EXECUTIVE SUMMARY
Salacious headlines about massive fines leveled as a result of corporate malfeasance grab
the attention of readers. Those headlines do not tell the entire story, yet readers form
judgments based on those headlines. Grainger has been the subject of some of these
headlines and as unflattering as they may be, the root of the problem is deeper and the
damage is much more insidious. When a business finds themselves as the subject of these
headlines, they must act quickly and decisively to address these problems.
Recent fines and investigations are the result of ethical lapses which undermines the
ethical underpinnings upon which Grainger has built their business. Headlines and fines do
not target individuals and their ethical lapses, they indict the entire company. A reputation
that took decades to build is called into question by a single lapse in judgment from one
individual. Grainger must take swift and decisive actions to resolve their recent ethical
lapses in hopes of rebuilding their reputation. In an increasingly competitive business
segment, Grainger cannot afford to ignore the damage that has been done.
This report examines Grainger’s business environment, defines their unique
business situations, business challenges and the problems Grainger faces. It identifies the
symptoms of the underlying problem as well as the damage being done. This report
proposes and weighs four potential solutions. This report recommends for Grainger to
invest significant resources into developing an ethical “Northstar” which will help all
employees navigate through complex business situations. This report also concludes with
implementation details and metrics to measure success.
TABLE OF CONTENTS
Executive Summary 2
Introduction 4
Situation Analysis 5
Industry Overview 5
Competition 6
Grainger as a company 7
Business Environment Overview 8
Problem Statement 11
New horizons 11
Potholes in the road 11
Contracts to courtrooms 11
Dog eat dog 12
Tools or used cars 13
“Clear and present danger” 14
Solutions 16
Black, white and gray 16
Option 1: Sharpen the saw 16
Option 2: Find the “Northstar” 17
Option 3: Carrot and Stick 18
Option 4: Let Sleeping dogs lie 18
Ethical Viability 18
Feasibility 19
Cost / Benefit 21
Decision Matrix and Recommendation 22
Outcome Measures and Expectations 23
Conclusion 24
Works Cited 25
INTRODUCTION
In 1927 William W. Grainger founded a company to sell electric motors by means of an
eight page catalog. Today, Grainger sells over one million products and parts through
various distribution channels (Grainger, 2012). In 2012, Grainger ranked number 318 on
the Fortune 500 list with over $8 Billion in revenues (Fortune 500, 2012). Understanding
the industries Grainger operates in, the company itself and the overall market gives insight
to their situation, the problems they face and recommended solutions.
SITUATION ANALYSIS
INDUTRY OVERVIEW
Grainger operates in several markets, but the bulk of their revenue comes from the
industrial wholesaler market. Grainger owns 12.4% of this $54.7 billion dollar industry,
which is almost twice as much as the second place competitor. The top seven companies
combined hold less than 30% market share (McBee, 2012). These factors represent room
for Grainger to grow, but they also represent opportunity for competitors. The industry is
lightly regulated and requires a low level of capital investment (McBee, 2012). The rate of
technological change is not particularly onerous. The industry is considered mature and
has little volatility (McBee, 2012). Overall the industry continues to be held back by the
overall sluggish economic recovery (McBee, 2012). Other factors that will impact this
industry
moving
forward include
the trend of
customers
bypassing
resellers and
buying directly
from
manufacturers
and the
growing budget
deficit (McBee, 2012).
COMPETITION
While it is easy for new competitors to enter the market it may not be enticing.
From 2007 – 2012, industry growth was -1.7%. Between 2012 and 2017, the industry is
expected to grow 3.2% (McBee, 2012). These factors prove the industry that is highly
dependent on the overall economy. Even though they are not directly impacted by
consumer demand, their customers are. Soft consumer demand equals lower industrial
demand which explains the recent industry slump and the anemic projected growth.
As an industry, industrial wholesalers are a disparate group of specialty suppliers that are
starting to converge through expansion of product offerings. For instance, Airgas which is
primarily a specialty gas supplier, supplies welding equipment as well as tools and
hardware through brick and mortar locations (Airgas, 2013). MSC supplies tools and basic
maintenance parts, but is almost exclusively online (MSC, 2012). Sun Hydraulics
manufactures and sells hydraulic parts through local distributors (Sun Hydraulics). These
are all products that directly compete with offerings from Grainger (Grainger, 2012). Some
of these companies have local branches that are stocked with parts while others use an
online model.
Grainger uses both
models creating more
direct competitors.
GRAINGER AS A
COMPANY
Grainger
company activities are guided by their vision statement: “To be the leader in the
distribution of maintenance, repair and operating supplies and related information to
commercial, industrial, contractor and institutional customers” (Grainger, 2008). If market
share is the measure of leadership, then Grainger has attained their vision. If a full trophy
case is the measurement of leadership, their website lists 47 awards they have received
over the last five years from national and trade publications, customers, business groups
and government agencies (Grainger, 2008). If the measurement of leadership is embracing
new technologies, Grainger is fifteenth largest online retailer (Internet Retailer, 2013) with
over 25% of their annual revenue generated online (Grainger 10K, 2013). Grainger
