The Home depotDe’ Lonsum Angga Graharya Suherman Hadriana Jogi Elliot Primantoro Marcia Louise Mandagi Rizki GinardyMBA ITB R45 Sefta Marisa Dwipasari jn
background Home Depot Inc. was founded in 1978 and is the worlds prevalent home improvement retailer and the second largest retailer in the United States. The sales for the fiscal year 2000 were $45.7 billion, compared to $38.4 billion in fiscal 1999 Home Depot stores sell a wide variety of building materials, home improvement and garden products
Succeed in business the company had completed 21 acquisitions. the purchase of Hughes Supply, the largest acquisition in Home Depot’s history. the company had successfully expanded across the border to become the largest home improvement retailer in both Canada and Mexico.The key success factors (KSF) are the ability to meet competitive pricing, a broad mix of products and distribution capabilities The Companys focus on customer service The Companys focus on product authority The Companys approach to driving productivity and efficiency will be achieved through disciplined capital allocation Why stock price decrease Because Nardelli increasingly being attacked for having “excessive compensation,” given the poor the firm’s poor stock performance.
Core and Distinctive competencies Operation and service excellence in retail industry One-stop shopping UPC scanning system to speed check out time High quality merchandise and services at low price
Home Depot’s Culture beforenardelli “named orange-blooded culture The Home Depot culture is distinct in retail” “extremely entrepreneurial and very customer focused”Nardelli’s tenure Concentrated on overhauling Home Depots business processes, which did need to be addressed, but the "overfocused" on the processes and swept aside the elements that made Home Depot special increased the number of less knowledgeable part-time workers at Home Depots stores, which left full-time employees fuming and led to a diminishment of customer service, one of the companys strengths
Strengths – S Weaknesses – W 1. #1 home improvement retailer in the 1. Rising expenses world / #2 retailer in U.S. 2. Store layout and appearance 2. Profits climbed 16% / revenues 13% 3. New store productivity remains weak Home Depot in 2004 4. Revenue growth is slower than SWOT Matrix 3. Innovative methods of differentiating industry average and Lowe’s 4. Dominant in lumber/building 5. 18% decrease in cash and cash materials industry equivalents from 2002 to 2004 5. Efficient business modelOpportunities – O SO Strategies WO Strategies1. International expansion 1. Open stores in Europe or Asia-Pacific 1. Expand product line to other areas2. Consumer interest in one-stop markets (S2, S5, O1, O5) (W3, W4, O2, O6) shopping 2. Buy out Kingfisher or OBI to expand 2. Sell wider variety of products online3. Growth in global sourcing into those markets (S2, S5, T1, O5) (W1, W2, W4, O1, O3, O7)4. Payback from IT investment 3. Experiment with different check-out 3. Open Stores in Europe or Asia-5. Select industries expected to grow methods (S3, S5, O2, O7) Pacific markets (W4, O1, O5, O6)6. Slow housing sales (more 4. Add more options such as fuel remodeling) centers or convenience stores (S2, S3,7. More “do it yourself” women S5, O2, O5)Threats – T ST Strategies WT Strategies1. Competitors (Wal-mart, Sears, 1. Increase market share by buying out 1. Open stores in every large U.S. Lowe’s) Menard Inc., True Value, or Ace market (W3, W4, T6)2. North American market saturation Hardware (S2, S5, T1) 2. Open Stores in Europe or Asia-3. Contractor shortage / backlog in 2. Open stores in Europe or Asia Pacific Pacific markets (W3, W4, T2, T6) home remodeling markets (S2, S5, T2, T6) 3. Supply contractors working in4. 2003 Lawsuit Middle East reconstruction efforts5. Overlap between H.D. and Lowe’s (W4, T1, T2, T3, T6)
Best future strategicThe home depot’s commitment “Everyday low pricing compared from their competitor”
Business and corporate Overall, Home Depot’s best chance for success is to focus its strategy on several key efforts. By continuing to expand both within the US and internationally in underdeveloped markets, Home Depot will be able to continue corporate growth. Equally important is the advancement of an aggressive advertising campaign backed by improved current stores and customer service practices that will allow Home Depot to hold its current marketshare
FunctionalThe development of a business strategy involves coordination ofvarious function area:Marketing Product line strategy - Segmentation strategy Pricing strategy - Information technology strategy - Global strategy Distribution strategy - Internet strategy Communication messaging strategyProduction Manufacturing strategyThe strategic assets or competencies that underlie the strategy andprovide the sustainable competitive advantage.
RECOMMENDATION Home Depot should continue with its current concentric/related diversification growth strategy of using acquisitions to move into the building supply segment of the industry company’s reputation in home improvement and its relationship with suppliers should provide it with a cost advantage