Final Living Case Study

Living Case Study:
Strategy Edition
G U I D E D S T U D Y O F H O M E D E P O T I N C .
EXECUTIVE SUMMARY
Findings
The Home Depot is in a unique place right now, the company has tremendous
amounts of resources and capital, but no definitive direction going forward that
would give them a strategic and competitive advantage over their main competitors
Lowe’s and Menards. The current state of the home improvement industry has
pushed Home Depot to its cross-roads, they can go in a direction that will help the
company grow and gain a bigger piece of the market, or the company can just stay
where it’s at and hope its competitors falter along the way.
The following report was put together to show how Home Depot can take
advantage of their current situation in the home improvement industry. Home
Depot’s market share will allow them to react to new forces and competitors in the
environment, but also gives them the resources and time to work on integrating a
new strategy that will take advantage of the company’s core competencies while
addressing and minimizing the company’s weaknesses. Going over the current
structure, the internal and external environments and the company’s vision,
mission and long-term objectives has led me to conclude that a new strategy will
be best for the company going forward. In assessing which strategy Home Depot
should use going forward, I have studied all facets of the industry and background
of the company and have included them in the report. The strategy that Home
Depot should pursue going forward is the “Product Development” strategy. The
HDX brand has a bad reputation for its shortcomings and has led to a decrease in
both customer confidence and associate confidence in selling HDX products. The
“Product Development” strategy should be put in place to increase the quality of all
HDX products. If some HDX products cannot effectively and efficiently be increased

in quality, then those products should be taken off the shelves and their resources
should be reallocated to other HDX products where quality can be significantly
increased. By taking the time and reallocating resources properly, Home Depot can
develop action plans and unit goals to help meet the “Product Development”
strategy. Home Depot has the right leaders in place to lead the implementation of
this strategy and the foundation to build upon the values the company lives. The
“Product Development” will increase both customer satisfaction and employee
morale surrounding the HDX brand. It will also give customers a quality and cost
effective alternative compared to the expensive brands.
The “Product Development” strategy will allow Home Depot to capitalize on
founders Bernie Marcus and Arthur Blanks’ innovative philosophy involving the
“Customer Bill of Rights” (Our Company, n.d.). Home Depot is change ready, the
company’s customer service is bounds ahead of the competition and this strategy
will help the company reach new heights. Companies like Home Depot always hit a
point in time where they need to make a decision about their future; companies
who do not take the time to study the environment, or look at the trends and
develop new processes and strategies, lose their footprint in their industry. Home
Depot is at that point and the best way to go moving forward to execute on their
industry is implementing the “Product Development” strategy.
Recommendations
1. The “Product Development” strategy should be implemented going forward.
This strategy will help Home Depot build on its strengths, address the
company’s weaknesses, take advantage of the company’s opportunities and
minimize the company’s threats. This strategy will also help the company
get back to its roots and will help the company live its vision by executing on
the eight core values the company stands for.
2. The “Product Development” strategy should be implemented immediately to
catch the company’s competitors Lowe’s and Menards off guard. It should be
implemented by studying the processes in place for making HDX products
and gathering data to figure out which products can be increased in quality.
If a products quality cannot be significantly increased, than Home Depot
should get rid of it and take the resources and put them towards new
products and new processes.

3. In order to achieve alignment with this strategy, Home Depot needs to
change the culture surrounding the brand and train associates on the
improvements made for the brand. To achieve alignment across all facets of
Home Depot, the company will need to create an effective means of
communication. Communication is key in any strategy implementation.
Home Depot needs to make sure every unit level, store level and corporate
level manager is communicating with one another.
4. Home Depot will need to exercise management controls during the entire
process to help with the implementation. If the “Product Development”
strategy is executed and implemented effectively and successfully, the
company can expect an increase in customer service and an increase in sales
for the store brand. The company can also look forward to customer
retention and customer loyalty that will build by giving customers a quality
alternative to choose from in comparison with competitors.
5. Successful implementation and execution of the “Product Development”
strategy will increase intangible assets like employee morale and customer
service. This strategy will also increase tangible assets like inventory
turnover, which will allow the company to gain bigger capital at a faster rate
by turning the inventory of the HDX brand into a quick liquidity turnaround.
It will also increase the return on investment because more customers will be
buying HDX product, which in turn helps Home Depot recoup on the
investment for increased quality.
6. The “Product Development” strategy should be reviewed on a weekly basis
with both progress reviews and also periodic reviews. It should be evaluated
by managers at every level by asking the right questions and gathering the
correct data that will help them find root causes for any issues and help
them obtain information that could be effecting the implementation. Lastly,
communication on all levels, through every phase of the implementation
process; starting with manufacturers and going all the way to store level
associates, keeping everyone in the loop and communicating effectively will
help with the evaluation and reviews of the implementation process.

STRATEGIC STUDY
Historical Background and Present Context
History
The home improvement industry has been running strong for many years
now and at the top of that mountain is the Home Depot. According to the
company’s corporate website, The Home Depot was first established in 1978 by
both Bernie Marcus and his colleague Arthur Blank. But Marcus and Blank could not
do it on their own, and this caused them to seek help with further guidance and
the financial aspect of the company, for which they hired Ken Langone an
investment banker and Pat Farrah who knew the ins and outs of merchandising.
Together the four of them would open the first two stores in June of 1979 in
Atlanta, Georgia. The main idea behind the stores was to provide customers with
an overwhelming shopping experience that had a “Warehouse Feel” and an
abundance of products (Our Company, n.d.). Home Depot’s history has been
documented on their corporate website, in which they talk about the first stores,
saying “The first stores, at around 60,000 square feet each, were cavernous
warehouses that dwarfed the competition and stocked 25,000 SKUs, much more
than the average hardware store at that time” (Our Company, n.d.).
Early on, both Marcus and Blank began to realize the importance of customer
service, which led them to the idea of the “Customer Bill of Rights” (Our Company,
n.d.). This idea in Marcus and Blank’s eyes was that the customer was deserving of
and entitled to certain things when shopping at Home Depot. Those included
things like great prices, a large selection with consistent quantities and employees
that worked on the sales floor who knew what they were selling and provided
customers with the best possible customer service (Our Company, n.d.). Both
Marcus and Blank came up with their own unique philosophy in regards to
customer service and that was “whatever it takes” (Our Company, n.d.). What that
meant, was that customer service was more than getting people in and out of the
store, it meant more than just bringing in a customer selling them a product and
waving goodbye. The philosophy’s framework was building a relationship with the
customer, they knew this philosophy would bring back repeat customers and
cement their company as a retail giant (Our Company, n.d.).

After a few years, the Home Depot was gaining so much recognition and
praise from both customers and financial advisors, that in 1981 the company
finally went public. After going public, the company saw extreme growth and by
the end of 1989 the company opened its 100th store. This tremendous growth
caused other nations to push Home Depot into expansion. Their first move came in
the early 90’s when they opened their first store outside of the United States
borders and into Canada and in 2001 they opened their first store in Mexico. As
the expansion continued to grow and the company gained a larger footprint in
North America, they decided to take the business overseas in 2006 and opened
their first store in China (Our Company, n.d.).
The Industry
Building off the early years, Home Depot has continued to make leaps and
bounds in market share and growth. Of course, there has been hiccups along the
way, but as the home improvement giant has shown in the past; they can overcome
anything. Home Depot has always been a company striving to provide its
customers with top end products at competitive prices. Home Depot’s corporate
website says “The Home Depot began changing consumers’ perspectives about
how they could care for and improve their homes. The Company created the “do-
it-yourself” concept, spawning an entire industry that now spans the globe” (Our
Company, n.d.). But with all great things in both life and business, there is going to
be competition and Home Depot was not the first one into the industry, that title
goes to their biggest competitor and that is Lowe’s. Lowe’s opened its first store in
the 1920’s and has since maintained a level that has built strong competition
between the two. The two home improvement retailers have made it through
difficult times and have both flourished and faltered. The home improvement
industry is largely weighed on by the economy and there is nothing more unstable
than the economy. For Lowe’s, they had to deal with World War II that had the
entire economy focusing on bonds and building materials for war, but they pushed
through. By the time Home Depot opened its doors the economy was in a flux,
moving upward and then falling. Global issues had caused the industry to slip, but
they stuck with their design and vision because they knew what it could become.
As the years have progressed on, competitors have fallen off the map and have
filed for bankruptcy, we can see this with a company like Builders Square who was
owned by Kmart. They couldn’t withstand a reorganization with Home Quarters

who was a big retailer at the time and eventually shut their doors. But one thing
stayed true, Home Depot and Lowe’s were here to stay.
As the millennium approached, Home Depot saw a low market share home
improvement retail center gain ground and become a threat in the industry and
that is Menards. Menards has a similar store image and layout design like Home
Depot and caused Home Depot and Lowe’s to realize that it was no longer a one-
on-one competition. Where Home Depot sets itself apart from companies like
Menards and Lowes, is the fact that Home Depot offers trusted and durable brands
that others just simply do not. Take Menards for instance, they only offer their
home brand when it comes to power tools and other home equipment. At Home
Depot, they offer brands like Rigid, Porter Cable, Ryobi, Echo and the store brand
HDX.
Present Context
This brings us to today, and as we all have witnessed no matter how
powerful you are and how much market share you may have, one slip up can prove
detrimental. Home Depot showed they are not invincible and with technology
seemingly improving with new gadgets and software every day, the industry has
changed and Home Depot didn’t change with it. They had a massive data breach.
Home Depot lost the trust of its customers and let rivals including Lowe’s gain
ground on Home Depot’s personal relationships with contractors and the average
Joe with its recent data breach. It showed that Home Depot had a lapse of
judgement and decided to put its customers at risk by not keeping up-to-date with
its encryption data software. Home Depot’s stock did decline but didn’t drop as far
as most would have thought and that is because corporate officers kept those at
risk informed and updated on the investigation into the breach and how they were
going to prevent something like that from happening again in the future.
Regarding the Data Breach, Robert Hackett of Fortune.com talked about how
the hacking barely made a dent for Home Depot. Hackett said that the Home Depot
spent $28 million dollars in reimbursements and insurance coverages. According
to Hackett, that $28 million dollars only represented about .01% of the company’s
sales for the year (Hackett, 2015).
As you can see, a company like Home Depot, which has established itself as
one of the biggest, most reliable companies in the world can push through. Home
Depot’s history and the foundation they have built and continue to build on, has

allowed them to flourish even in downtimes. They have made it through the
housing crises, recent depression and now they have so far been successfully
moving their way through a data breach that would have bankrupt most
companies. It all starts with people, and Marcus and Blank knew that. The customer
service philosophy and foundation those two built is still guiding Home Depot
today and with housing market rising again, we can only imagine that Home Depot
will continue to grow.
Company Mission, Vision, and Other Guiding Stars
Mission and Vision
Home Depot has many guiding stars that effectively and systematically
work together to provide the organization and customer the best shopping
experience and customer service. The company’s values statement as stated on
their corporate website is “The Home Depot’s values guide the beliefs and
actions of all associates on a daily basis. Our values are the fabric of the
Company’s unique culture and are central to our success. In fact, they are our
competitive advantage in the marketplace. Associate pride and our “orange
blooded” entrepreneurial spirit are distinctive hallmarks of our culture” (Investor
FAQ, n.d.). The organization also follows a mission statement that is built on
eight core values that include excellent customer service, watching out and
looking after the care of their people, giving back, doing the right thing, creating
value for the shareholder, respecting all people and creating entrepreneurial
spirit. The mission statement for the company as provided on their corporate
website is “The Home Depot is in the home improvement business and our goal
is to provide the highest level of service, the broadest selection of products and
the most competitive prices” (Our Company, n.d.). These statements show that
Home Depots approach, along with their vision and mission statements do in
fact, as stated above, work systematically within one another. This is can be
noticed, as their values statement speaks about their associates living and
believing in the values that Home Depot provides. Reading the company’s values
statement above, we can see that Home Depot believes their competitive
advantage is based on their associates striving to provide those values and
bringing those values to life, as they work day-to-day providing excellence in
customer service. The values statement directly leads into the company’s mission
statement, based on the involvement of extraordinary services.

Home Depots values are extensive and by reading the values of Home Depot
it is easy to see why the company has thrived while others in the industry,
excluding Lowe’s, have faltered. The value that stands out the most is “Doing the
Right Thing”, in which Home Depot believes instead of taking the easy route and
just "Doing the Right Thing" the company takes it a step further and focuses on
"doing things right” (Investor FAQ, n.d.) Too many home improvement and do it
yourself companies or stores focus on just doing things right, by which I mean
getting the customer in and out of the store with the product they need, without
forming a personal relationship and helping the customer feel trust in them as
informative and wise to their individual situational needs. At Home Depot, they
focus on building those relationships so customers will continue to come back and
ask for a certain associate because they helped them personally with their at home
project and built a foundation for a long-lasting relationship.
Guiding Stars
The guiding stars that drive Home Depot include associate empowerment
and from first-hand experience working for the company, I feel the concept of
empowerment has pushed Home Depot to greater heights. Associate
empowerment is putting customers first and this to some employees is a
motivation within itself. As employees of Home Depot we are empowered to offer
up to $50 off in any transaction as a discount; anything above $50 requires a
manager’s log in and signature for approval. In my personal experience, it is very
motivating and rewarding to know that I can personally help a customer make a
purchase if they don’t think they can afford it or they think the price is too steep.
There are a lot of items in Home Depot that are way overpriced and a lot
customers see this; which can make them hesitant about their purchase. But
from personal experience there is nothing better than telling a customer that you
will take certain amount of money off to help the customer out and then seeing
how grateful they are, which in turn makes customers a little more proactive
about filling out surveys and mentioning your name. It also gets those customers
back into the store because they know the store associates take care of them and
will continue to look out for their best interest. On the other side, there are some
employees who simply just do not care and do the bare minimum just to get
their paycheck and go home. I feel it is like that with most, if not all companies,
regarding employees who are excited about making a customer’s day and those
who don’t care what happens as long as they’re getting their paycheck. That

aside, all the guiding stars that Home Depot has in place, have given associates
like myself and customers the confidence and trust to make effective decisions
about the shopping experience at Home Depot.
Areas for Improvement
Having a strong mission, vision and other guiding stars can only provide a
foundation for a company and like all facets of business, Home Depot does have
areas in which the company can improve. The one to me that stands out the most
is the second core value in the company’s mission statement, which states “Taking
care of our people” (Our Company, n.d.). I cannot speak for the company as a
whole or any other store for that matter, but the first and second core values within
the mission statement should be switched. I feel I speak for a lot of associates at
Home Depot when I say that the “Taking care of our people” value should be the
number one priority of Home Depot. In author Stephen Covey’s book “The 7 Habits
of Highly Effective People”, Covey talks about successful companies working
inside-out and not outside-in, meaning that successful companies take care of
their people first and then consumers or customers (Covey, 2004). At the store
level, associates are treated as replaceable or disposable. In fact, the Home Depot
store where I work, it is known that the stores turnover rate is one in three and the
most common issue new associates and associates that have worked there for a
while have, is that management is too concerned about the customer and puts no
effort into their relationships with employees. For example, there are sometimes
issues that arise with customers, whether it be pricing or something else. Too
many times employees will call managers over to help them and by looking at the
values the Home Depot believes in, one would think store managers would back up
their employees. This simply just does not happen, managers almost always side
with customers and make the employee look foolish in front of other customers
and associates because they put too much focus on outside-in rather than inside-
out.
The biggest improvement Home Depot can make to live the values, mission
and guiding stars the company has set forth, is to hire managers who believe in
what the company stands for. It is clearly outlined that the company believes in
taking care of their own, but if managers do not follow or believe in this value, than
the core values are just words on a sheet of paper. Home Depot has long believed
in promotion from within, but those promotions for associates to become
managers, are on seniority and not on merit. If Home Depot starts focusing on

their hiring of managers and department supervisors that live those values, Home
Depot could significantly improve their turnover rate at the store level. It is easy to
understand why putting customers first is a part of Home Depot’s values because it
is a retail company and you need to have customer retention in order to succeed,
but in order to provide great customer service and achieve customer retention, you
need to work from inside-out and not outside-in as Stephen Covey puts it.
External Environment Assessment
External Environment
Home Depot has the market share and foundation that every CEO and
entrepreneur of company strives to obtain. But the external environment has a lot
to do with where Home Depot is, how they got there and where the company will
go from here. Looking at the external environment in which Home Depot operates,
from a dynamic systems perspective we can see that many things affect and can
affect the home improvement industry. The main trends and forces that heavily
weigh on the industry are economics and technologies. The economy is foremost
the biggest trend and force effecting the industry. Sales for home improvement
retailers like Lowe’s and Home Depot, weigh heavily on the economy and housing
market. In 2007, the housing market crashed and the industry’s sales fell with it.
When the economy is unstable and houses are not selling, customers will not be
going into stores like Lowe’s and Home Depot to make major purchases and the
sales from 2007 to 2009 reflected that. Since then, the market has started to
stabilize which has led to more and more individuals purchasing homes and
renovating current homes, which in turn has increased sales for the industry.
Technology trends also have a deep impact on the home improvement industry.
Technology, impacts every industry and can deeply effect a company if they do not
keep up with current trends, this can be seen with the data breach Home Depot
had. Besides security reasons, technology has changed the way consumers shop,
make purchases and create ideas for projects. Technology is also changing the way
products are manufactured and with that comes price decreases. These trends are
effecting the way home improvement retailers do business and are shaping how
business will be done in the coming years.
From a market competitive perspective, the home improvement industry has
seen more than its fair share of changes and shifts. There are new products and
marketing campaigns that are pulling the consumer every which way, with that

comes pure competition. The main industry leaders are Home Depot, Lowe’s and
Menards, each coming up with new ideas and sales promotions to drag customers
from one store to the other. Each company has tried to set itself apart from the
others, but they keep bumping heads in order to grab the customer’s attention.
The big three have been doing this with credit cards, price matching and incentives
to customers to keep them coming back. After years and years of pushing back
and forth, the industry has come to realize the importance of intangible things like
customer service and customer relationships and now the industry is spending
more and more on resources, trying to provide the customer with the best
shopping experience possible.
Porter Five Forces Model
Looking at Home Depot through the lens of Porter’s five forces, it shows me
that Home Depot is almost placed perfectly within the industry. If you look at
Menards, they basically only offer the store brand products and do not carry a lot
of different, trusted suppliers or manufacturers. Lowes on the other hand does, but
they do not hold enough market share or bargaining power to negatively impact
Home Depot. Porter’s Five Force Model in relation to Home Depot is as follows:
1. The threat of new entrants, i.e., new competitors.
 The threat of new entrants in regards to Home Depot and the home
improvement industry is very low. The market share between Home Depot,
Lowes and Menards doesn’t leave barely any room for a new entrant. The
time to effectively market a new entrant and price to enter the industry
would be abnormally large given the fact that only three companies have
successfully done so, those are named above.
2. The threat of substitute products or services.
 The threat of substitute products or services remains high, considering the
amount of services Home Depot provides at flat rates. It would be easy for a
company to do those same services like fixing tools or delivering products at
a sufficiently lower rate. The products Home Depot offers are in a lot of
stores and depending on the price for each of those individual stores
depends on how big the threat would be. The lower the price, the more likely
the customer would shop somewhere else.
3. The bargaining power of customers (buyers).

 It is not easy for customers to drive prices down at Home Depot. Home
Depot is given a price list for all the products they carry from each
manufacturer that provides that particular product. If it simply does not sell,
the company will buy it back from the store and work on new prices at the
manufacturing level. However, it is easy for customers to find or bring in
coupons for specific products and get them at discounted prices. And there
is always putting up a huge fuss and whining until management lowers the
price of an item just to get the customer out of the store.
4. The bargaining power of suppliers.
 The bargaining power for suppliers is minimal for Home Depot. Home Depot
offers almost every single brand you can think of that would help someone
with their project. Suppliers like Rigid, EZ GO, Porter Cable, Echo and Ryobi
are each vying for shelf space. There is way too many alternatives for
suppliers to have any sort of bargaining power.
5. The intensity of competitive rivalry, i.e., the jockeying for position among
current competitors.
 There is a tremendous jockeying situation for position among current
competitors. With companies like Lowes and Menards, Home Depot has to
honor all coupons offered by those competitors just to stay ahead of the
curve. Although that is a small number of major competitors, it is still a
driving force for good position in the industry and impacts the market share
for each company.
Using Differentness
After looking at Home Depot through the lens of the five forces model, it is
now time to look at Home Depot and how they use their differentness to set
themselves apart from their competitors. Home Depot, an industry leader in the
area of home improvement may seem cookie cutter, in regards to Lowes, but
taking a deeper look into the organization will help us understand how Home
Depot sets itself apart from others. In my eyes, it is easy to see why Home Depot is
different from others and that is mostly based on the fact that I work there. From a
store perspective, Home Depot relegates different aspects of customer service for
every type of customer. Contractors do not even head to the opposite end of the
store relevant to the Pro Desk area. The Pro Desk works directly with vendors,

calling them to get specific products for contractors at the exact dimensions the
contractors need. The Pro Desk also deals with a service called the bid room. In the
bid room, pro desk associates are able to submit large quantities of lumber, for
example, and tons of manufacturers will compete to fulfill that order and bid
against each other to gain the lowest price. This allows contractors and other
customers, to receive the lowest possible price for the best quality of products.
The customer service desk deals with every day customers helping place
online orders and fixing issues with deliveries and refunds. Then there are the
specialists who work in one department customizing products and orders for
customers to get their project done. These departments include bathrooms,
kitchens and flooring, for example. I strongly believe its Home Depots customer
service that sets them apart from companies like Lowes. Whatever the problem is,
there is a person(s) in the store that will help fix the issue and get customers out of
the door at the smallest price possible. Home Depot also sets itself apart from
others with the Home Depot credit card. Unlike that of Lowes, Home Depot’s credit
card offers great financing at 6, 12, 18 and 24 months depending on the purchase
price. If you pay off that project within the allotted financing time you pay zero
interest and at Home Depot most customers will pay off their projects within that
allotted time. Lowes offers 5% of your purchase but charges ridiculous interest and
provides horrible financing. It is the little things like that that sets Home Depot
apart from others and with the new updated software for security protection with
peoples identities on the Home Depot credit card, it is now safer than ever to get
and use one.
Potential Threats
Even with great customer service and unique credit card financing, Home
Depot does face threats. The three biggest threats facing Home Depot are:
1. Fraud/Return Policies:
 Home Depot has long been known for its relaxed return policy, often
returning items that are not even from the store. To many customers are
finding out how easy it is to get store credit and are just turning around and
selling the store credit. Home Depot loses thousands of dollars each day in
every store from fraudulent returns and their relaxed return policy.
2. Competitors Copying Strategy:

 With Home Depot taking a majority of the market share, which can only
mean one thing for its competitors, and that is to copy Home Depot’s
strategy and try to get consumers out of Home Depot and into their stores.
Whether it be by sales or service, companies will continue to copy or emulate
Home Depot so they can make a profit and take a little bit of that market
share back.
3. The Economy:
 If the economy keeps trending upwards than Home Depot has nothing to
worry about, but if the economy slips or crashes it will drive down sales for
Home Depot and also drive the stock down. This will lead to more firings
and stores closing up shop. We can only predict what the economy will do,
but that does not mean that is what is going to happen.
Looking at the threats and thinking about how they could be effectively
reduced (because nothing can ever be eliminated) we can see that Home Depot
needs to tighten itself up. If they can gain operational effectiveness they will gain a
strategic and competitive advantage over companies like Lowes and Menards. If
they focus on denying returns without receipts they will be able to almost eliminate
the fraudulent return policy. Customer service will hold the threat of theft at bay if
it is done correctly. If Home Depot continues to provide excellence in customer
service and tweaks a few areas they will be able to make the best of what they’ve
got and that is customer loyalty. The economy is out of their hands and it can only
be foreshadowed, but if they prepare for the worst and have a contingency plan
just in case the economy dips again, they will be well positioned and trained to
combat what the economy might hold in store.
Opportunities
Home Depot may have some pretty serious threats that could affect the
company, but it also has a lot of opportunities the company can capitalize on.
Those opportunities include:
1. Housing Recovery:
 The housing market has made a significant improvement in both new houses
being built and houses being sold. This will bring the demand back to the
home improvement industry as consumers will be looking for products to
build and renovate houses.

2. Expansion:
 With the housing market increasing and unemployment on the decline, new
economies will be emerging in new geographic areas. This will allow
businesses to expand and open new store fronts to meet the demand of
these new rising economies.
3. Environmental Friendly Building Materials:
 According to Green Building Materials website, a turnaround in construction
activity which will occur through 2017, is going to push growth in eco-
friendly building materials demand 11 percent annually to reach around
$86.6 billion. Green Building Materials website also believes that an increase
in growth for eco-friendly building materials, will cause an increase in
customer interest surround the eco-friendly materials and that increase will
cause a market share growth for eco-friendly companies (Green Building
Materials, 2013).
Home Depot can capitalize on these opportunities by continuing their eco-
friendly initiative and by continuing to support green alternatives and recycling in
their stores. If Home Depot continues to move toward a greener future, they will
continue to gain profit and make the earth a better place and that will cause
more customer support and spending. To take advantage of the housing
recovery, Home Depot needs to start rolling out new products and lower costs.
They can also address this issue by giving customers even better financing
options with their store credit card, which will get new home owners in the door.
Expansion, is an opportunity that Home Depot needs to really take a step back
and look at. They have had problems in the past with expansion by going into
unstable markets. But the economies that are growing in the United States,
means Home Depot will be able to keep a close eye on progress in new
geographic areas.
Internal Environment Assessment
Internal Environment
Assessing Home Depots internal environment brings forth a lot of tangible
and intangible data, as the company has been in the market since the first doors
opened in 1979. Home Depot’s tangible data includes a large inventory of products
that stack every shelf. It would be hard to walk into a Home Depot and go down an

aisle with no product. The company’s inventory span’s throughout North America,
with warehouses full of product ready to ship out at a moment’s notice. Other
tangible assets include the amount of stores Home Depot currently has open.
According to Home Depot’s corporate website, “The Home Depot has more than
2,200 convenient locations throughout the United States (including the territories
of Puerto Rico and the Virgin Islands), Canada, China and Mexico. Stores average
105,000 square feet with approximately 23,000 additional square feet of outside
garden area” (Stores, Products, and Services, n.d.). Home Depot’s capital internal
environment is a little different, as some of their current ratios are not as strong as
they used to be. Home Depot’s most crucial financial and capital data can be seen
in the following ratios:
1. Growth Rate Annual Revenue = 5.71876
 This is very important to Home Depot because it shows how the annual
growth rate of the company and where the company is trending.
2. Current Ratio = 1.35788
 This ratio shows how strong Home Depot is and shows the company
efficiency in turning products into cash.
3. Return on Investment = 21.71235
 Return on investment is crucial because it shows that Home Depot is using
its resources in the most efficient way possible.
4. Net Income per Employee = 17241.85000
 This ratio shows the efficiency of how Home Depot uses its employees. The
higher the number the more efficient Home Depot is with their employees.
5. Inventory Turnover = 4.89899 (Home Depot Financials, 2015)
 This calculates the number of times Home Depot’s investments in inventory
are regained in an accounting period.
These ratios and the numbers that follow, show that some of Home Depot’s
financials and efficiencies are not only strengths, but are also weaknesses. This can
especially be seen in the inventory turnover, which shows that Home Depot is not
recouping its investment in a good manner and there could be many causes for
that. Growth Rate Annual Revenue is also a good starting point to figure out how

Home Depot is growing as a company and in this day and age, this should be done
all the time, not just on an annual basis.
Change Ready Structure
The structure of Home Depot is changing from what it was in the past.
Before the housing crash in early 2007 Home Depot had a sound structure that
kept them way ahead of the curve in terms of market share. Judging on how they
have overcame that crash and adapted for the future, it shows that Home Depot’s
structure is not fixed and they’re more than capable of making structural changes
easily. The new strategies Home Depot has implemented have worked so far, it is
still way too early to tell if their new strategies and ideas will fully become what the
company envisioned, but their handling of new strategies has gone extremely well,
especially at the store level. All-in-all, Home Depot is in a good position to both
adapt to new structures and environments, and the company has shown they are
capable of change.
Using Strengths
As an organization Home Depot’s major strengths include excellent
customer service, special services, adaptability and competitive pricing. Home
Depot’s customer service has and always will be one of their strongest
competencies. The only way they can further exploit the strength of their customer
service is by continuing training and be selective in the hiring process. They have
built such a strong reputation in regards to their customer service, that they need
to keep bettering it, or they will lose customers who absolutely live and die for
Home Depot and their service. In regards to the company’s competitive pricing
strength, the best way they can further take advantage of their competitive pricing
is to be their first. And by first I mean not just offering great prices and matching
other companies, but by being the company who has such good prices that others
are trying to meet and beat Home Depot’s prices. They need to strengthen their
relationship with both suppliers and vendors and continue to build off of those
relationships to get better bulk deals. In regards to adaptability, Home Depot has
shown great skill in adapting to the new environment. They have been doing this
by offering great financial services and financing on certain price brackets. They
can better their ability in adapting by continuing to follow market trends and
observing the future market trends. They can do this by performing a plethora of
assessments to better gain knowledge of the upcoming trends and where the

market is heading. Lastly, in regards to special services; the special services and
Home Depot both go hand-in-hand with all the services they provide, including,
the pro desk, bid room, installation, credit financing and all custom specializations
that the department specialists can create. They can build off of that by offering an
easier way for customers to look at their designs and make suggestions on
changes and colors from the comfort of their home. Installation services can be
better in aspects of timing and making arrangements, as of right now, it is a
confusing process that customers should probably come into the store to set up
measures and things of that nature to make sure it is done correctly.
Addressing Weaknesses
Having listed the strengths Home Depot can build on and improve, it is just
as important to look at the company’s weaknesses which include the outside-in
approach, loss prevention presence, target audience and caps on compensation.
Home Depot’s outside-in approach has been detrimental in terms of turnover rate.
The outside-in approach can be diminished by having managers put more trust
into employees and backing them on situations when the customer(s) are truly
wrong. I know the home improvement industry is a customer first based industry,
but you have to work inside-out and not outside-in. Home Depot needs to take
care of their own people before they take care of everyone else. In regards to Home
Depot’s loss prevention presence, it is difficult for big store like Home Depot to
watch for theft. A loss prevention associate can only work in one store for so long
before they change because potential thieves will sooner or later recognize who
they are and what they do. This leaves the door wide open for potential thieves to
take product out of the store and either sell it or return it without a receipt for
store credit which they sell on sites like Ebay. To minimize this, Home Depot can
take the initiative and hire an outside company who employs more than one LP
associate to rotate through different Home Depot’s. It can also be maintained by
putting someone at the door checking receipts they too will deter thieves, just as
Costco does.
Home Depot’s target audience has been that of contractors and men
working on homes and projects, which leaves the women demographic lacking in
terms of shopping experience. In recent months, Home Depot has been showing
gardening commercials depicting women and I know personally in the stores they
have been putting out more women friendly tools and trying to make it easier for
women to grab large items off of tall shelves by keeping small ladders in aisles that

women frequently visit. To improve and build on the women demographic Home
Depot needs to continue to make improvements and adjustments to make stores
friendly to both men and women. Lastly, comes Home Depot’s compensation
weakness. With the minimum wage looking to increase here soon, Home Depot can
remove the cap on wages for associates who have been there for a long time,
instead of losing them when the associate realizes they can no longer get a raise
because they reached their cap. All of these weaknesses can be overcome at
minimal cost and Home Depot will be better for it in the end. Home Depot has the
resources to take these weaknesses and turn them into strengths.
Strategies in Action at Home Depot
Long-term Objectives
Home Depot’s long-term objectives have been well documented throughout
the company’s transformation from former CEO Frank Blake to current CEO Craig
Menear. Home Depot has expressed three long-term objectives. It begins with
making the Home Depot a great environment for associates to work in and
expresses the objective for career advancement within the store. The next long-
term objective is having Home Depot be in a place where the company’s business
partners can grow and be able to increase the sales and profitability of their own
businesses. The last long-term objective of Home Depot, is to create the best
business environment for current and potential investors to put their money
(Investor FAQ, n.d.). Evaluating these objectives leads me to believe that Home
Depot has the right idea in mind and these objectives, if met, will increase profits
and decrease the employee turnover rate. Home Depot should elaborate more on
these objectives and produce specific criteria and data for when and how they are
going to reach these objectives. Assessing these long-term objectives creates
confusion as Home Depot does not provide a lot of room for adequate personal
and professional growth within the store ranks. Being that there is a cap on wages,
much like there is a cap on sports teams, associates and potential associates need
to be informed that unless they plan on working for Home Depot for an extensive
period of time to become a manager, they will be in a way stuck or bottlenecked.
The company’s long-term objectives do work well with the company’s
strengths in customer service, as making the Home Depot a great place for
advancement will give associates motivation to provide great customer service to
better than chances of advancement. However, the long-term objectives do not

address the loss prevention or female demographic weaknesses. And assessing
these objectives against Home Depot’s mission statement, it makes things a little
more clustered and confusing. Home Depot’s mission statement says putting
customers first, yet the long-term objectives make it sound like they are putting
employees first. It is extremely confusing to understand. On one side it seems
Home Depot is ruffling the feathers of investors, but on the other side I am hoping
that the company’s long-term objectives are true regarding associates. But unless
the company makes some big changes at the store level, they will not be able to
obtain some of those objectives.
Current Strategy
The current strategy Home Depot uses is called the “Three-legged stool”,
which focuses on customer service, disciplined capital allocation and product
authority (Moskowitz, 2014). I feel that Home Depot is continuing to use its
“Three-legged stool” approach because it allows them to put priorities in place on
which items or topics need to be tackled first. Although I am not too easily
persuaded by this strategy, I do feel it gives Home Depot a certain type of
uniqueness. Home Depot has done a wonderful job using this strategy to obtain its
long-term objectives in most aspects. Home Depot has been able to continually
increase its shareholder price and stock price to become more profitable. This
strategy however is not increasing internal capacities and internal strengths. Home
Depot’s “Three-legged stool” strategy in some ways provides clarity in the
utilization of its core competencies and its differentness in the market. By using
the “Three-legged stool” it utilizes competitor awareness which provides quality
and develops personal relationships with customers. It does this by putting
customer service first. The product authority segment of that same strategy also
helps utilize Home Depot’s strength in buying power, high inventory and quality
products.
Although this strategy does work well with the company’s core
competencies, Home Depot’s strategy as far as I have been able to see is a one-off
type strategy, meaning it is just the one strategy to develop and promote the
business to make it more profitable. The strategy just seems to be solely focused
on increasing profit. There are still, in my opinion, too many weaknesses that have
not been addressed using this strategy and there is a ton of room for

improvement. The “Three-legged stool” strategy does not take into consideration
any of the company’s weaknesses. It does not address the theft or loss prevention
aspect or the compensation weakness and lastly, it does not address the female
demographic. However, Home Depot’s “Three-legged stool” strategy is helping the
organization in achieving its end goal of competitive sustainability. A few areas
need to be touched up and tweaked a bit, like the confusion within its statements
and its treatment of employees. But all in all, by focusing on price allocation and
the opening of multiple channels and mediums to help better the customer
experience, Home Depot is improving its competitive position within the industry.
Strategy Trade-offs
The “Three-legged stool” strategy does explain the trade-offs that Home
Depot is making. By focusing on price allocation and productivity, they are focusing
on putting more money into safe technology that will combat hackers from stealing
the identities of cardholders. By doing this, they are allowing their customer service
to further increase and profits to continue to rise because more people will sign up
for credit cards, which puts more money in the pockets of Home Depot
shareholders and associates through profit sharing. The trade-off, while putting
more focus into price allocation and correct disbursement, they are spending less
on training classes for associates and money for wage increases, which for
associates can make it a bad trade-off. It is a good trade-off in some aspects
because this will increase profit sharing, which means a store that exceeds sales
plans will disperse the extra money into the pockets of associates; and by getting
more customers signing up for credit cards, that means they will be spending more
money in the store.
Strategy Analysis and Choice
Strategy Going Forward
The strategy that Home depot should seek to implement going forward is
“Product Development”. The “Product Development” strategy is pursuing an
increase in sales by improving current products or creating new ones. I have
strongly urged the development of HDX, which is Home Depot’s store brand. Why? I
know personally from working at Home Depot and more importantly working at the
customer service desk which deals with returns, that HDX is not a trusted brand or
product. Customers will buy the HDX brand because it is a cheap alternative to
products or brands like Ryobi, Echo or Rigid and makes the customer feel like there

are getting a deal. But more times than not, we will have customers come back
within the thirty day time frame with HDX products because they’re busted and do
not work. By continuing to focus on the HDX brand and marketing it more as still a
cheap alternative, but more importantly a quality cheap alternative than the
expensive counterpart, Home Depot will be able to take a bigger slice of the pie
when it comes to sales. Customers want quality at a good price, and further
product development of the HDX brand and its products will help strengthen the
trust and reliability of Home Depot’s products. On Consumer Reports website, they
give a look inside just one of the shortcomings that HDX provides, that being paper
towels for which they say “Home Depot’s exclusive HDX paper towels struggled
with both, for an overall score of just 36. That’s a full 60 points below the top-
rated Bounty DuraTowel, though to be fair the DuraTowel is head and shoulders
above the competition, and the only paper towel judged excellent in every way”
(DiClerico, 2014).
Utilizing Leverage
The “Product Development” strategy will utilize leverage in helping Home
Depot gain and sustain competitive advantage. Too often, companies and
businesses like Walmart, Target and even Home Depot, focus on stocking their
shelves with as much product as possible, not taking into account the quality of
the product they are selling. Is it nice to walk into a store and see a plethora of
different brands to choose from? Yes, but at what cost. I can walk into a store and
see thousands of brands and find the one that’s right for me, but that doesn’t
mean I am going to go home and find out I hate it. Menards had a similar approach
with their store brand, but Menards is too focused on how many products they can
make under their store brand that they too have forgotten about quality. Just
because you make a sale with your store brand doesn’t mean it won’t be returned
and begin a negative word-of-mouth following. If Home Depot begins focusing
more on the HDX brand and fixing its shortcomings, they will be able to gain a
competitive advantage over Menard’s and Lowe’s because they too are behind the
eight ball, as far as their store brand goes. Focusing on quality and resources will
allow Home Depot to get rid of HDX products that do not sell well and the HDX
products that they cannot make with superior quality. By eliminating the products
that they cannot make any better, they will be able to take those resources and
focus those resources on products that they can make better and will save them
money in doing so by refocusing those resources.

Building on Core Competencies
Home Depot’s core competencies will only increase if they pursue the
“Product Development” strategy. It will help build off of the customer service aspect
because it will allow associates to be able to speak with confidence about the HDX
product with customers, which in turn will build better long lasting relationships. It
will allow Home Depot to adapt should Lowe’s and Menard’s broaden their store
brands, because Home Depot was there first. It will help with pricing because it is
Home Depot’s store brand and they will be able to reallocate their resources
appropriately to make sure they can keep the prices down and competitive. It will
help with execution because it will allow more sales and create a better reputation
with customers and contractors who are hesitant about buying certain products.
This will not happen overnight, but Home Depot will be able to do it and it will
make the company better as a whole, while increasing the money in shareholders
pockets and increase profit sharing within the store among associates. The
“Product Development” strategy will above all else, help the reputation and
customer service aspect of Home Depot, for which Home Depot is known for.
Customer Service is the most important aspect of any business selling products,
you don’t want to shop where you get awful service and Home Depot recognized
that early on and spent a lot of time and money on focusing how to do it right.
Product Development in an industry that has seen its ups and downs in recent
years will only help strengthen the brand and image of the said organization. By
being able to confidently sell a store product and build a long-lasting relationship
with your customers, will help your customer service build upon itself. I know this
first hand, working with different contractors or builders, I have seen sales lost
because associates aren’t confident about the products they are selling. People are
always looking for a deal, with HDX products improving in quality with this
strategy, customers will get great deals for great products.
Embracing Trade-offs
Lastly, the “Product Development” strategy embraces trade-offs effectively
because it focus on putting resources including money, time and knowledge into
products that can be better made and getting rid of products that cannot be made
efficiently or effectively. There has to be tradeoffs in this strategy in order for it to
work. I have seen at my store HDX products that have been sitting on the shelves
for months, with maybe two or three units sold in that time. If you think of that
shelf space that could be given to another supplier which in turn would increase

your profit margin, and give you more time to focus on products that do sell and
that can be sold at greater rates if the quality was better, than why wouldn’t you do
that? It is a necessity. That is why this strategy requires trade-offs. It also will
increase the insecurity of certain suppliers who are worried about the HDX
products taking more sales away from them, which will cause them to lower their
pricing, which in turn will create more foot traffic through your store because of
the low prices. Will some vendor’s be upset? Yes, but in the long run it will be
beneficial for everyone, including store associates. As said in Senge’s “The Fifth
Discipline”, “In reinforcing processes such as the Pygmalion effect, a small change
builds on itself. Whatever movement occurs is amplified, producing more
movement in the same direction” (Senge, 1990). The “Product Development”
strategy will create a snowball effect as more and more products provided by Home
Depot under the HDX brand name will become sincere quality products. This will
slingshot Home Depot into a direction they might not have been expecting, but will
further implement them as the number one home improvement store in the
industry. Resources will be used in a more efficient manner and money and time
spent will be used to further create a brand that Home Depot can be proud of. The
snowball effect will continue to roll forward and shelf space will be used more
effectively to create maximum profits and will help build long lasting relationships
with customers.
Home Depot’s vision has always been about providing customers with the
widest selection of products to choose from and providing the best service
possible. Achieving this strategy will help Home Depot move towards its vision
because this strategy requires high levels of great service in every facet of the
company. It will also give every customer who walks in the door another option or
product to choose from and they will know that the HDX brand is a great viable
alternative at a competitive price.
Strategy Implementation: Alignment
Adjustments
In order to accomplish the “Product Development” strategy, a lot of
adjustments will need to be put forth in order for this strategy and Home Depot’s
structure to become aligned. The major structural adjustments that might need to
be made include the culture surrounding the HDX brand and the ways employees
sell it. It will require new processes to be made in order to build up the HDX brand

and it will also require processes at the manufacturing level in order to start
making higher quality, more reliable products under the HDX name. The impact of
a change in the strategy at Home Depot should not affect the “Three-legged Stool”
approach they have been following, in fact those two strategies would work in
great harmony with each other. The “Three-legged Stool” strategy again is defined
by CEO Craig Menear, for which he states “Our strategy continues to be rooted in
our three-legged stool, which stands for customer service, product authority for
home improvement and disciplined capital allocation” (Menear, 2015). By pursuing
a “Product Development” strategy Home Depot will be able to create a better
customer service environment by giving employees the confidence to sell more
Home Depot products and with the quality becoming better, which will bring back
happier customers. It will also build a better image for Home Depot’s product
authority, in that it will create a good product and foundation to build upon. Lastly,
it will help immensely with capital allocation, in that it will put money, resources
and effort into building a better store brand which will keep money flowing in the
right places.
Alignment with Structure
The current organizational structure at Home Depot is multidivisional. I
would describe Home Depot’s structure as the same in being multidivisional
because it has individual stores that act as profit centers or separate businesses
but work together as a whole for the organization. The strengths of having a
multidivisional structure align with the “Product Development” strategy in that they
allow an organization like Home Depot to expand their operations, which would
allow Home Depot to expand the HDX brand. Another advantage to a
multidivisional structure is synergy and this is going to be crucial for Home Depot
in the pursuit of the product development strategy because corporate managers
and manufacturers are going to have to work together in order to complete all
necessary changes for quality improvement. If Home Depot is able to take
advantages of the strengths that accompany their multidivisional structure towards
the “Product Development” strategy they can eliminate the weaknesses that come
with that structure. By creating synergy they can make sure they coordinate
accordingly to eliminate the duplication of resources. By expanding operations
within their already existing HDX brand they will not have to fight or compete for
scarce resources. The multidivisional structure does serve the product
development strategy. It could be improved by creating better channels of

communication between high level management and manufacturers.
Communication is essential in all facets of business and even though Home Depot
has a good communication structure in place, it can be better improved to help
align the new strategy of product development and the multidivisional
organizational structure. If the CEO stays actively involved with the manufacturers
during every process of creating new processes for making HDX products, than
there will be no surprises along the way and the company and manufacturers can
work together as a whole.
Alignment with Culture
The culture at Home Depot needs to be changed in regards to the new
strategy of product development. Associates will often tell customers that the HDX
brand is garbage or no good and there are better alternatives. I actually have over
heard associates at work tell customers in regards to buying an HDX drill that “You
are getting what you pay for in regards to quality”. This needs to be adjusted for
this new strategy to work. If associates are constantly referring customers to other
products because of the stigma that lies with the HDX brand, than this strategy will
fail. This can be adjusted by training and incentives for selling HDX product. It can
also be changed by allowing customers to demo HDX products in the store and
compare them with other brands.
The high level leaders or corporate leaders such as the CEO and COO are
capable to lead a change in culture for Home Depot in seeking alignment with the
“Product Development” strategy. Since Craig Menear took over for former CEO
Frank Blake, morale within store management has changed. Managers were and are
excited about Craig’s ideas from what I understand and have heard. His “Three-
legged Stool” approach has been working and he has the capabilities and mentality
to lead the organization in change and alignment. There is a gap between the
current state of the company’s culture and the culture needed for this strategy, but
that gap is manageable and can certainly be aligned for execution and
implementation. It can be easily managed by giving associates enough information
about the new HDX quality and letting them demo them out. Personally, I have
never trusted the HDX brand, but if I were able to try out a new and improved
product by HDX, I would change my opinion on the matter. I am not saying that will
happen with everyone because some people do get stuck in their ways, but that is
why it is so important to focus on getting the right people first, the people that
believe in the new direction. Also, I am not saying Home Depot employees should

quit trying to sell different brands because that would prove catastrophic, but
giving them the knowledge about the quality improvements will help them let the
customer know the benefits of any product compared to that of the HDX brand.
It is difficult to change an organization’s culture, it’s difficult for any type of
change in both life and business. No one likes change, when something is new,
people tend to stick with what they know and changing those habits is difficult. But
it seems more than possible to align Home Depot’s culture with the “Product
Development” strategy. Besides what I listed above in changing the culture at Home
Depot, I just firmly believe that giving associates the time to learn more about the
HDX products and focusing on bringing in the right people that are open to trying
new brands and products like HDX, Home Depot’s culture will change and will
continue to develop for perfect alignment.
Alignment with Operations, Functional and Supportive Activities
In order to create alignment between the current operations, functional
activities and supportive activities, the company must reallocate the correct
resources into the right spots. Functional activities need to market the new HDX
products and how they have changed, money needs to be put in the right hands for
product development and the pursuit of great quality. The dot com facet of Home
Depot needs to focus on putting more HDX products on the front page and come
up with great ideas for selling the products.
The “Product Development” strategy will affect the functional areas of Home
Depot in different ways. For marketing, it will require a new marketing plan to sell
the HDX brand because of the bad stigma that is held or was held in conjunction
with the brand. For finance and accounting, it is going to require money in order to
develop new processes that will help assure the quality of the new product line. For
research and development, it is going to be a process that will take time and
research, they will need to figure out which products the HDX brand should
continue to make and which products they need to cut ties with. They also need to
figure out how they can best make these products with great quality but still be
able to sell at a cheaper level then competitors like Ryobi or Porter Cable. Human
Resources needs to make sure they get the right people hired for the company and
figure out which current employees are not willing to change and see if it is time to
move on or continue to train them. Customer service will be affected in areas like
customer questions and inquiries about product, creating orders with HDX

products which is rare right now and gaining customer confidence about the new
refined HDX brand. The current supportive and operational activities are going to
complement and reinforce one another when this strategy is implemented, as they
are already working together in marketing the Home Depot as the go-to-store for
home improvement products and product development. By adding a refined HDX
product and brand it will only strengthen the synergy that the current operational
and supportive activities have. I have full confidence that Home Depot has the
resources and capabilities to make the changes in order to maintain alignment
between this strategy and structure. Remember, Home Depot is huge company and
leads the market share to that of its competitors, which means they can spend a
little extra time and effort in order to make changes to their structure. They already
have the strong foundation built and now they can build upon that structure to
become a better all-around company.
Strategy Implementation: Action Plan
Strategic Goals
In order to successfully execute on the “Product Development” strategy,
Home Depot will need to set strategic goals in relation to this strategy. Those
strategic goals will be to (1) create a quality alternative choice in comparison to
other brands and maintain a low price by getting rid of HDX products that Home
Depot cannot strategically improve quality and reallocating those resources to
other facets of the brand. (2) Improve customer satisfaction significantly with the
HDX brand. (3) Increase sales of the HDX brand and grow customer service. (4)
Create more repeat customers. These strategic goals will be broken down to unit
goals that are measured and time-bound to make sure they are met. These goals
are all measurable through a system of metrics and data that will provide the basis
of the measurability. For example, looking at the first goal we see it can be
measured by testing the quality of the HDX product to that of its counterpart and
seeing how well they both perform. To maintain the low price, Home Depot can
measure this by keeping track of manufacturing processes and comparing the price
of their brand to its competitors. The second goal, improving customer satisfaction
significantly with HDX brand, you can see that this goal can be measured by
customer surveys and the rate of returns for the HDX brand that come back to the
store The third goal can be measured by watching how many units are sold each
quarter, which will help determine whether any of the HDX products should cease
production, with those resources being put towards other HDX products. The last

goal can be measured by sales and tracking purchases within customers. Where
customers make orders or use their cards for sales, even when they fill out surveys,
that information can be analyzed to see how customers return to make purchases
of HDX products.
The strategic goals will be accomplished by Home Depot’s manufacturing
department and marketing department. The manufacturing department will need
to create new processes that both improve quality and keep pricing low. The
manufacturing department will also need to study the processes already in place
for HDX products and determine whether or not those products can be improved
upon or the company should quit manufacturing those products and reallocate
those resources to other products. The marketing department will need to market
the refined HDX brand to reach the target audience and provide customers with
information in regards to how HDX products were improved in quality. The
marketing department will need to study and look for new mediums to reach that
target audience and come up with a marketing campaign that will grab customer’s
attention.
Action Plan
For Home Depot to capitalize on the on the company’s strategic goals, the
manufacturing department and marketing department will need action plans. The
action plans for each are as follows:
1. Manufacturing Department
Goals: Develop new manufacturing processes that will:
 Increase the quality of HDX products.
 Lower the cost of manufacturing HDX products.
 Improve customer service in relation to HDX sales.
Performance Metrics:
 Year 1: Complete the design of new processes for manufacturing
by end of year.
 Year 2: Gather all proper resources required for new processes and
begin manufacturing by end of year.
 Year 3: Begin process design for additional HDX products for
quality improvement.

Action Steps:
Year 1:
Establish process
designs for
manufacturing
Manufacturing
personnel; engineers
June 2016
Get approval for
specifications on
processes
Top level
management
November 2016
Year 2:
Figure out what
resources will be
required for new
processes
Manufacturing
personnel; engineers
June 2017
Gather all resources
and begin
manufacturing
Manufacturing
personnel
December 2017
Year 3:
Begin design phase
on additional
products for
manufacturing
Manufacturing
personnel;
Engineers
June 2018
Get approval for new
process designs
Top level
management
November 2018
Interlocks:
Manufacturing
department works
with:
To: When:

Information
technology
department
Help with process
design
Start June 2016
Construction
department
Manage construction
of processes
Start December 2017
2. Marketing Department
Goals: Market HDX brand that will:
 Gain customer confidence with purchases of HDX products.
 Increase sales of HDX products.
 Reach target audience.
Performance Metrics:
 Year 1: Study new possible mediums for the marketing of new HDX
products by end of year.
 Year 2: Develop marketing plan for reaching target audience through
new mediums and gather proper resources for implementation by end
of year.
 Year 3: Start implementing new marketing plan by end of year.
Action Steps:
Year 1:
Begin study of new
mediums
Marketing team June 2016
Establish which
mediums will be
used in marketing
campaign
Marketing team September 2016
Get approval for
marketing campaign
Marketing team;
Top level
management
December 2016

Year 2:
Gather proper
funding for
development of
marketing campaign
Marketing team;
Finance department
March 2017
Develop marketing
plan
Marketing team June 2017
Year 3:
Implement new
marketing campaign
Marketing team December 2018
Interlocks:
Strategy Review, Evaluation, and Control
Strategy Review
As Home Depot is implementing its strategy of “Product Development”, it is
crucial that this new strategy is evaluated on a regular basis and continuously.
Home Depot will need to review the progress being made against the plan by
asking the right questions and making sure everyone at every level, is
communicating effectively. In order for this strategy to work for Home Depot,
weekly progress reviews will be necessary to make sure everything is running
smoothly. I feel unit managers and top management as well as individual
Marketing
Department works
with:
To: When:
Manufacturing
Department
Learn of process
improvements to
include in campaign
June 2016
Finance Department Gather funding for
campaign
March 2017

employees should be involved in the weekly progress reviews. Having those three
groups of individuals will let management know from bottom to top what is going
on and will also make them aware of problems that could be evolving. Having
weekly progress reviews will allow Home Depot’s upper management team enough
time and notice to act on issues that could be arising within the implementation
stage and will give them adequate time to adjust things that will make
implementation be successful.
The review process is in place to give everyone a chance to voice their
concerns and opinions that are going on within the strategy implementation stage.
There is no single way to prevent any mishaps or misfortunes that will arise with
implementing a new strategy, but if everyone is involved and performing weekly
reviews at every level, Home Depot can make sure they’re in the best position to
make the “Product Development” strategy work and be successful. The philosophy
and objectives of the weekly reviews are to:
1. Allow time to adjust from deviations of the plan.
2. Keep everyone involved at all levels of the implementation stage.
3. Have every unit manager complete weekly reviews to indicate how they
are adjusting and if additional resources will be needed to make sure
everything is going smoothly.
Strategy Evaluation
As Home Depot implements the “Product Development” strategy it will
evaluate what is occurring by keeping everyone involved and having management
asking the right questions. Home Depot will start by, as Fred David states in his
book “Strategic Management: Concepts” about strategy evaluation, “Strategy
evaluation should initiate managerial questioning of expectations and
assumptions, should trigger a review of objectives and values, and should
stimulate creativity in generating alternatives and formulating criteria of
evaluation” (David, F. R. 2010). Home Depot will evaluate the strategy by reviewing
the bases of strategy, measuring organizational performance and if necessary
taking corrective actions. By reviewing the bases of strategy, Home Depot will be
able to look at the strategy as whole and will allow management and other
members of Home Depot, to ask the right questions about strengths, weaknesses,
opportunities and threats, which is theoretically performing a SWOT analysis of the
strategy and how it will impact the organization and implementation. Measuring

organizational performance is important for Home Depot and the implementation
of the strategy because as Fred David states about the activity “This activity
includes comparing expected results to actual results, investigating deviations
from plans, evaluating individual performance, and examining progress being
made toward stated objectives” (David, F.R. 2010). Lastly, in regards to formulating
criteria of evaluation, Home Depot will be able to changes processes and
techniques they are using that have proven to be ineffective. This will help Home
Depot better align all of its implementation strategy units to help the organization
perform better in coming years.
Locating Implementation Problems
If things aren’t going well with the “Product Development” strategy, it will be
crucial in figuring out where the root cause lies and doing that in a swift manner.
The best way for Home Depot to do this, is to keep following the weekly progress
reviews and continuing to have excellent communication at all levels throughout
the process. If everyone is communicating and performing weekly progress
reviews, it will be helpful in determining where the root problem lies. For instance,
if the strategy isn’t going smoothly and everyone is communicating strongly, the
weekly progress reviews will show where things might be going wrong. That starts
from store level management reports on sales of the HDX brand and all the way to
the manufacturing of the HDX products. I also believe it would make things run
smoothly if Home Depot were to hire or create, from within the organization, a
team who can examine every process at every level. Looking for issues and
problems by this group and effectively communicating the data with management
from the CEO to store managers will help everyone act on data they have received.
The criteria that Home Depot will use to guide the organization in this evaluation
will be examining the progress and seeing if goals are being met or if units are
falling behind. By having objectives and timelines, the group Home Depot has
created for the examining of processes, will be able to look at the goals, objectives
and timelines to see where improvements are needed and where additional
resources or change needs to be implemented.
Management Controls
As Home Depot is implementing its strategy, it will need appropriate
management controls so that adjustments are made and Home Depot’s actions and
results move closer to the “Product Development” strategy. This can best be done

by having management clearly state the company’s objectives, short-term and
long-term goals. By keeping everyone in the loop about the progress, objectives
and goals, Home Depot will be able to identify where there are adjustments to be
made. Having clear and concise communication at all levels about the company’s
vision for the future, it will allow appropriate management controls like providing
incentives to individuals and units who meet their goals on time and stressing
those incentives a head of time to give people the motivation to meet these goals.
Having good communication about all objectives will also allow Home Depot to tell
individuals what will happen if they fail to meet goals in timely manner, that can
include additional training or being moved to a different part of the company and if
all else fails, finding someone else who can get the job done.
Synthesize, Integrate, Summarize: Conclusion
Home Depot associates and customers probably have never heard of Bernie
Marcus or Arthur Blank, but those two were pioneers and they set the standards for
Home Depot when they first came up with the idea. Home Depot has seen its fair
share of shortcomings, but the foundation that those two men built pushed the
company through even the worst of times. Their idea of the “Customer Bill of
Rights”, shaped Home Depot’s attention to customer service (Our Company, n.d.).
Home Depot is known for their customer service and associates as well as
customers have both Bernie Marcus and Arthur Blank to thank for that. It has been
a long time since Home depot opened its doors and the company has continued to
make innovate ideas and processes into reality. The company tries to live the eight
core values they have put in their mission statement and those eight core values
have shaped the way Home Depot conducts its business. The company is guided by
its attempts to create a great shopping experience for customers and has recently
made attempts to better the environment.
As years progress and time moves forward, things change and environments
are dramatically moved around as the economy shifts. The home improvement
industry hasn’t been the easiest industry to navigate for Home Depot, as we have
seen with the recent housing crisis. The housing crisis tested Home Depot and
tested their ability to adapt and execute on a down economic depression, but the
company pushed through and showed shareholders and competitors that the
company is here to stay. Home Depot’s internal environment is similar in some
aspects, as through years and years of hard work, they have been able to gain
extensive capital and store fronts. For years, the company has been following their

“Three-legged stool” strategy and that has helped them capitalize on some of the
company’s strengths and weaknesses, but has also fallen short on others. The
“Three-legged stool” strategy didn’t help the company with the data breach it
recently experienced and the data breach has taken away a lot of customers from
Home Depot (Moskowitz, 2014).
As Home Depot approaches its 37th anniversary, the company has hit its
plateau and it is time for Home Depot to make changes in its strategy in order to
keep up with the changing environment and industry. With competitors like Lowe’s
and Menards opening new stores every day and fighting to grab a larger piece of
market share, Home Depot can capitalize on all the hard work they have been
doing since the company’s creation. Home Depot can solidify themselves as the
number one home improvement retailer but implementing the “Product
Development” strategy. This strategy will allow Home Depot to focus and improve
on one of their biggest shortcomings and that is the company brand HDX. The
company brand is a cheap alternative compared to competitors, the products are
not only cheap in price but are cheap in quality. The “Product Development”
strategy will help the company focus on reallocating resources to improve the
quality of the HDX brand and give both customers and associates confidence in
purchases and sales of the brand. This strategy will not be easy and like everything
else in the world, it is not going to happen overnight. Home Depot will need to set
guidelines and goals for each unit at every level to meet in order to successfully
implement this strategy. These goals need to be time-bound and specific, and
every unit level goal needs to have someone who is constantly monitoring the
goals and making sure they are met. Above all else, Home Depot needs to get the
right people on board and train associates who do not believe in the strategy. The
culture surrounding the HDX brand needs to be shifted and the best way to do this
is training and incentives. The company needs incentives for associates at all levels
of the company in order to create motivation for the associates to follow this
strategy and its implementation. Communication is going to be key for this
strategy to work, every single individual from CEO Craig Menear down to store
associates need to communicate effectively and consistently to make sure
everything regarding this implementation is going smoothly.
If Home Depot can implement this strategy, the company will break through
the plateau they are currently at and reach heights that competitors like Lowe’s and
Menards will not be able to reach. Every strategy including the “Product

Development” strategy will need constant progress reviews to keep everyone in the
company informed about shortcomings and areas of improvement. If this strategy
is successfully executed Home Depot’s market share will grow and continue to
grow as processes for manufacturing the HDX products improve. I feel the “Product
Development” strategy and all of the unit goals and changes in culture will
strengthen customer retention and create the positive environment that Bernie
Marcus and Arthur Blank established in the beginning years. The strategy will
reinforce what both Marcus and Blank believed in and innovated, and that is the
“Customer Bill of Rights”. The retail industry is based on customers and the service
they receive, and the “Product Development” strategy will capitalize on the
excellent customer service already in place and strengthen Home Depot’s core
competencies while diminishing the company’s weaknesses.

REFERENCES
Covey, S. (2004). The 7 habits of highly effective people. New York, NY: Simon &
Schuster.
David, F. R. (2010). Chapter 9: Strategy Review, Evaluation, and Control. In Strategic
management: Concepts (13th ed., pp. 290-295). Upper Saddle River, NJ:
Prentice Hall.
DiClerico, D. (2014, June 4). Home Depot Shopping Advice from the experts -
Consumer Reports News. Retrieved from
http://www.consumerreports.org/cro/news/2014/06/best-and-worst-
products-from-home-depot/index.htm
Green Building Materials - Market Size, Market Share, Market Leaders, Demand
Forecast, Sales, Company Profiles, Market Research, Industry Trends and
Companies. (2013, February). Retrieved
from http://www.freedoniagroup.com/industry-study/2995/green-
building-materials.htm
Hackett, R. (2015). How much do data breaches actually cost big companies?
Shockingly little. Fortune.Com, N.PAG.
Home Depot Financials. (2015, February 1). Business Insights: Essentials. Retrieved
from Walsh College Database.
Menear, C. (2015, March 26). The Home Depot 2014 Annual Report - Letter to
Shareholders. Retrieved from http://www.homedepotar.com/letter.html
Moskowitz, D. (2014, July 25). Home Depot’s 3 part recipe for success. Retrieved
from
http%3A%2F%2Fwww.fool.com%2Finvesting%2Fgeneral%2F2014%2F07%2F25%
2Fhome-depots-three-legged-stool.aspx
Our Company. (n.d.). Retrieved from
https%3A%2F%2Fcorporate.homedepot.com%2FOurCompany%2FPages%2Fdef
ault.aspx
Senge, P. M. (1990). The fifth discipline: The art and practice of the learning
organization (pp. 79-81). New York: Doubleday/Currency.

Stores, Products, and Services. (n.d.). Retrieved from
https%3A%2F%2Fcorporate.homedepot.com%2FOurCompany%2FStoreProdSer
vices%2FPages%2Fdefault.aspx
The Home Depot, Inc. - Investor FAQ. (n.d.). Retrieved from
http://ir.homedepot.com/phoenix.zhtml?c=63646&p=irol-faq#37549
Copyright © January, 2015. James C McHann & Laura A Frost, All Rights Reserved.

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