onward definitely appears to be at a crossroads, with some players benefiting from simplifying and retrenching from their global footprint, while others may see incredible new opportunities and growth through acquisition in international markets. 

    In this context, the office products industry can be seen as a microcosm of a wider trend that is noticeable in more than a handful of industries. In fact, hundreds of internationally active companies are rethinking their globalisation strategies with reshoring/onshoring a key component in their considerations. The impact of this rethinking is felt in the automotive industry, electronics, consumer goods, appliances and other areas of manufacturing.

    In the office products industry, the most recent example of course is Esselte, which just announced the sale of their US operations to RR Donnelley. During the previous 18 months, Office Depot had already announced a number of steps suggesting that they too are looking at simplifying their business model around the globe with retrenchments in Eastern Europe, Israel and Mexico.

    2014 may very well turn out to be a busy and successful year, with mergers, acquisitions and divestitures around the industry and across borders, providing the building blocks for a restructuring of the industry and laying the groundwork for new business models, new players and a fresh new look at opportunities for growth and prosperity around the world.

    Tom Schinkel is a certified M&A advisor who works with owners and senior executives of mid-market businesses on issues of adapting to the digital age and on acquiring or divesting businesses. He does this through coaching, individual consulting, writing, training, meeting facilitation and conference speaking.