Reference no: EM132242905
Mission
Grainger provides a range of maintenance, repair, and operating supplies and products to a broad range of clients. It seeks to deliver reliable products efficiently and at reasonable prices.
Business segments
Grainger organizes its operations into two reportable business segments:
United States, which offers a broad range of maintenance, repair and operating supplies and other related products and services, including material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, building and home inspection supplies, and vehicle and fleet components; and
Canada, which operates as a broad line distributor of industrial and safety supplies, distributing tools, fasteners, safety supplies, welding and shop equipment, and many other items.
History
Grainger was founded in 1927 by William Wallace Grainger, with a view to providing supplies for businesses across multiple sectors. The Company was formally incorporated in 1928 and proceeded to make sales primarily through mail order and catalogs.
Grainger has grown significantly in its 90 years of operation and has established itself as a leading player in the supply of maintenance, repair, and operating products. The Company has diversified its product portfolio significantly and now has a presence across the US, Canada, Latin America, Europe, and Asia.
Grainger is ranked at 285th on the Fortune 500 list. It trades a portion of its shares on the New York Stock Exchange and has a current market capitalization of $13.5 billion.
The business model of W. W. Grainger
Customer Segments
Grainger offers a broad portfolio of products to its international customer base. In 2015 the Company made sales to approximately 1.2 million customers averaging 105,000 daily transactions, with the Company’s customers ranging from small and medium-sized businesses to large corporations, government entities and other institutions. Grainger specifically targets purchasing managers or workers in facilities maintenance departments and service shops across a wide range of industries, including:
Manufacturing, including goods producers, textile companies, and plastics manufacturers;
Hospitality, including hotel chains, restaurants, and other service industry operators;
Transportation, including various transportation and logistics companies;
The government, including local, state, and federal bodies and government agencies;
Retail, including digital and physical retailers across multiple sectors;
Healthcare, including healthcare providers, medical distributors, and pharmaceutical companies; and
Education, including various educational and academic institutions.
Approximately 78% of Grainger’s sales are concentrated with large customers and no single customer accounted for more than 3% of total sales in 2015.
Grainger primarily serves customers across the US and Canada. The Company also generates a small portion of its revenue through sales to customers across Europe, Asia, and Latin America.
Value Propositions
Grainger provides value to its customers in the following ways:
Its track record and reputation, with the company, established as one of the largest names in its sector, having a track record for providing high-quality products to customers reliably, and efficiently;
Its broad portfolio of products, with the Company offering a wide selection of products, including national brands and private label items, spanning safety and security supplies, lighting and electrical products, pumps and plumbing supplies, and building and home inspection supplies;
Its efficient and reliable distribution infrastructure, with the Company operating a broad network of distribution facilities across the US and Canada, allowing it to make deliveries quickly and efficiently for locally-based facilities;
Its diverse selection of sales channels, with the Company offering multiple channels, through which customers can purchase products, including physical branches, sales representatives, and online sales portals; and
It's competitive pricing, with the Company offering its products at competitive prices, enabling to attract a broader range of customers.
Channels
Grainger operates a website at www.grainger.com, through which it provides information on its various products, services, and operating locations. The Company’s website also serves as an online sales channel, with customers able to browse the Company’s catalog of products, place orders, and arrange deliveries.
Grainger operates its own in-house sales force of approximately 3,600 professionals who assist businesses and institutions directly. These sales personnel operate out of the Company’s network of offices across the US and internationally. The Company is continuing to expand its sales force to facilitate growth with large customers who typically have more complex purchasing requirements than small and medium-sized customers.
Additionally, Grainger operates a network of branches that enables customers to complete purchases directly and in real time, as well as providing a channel through which other orders can be picked up. The branch network has approximately 2,300 employees who primarily fulfill counter and will-call product purchases and provide customer service. The Company also facilitates sales through its network of contact centers, which handle around 30,000 orders per day via phone, e-mail, and fax, including orders placed via its catalog.
Grainger operates its own distribution infrastructure, which manages the delivery of if the Company’s online and catalog sales, as well as replenishing stock at the Company’s branches. The Company has a network of distribution centers across all 50 US states, which handles the majority of customer shipping for next-day product availability.
Customer Relationships
Grainger makes a large proportion of its sales on a self-service basis through the Company’s e-commerce portal. This digital sales channel allows customers to manage their account details, browse the Company’s catalog of products, place orders, and schedule deliveries without interacting with members of the Company’s sales personnel. Customers are also able to place orders independently via email and fax.
Grainger provides a more personalized service to its customers through its direct sales, branch, and contact center personnel, who are able to assist businesses and institutions in selecting the most appropriate products for their individual needs, identifying immediate solutions to maintenance problems, and reduce operating expenses. These sales personnel provide tailored services to customers, with a view to attracting long-term, recurring business.
Grainger provides a range of support resources and services to customers. This includes a range of online resources, such as guarantee and warranty information, pick-up and order guides, and returns and cancellation policy. Customers are also able to contact the Company’s support staff directly over the phone in order to receive personalized assistance.
Additionally, customers are able to follow Grainger’s operations and interact with the Company directly through its various social media accounts, including with Facebook, Twitter, LinkedIn, YouTube, Instagram, and Google+.
Key Activities
Grainger is a distributor of maintenance, repair, and operating supplies and other related products and services. The Company serves a broad range of clients across multiple sectors – including the healthcare, manufacturing, retail, transportation, hospitality, and education sectors – primarily in the US and Canada, but also across parts of Europe, Asia, and Latin America.
Grainger aligns its activities into two reportable business segments: the United States, which offers various maintenance, repair and operating supplies, and other related products and services; and Canada, which, through Acklands Grainger, operates as a distributor of industrial and safety supplies. The Company's others businesses include The Fabory Group, MonotaRO Company, Grainger Mexico, and Zoro Tools, through which the Company conducts its business across Europe, Asia, and Latin America.
Key Partners
Grainger works closely with a broad network of partner companies and organizations in order to provide high-quality products and services to its customers. These partners include:
Supplier and Procurement Partners, comprising suppliers and manufacturers of products and goods that the Company sells on to its customers, as well as suppliers of services and technologies that are utilized more broadly across the enterprise;
Distribution and Channel Partners, comprising various sales agents, and distribution companies, that assist in supporting and extending the capabilities of the Company’s own in-house sales force;
Joint Venture Partners, comprising various manufacturing and distribution companies, with which the Company provides joint products and services through mutually owned entities;
Strategic and Alliance Partners, comprising market-leading companies across multiple industries with which the Company shares resources and collaborates on joint projects; and
Corporate and Social Responsibility Partners, comprising no-profit and charitable organizations with which the Company cooperates on social and community project across the world.
Grainger has a number of partnerships in place, including distribution partnerships with manufacturers Hepacart and Keysight Technologies, and participation in the American Red Cross Emergency Preparedness Partnership Program.
Key Resources
Grainger’s key resources are its intellectual properties and private-label brands, its network of distribution and contact centers, its chain of branches and sales offices, its online sales channel, its IT and communications infrastructure, its products and supply chain, its partnerships, and its personnel.
Grainger sells a number of products under its own private-label brands, which are protected by trademarks. This includes its Dayton motors and power transmissions, Speedaire air compressors, Air Handler air filtration equipment, Tough Guy cleaning products, Westward tools, Condor safety products, and Lumapro lighting products.
Grainger also owns and or leases a number of physical properties that are key to its operations, including 330 branch locations and 19 distribution centers across the US, as well as 179 Acklands Grainger facilities in Canada and other international properties.
Cost Structure
Grainger incurs costs in relation to the procurement of products and supplies, the development of its online sales portal, the maintenance of its IT and communications infrastructure, the operation of its branch and contact center sales network, the operation and maintenance of its distribution infrastructure, the implementation of advertising and marketing campaigns, the management of its partnerships, and the retention of its personnel.
In 2015 Grainger recorded cost of merchandise sold in the amount of 5.74 billion. The Company also accrued significant warehousing, marketing, and administrative expenses, which totaled $2.93 billion for the year, including the payment of salaries and benefits to its workforce of 25,800 employees. The Company’s annual advertising expense was $180 million.
Revenue Streams
Grainger generates revenue through the sale of and distribution of various maintenance, repair and operating supplies, including safety and security supplies, lighting and electrical products, material handling equipment, power and hand tools, cleaning and maintenance supplies, and pumps and plumbing supplies.
In 2015 Grainger generated annual net sales of $9.97 billion, up marginally on the $9.96 billion recorded by the Company in 2014. The vast majority of this revenue was attributed to the Company’s United States segment, which alone recorded net sale for the year of $7.29 billion.
QUESTIONS
1. What is the company’s business model? In other words, how does the company operate and make money?
2. What are the company’s goals, objectives, and strategies? Examine these at the following three levels:
Corporate
Division
Functional or departmental