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Cobb County, Georgia, the Home Depot employs more than 355,000 people and operates
2,141 big-box format stores across the United States (including the 50 U.S. states, the
District of Columbia, Puerto Rico, the Virgin Islands and Guam), Canada (ten provinces),
Mexico and China. Currently, the world's second largest Home Depot opened on
Established in 1978 by Bernie Marcus and Arthur Blank, the Home Depot Corporation
opened its first store in Atlanta, becoming the world’s largest home improvement retailer.
They are now the second largest retailer in the United States, offering 40,000 to 50,000
different types of home improvement supplies, building materials, and lawn and garden
products. They carry a wide assortment of low-cost products, and offer expert advice and
As an innovator of the home improvement industry, Home Depot has expanded into
Canada, Mexico, Argentina, Chile, and Puerto Rico. Currently there are 1,459 stores
including fifty EXPO Design Centers, one Floor Store, and three Home Depot Landscape
Home Depot’s stock went public in 1981 and is traded in the New York Stock Exchange
under the ticker symbol, "HD". It is included in the Dow Jones Industrial Average and
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The Home Improvement sector in general is in the growth stage of its life cycle. Even in
the weak economic environment, low interest rates have allowed the real estate sector to
survive. As a result, home ownership has reached new highs, and the housing industry
thrived.
In August 2002, Home Depot was ranked first in "Quality of Earnings" by Merrill Lynch
in a study of large, publicly traded companies. Home Depot reported net sales for fiscal
2001 of $53.6 billion and employs approximately 280,000 people. Fortune Magazine has
ranked them as “America’s Most Admired Specialty Retailer”. Business Week cited
In October 10, 2002, Home Depot announced they are opening two sourcing offices in
Goodwin, this will allow Home Depot to enhance their opportunities to purchase more
goods directly from their manufacturers, as well as rapidly expand their purchasing
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Home Depot held its IPO in 1981 and listed on the New York
Stock Exchange three years later under the ticker – ‘HD’. Home Depot
EXCLUSIVE BRANDS
• Husky (tools)
• Vigoro (fertilizer)
• Millstead
• Mill's Pride
• Workforce
• Thomasville cabinetry
• Behr (paint)
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Home Depot’s Values and Vision
Associates are central to Home Depot’s success and their values are
part of the fabric of the company. Values are beliefs that do not
change over time. They are what they believe in, they do, and they
and standards for the framework upon which Home Depot is built.
of The Home Depot is giving their time, talents, energy and resources
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Excellent customer service: Along with their quality products,
service, price and selection, they must go the extra mile to give
trust, honesty and integrity. They listen and respond to the needs of
partners.
company.
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• Don’t spend money on a fancy environment; that would make our prices higher.
• Stay flexible and make changes based on the customer needs and wants.
flooring.
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professional, or one of many emerging customer segments” (Annual
ORGANISATION STRUCTURE:
Bob Nardinelli
Chairman, President & CEO
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specialize in selling Craftsman tools to Home Depot’s offering; likewise
Depot and Lowes have very similar product offerings and large
stores go head to head both vying for the patronage of the do-it-
yourself customer.
Suppliers
Home Depot maintains relationships with many suppliers that stock
Home Depot has a significant amount of suppliers they are still able to
force them into offering price concessions due to the fact that Home
concessions have gone a long way in driving down the cost of home
Buyers
At the time of the case, Home Depot has 3 distinct customer
segments.
improvement projects.
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More recently, Home Depot has also begun to redefine the
market in which they operate. This redefinition has opened up the buy-
consumers that like to pick out the materials being used in their
landscapers, etc. This group has been able to get Home Depot to offer
Substitutes
Substitute products pose a grave threat to many companies. However,
Home Depot does not have many substitutes. People will always be
houses and the desire to improve one’s home is one that is ageless.
button, a customer can find “How To” instructions as well as plans for
the purchase of new homes. With new homes people will have a much
New Entrants
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New entrants to the home improvement will find it very difficult to
new to the market will face a vast difference in economies of scale that
they may not necessarily be able to overcome. Also new entrants will
be faced with trying to compete head to head with Lowes and the
category.
customer loyalty.
SWOT Analysis
Strengths
Home Depot has many competitive strengths that make them a
include:
• Business model
• Well known brand name
• Extensive product offerings
• Ability to grow
Home Depot’s business model, the first of its kind in the home
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customers in huge spacious warehouses that boast a wide variety of
about home improvement (case). This is all done with low prices as the
primary driver.
what you are looking for when it comes to home improvement. Their
extensive product lines have made Home Depot the one stop shopping
in home improvement.
number of stores over the next several years. By 2003 Home Depot
Weaknesses
Counterbalancing the strengths of Home Depot, it also has a
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Growth has both a blessing and a headache for Home Depot. As
the have expanded aggressively into new markets, they have seen
strategy.
Opportunities
Home Depot has been known for creating opportunity through
image. They might claim they are doing this out of the goodness of
help out.
business because customers are more likely to pay cheap prices for
also benefited from 2002’s building and real estate expansion. This
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was caused by the steep decrease in interest rates. Homeowners were
able to refinance their homes, save money on a monthly basis, and put
money back into their homes (Home Channel News Newsfax.) Some of
this money was spent at Home Depot stores across the country.
Depot increased their number of stores to over 1000. Its stores are
competitors. Home Depot also put stores in areas that are populated
Home Depot will set its sights on other world markets to further
expand and spread its business risk across many diverse world
markets. Expansion will be the primary focus for growth into the year
2000.
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Home Depot has an opportunity in the global sourcing of their products
Threats
Some major threats came about from the years 2000-2002.
September 11, 2001 and Enron crashing created a downward spiral for
the United States economy. This affected almost every industry. Even
they always had to worry about how fast to expand. At this time there
were many Americans leaving the country going off to war, and most
customer spending.
because Home Depot does not want a company with almost the same
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continue to grow at the same pace as Home Depot, so this will be
and wide product selections. In each market that Home Depot serves
to 15%.
combined 300 stores a year, the industry could reach saturation in the
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new competitor tries entering the market, Home Depot or Lowes puts
up a store right next to the new store knowing they will take most of its
business. There is no way a new competitor can compete with the big
anywhere else. Also, these new companies do not have the capital to
reducing costs. This has helped them sell their products at lower costs
Home Depot has about 10 true competitors, and of those Lowes Cos
Inc is the only Competitor that really competes on the national level.
Supply, Woloham Lumber, and True Value Company. This just shows
that Home Depot’s competition is far off the pace they are setting for
This industry has not shown signs of growth with regards to up and
Depot and this allows the company to sell their goods at lower prices
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Depot is and will search for their wanted products there instead of
almost always the case except for instances where customers have
There are not many fixed costs associated with this industry. Home
Depot and its competitors do not have set schedules to which they are
restricted. Home Depot has the option to buy goods and resources
when they need them. Through logistics they are able to decide the
when, where and how much questions linked to the supply and
opening up more stores across the country. By 2002 they had 1,050
stores open across the United States and Canada. This is 170 percent
more than Lowes, which is its closest competitor. This increase allows
them to lower prices. There really are only a few exit barriers in this
industry. There are not many companies selling in this market and
most of these companies have their set market share. With the real
estate market and new property, these companies are going to grow
over the coming years. The only thing these smaller companies have
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Threat of Substitute Products or Services
industry. The only substitute services are companies that only sell
lumber and would deliver that lumber at cheap costs to the customers.
These places are not very well known so this hurts them. This makes it
hard to create a substitute service that can compete with the low costs
The buyer always has power in deciding the price of the product that is
for sale. This buyer is taken from the general population and then the
prices are based on supply and demand. Home Depot sells thousands
sell you goods at low costs there is not much lower the product’s
selling price can go. For the most part the buyer is very satisfied when
they know what they want and make the purchase. There are not
The supplier also has power in the price they sell their products at.
They want to keep their products at a price that they will make profits
purchase the different items. Home Depot sets its prices at levels to
beat out the competition. Even if Home Depot does not make that
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much profit on one product, the company will make it up with the
major advantage big suppliers have, because they can keep customers
Communities also have a say, because there are city and state
some say in the decision process. Most shareholders hold a very little
share so they will not have much of a say compared to the bigger
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• Distribution Network
• Financial Resources
The price a company charges for its products and services is vital to
have if they priced their products way out of the reach of their target
customer.
competition. Home Depot has positioned its brand more towards men
and professionals as Lowes targets the women of the family with their
the most stores and can get the most product out to the customer
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Competitive Strength Assessment
In the competitive strength assessment, the industry key success
Lowes and Ace Hardware. Please see exhibit 1 for the actual strength
assessment.
industry. Lowes is not far behind Home Depot. The major difference
stores than Home Depot in 2000. The main difference is the fact that
one Home Depot store has a much higher volume of sales than a
typical Ace Hardware Store. Most of the other points were a wash, as
Home Depot won in all but one of the most important categories.
Low Priority
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Medium Priority
High Priority
could possibly have an impact on their market. Home Depot and its
advantage over its competitors because of their size. They are able to
trends.
There are many trends in this industry that can effect what the
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market, if customers started buying supplies from wholesalers. This is
worry about Domestic threats but with little worry. Home Depot has
captured a majority of the market share and it is also unlikely that any
Home Depot has made many joint ventures with companies to sell only
because this secures big time contracts and large amounts of income.
For example, in 2002 Home Depot and John Deere made an agreement
that Home Depot will only sell John Deere’s in their stores. Expect
HIGH
P Ace Hardware
R True Value
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I
C
E
HomeBase Inc
Hughes Supply
Low
es
Woloham
Lumber Home Depot
LOW
Diverse
Limited Selection Selection
Diversified Line of
Products
This strategic map shows that Home Depot has a more diversified
product line and sells their products at lower prices. Companies such
as Ace Hardware and True Vale cannot compete on the same level
very limited in its product line, but they do sell their wood as cheap as
Home Depot.
Important Issues
suppliers. Home Depot has also been able to establish and successfully
execute a market saturation strategy coupled with low prices and high
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service. Being able to execute on these three pillars has been the
hallmark of Home Depot’s strategy and will carry the company into the
future.
estate will rise as they compete head to head with their main
improvement projects.
Marketing Issues
to the DIY consumer. To achieve this, only the most qualified and
from suppliers.
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Financial Issues
increased from year to year. Some major financials for 2002 are as
follows:
Revenue: $58.2B
Gross Margin: 31%
Net Earnings: $3.7B
EPS: $1.56
disappointed in the way the stock price performed which in return had
R & D Issues
implemented within each store. This year the company tripled the
Operation Issues
In the past, the company would stock shelves during store hours.
will be done after hours to reduce clutter in the aisles. Home Depot,
Inc. also opened four new Transit Facilities and built two new Import
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the self-checkout system. This reduces the time the customer has to
HR Issues
found that 70% planned to further their careers at Home Depot, Inc.
need to be made to raise the retention rate. During the year management also provided
better pay and benefits to ensure satisfaction among employees. Aside from pleasing just
workers, the company “gives back” to local communities. They participate in projects
such as Habitat for Humanity and they have provided athletes jobs with full-time pay and
benefits during their training for the Olympics. Home Depot also provides employees
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Corporate Value Chain Analysis
Plumbing Shipments
Fiber glass
products arrive via
yarns
shipped to Muir’s Cartage
manufactured
“YoW” (Your Carrier to Port
by Owens
“other” of Charleston
Corporation.
Warehouse). or Savannah
Harbor.
Shipments also
“YoW” acts as arrive by air
Yarns are then a master freight.
sent to New distributor of
York for the specialty
further plumbing
construction. items. Shipments
arrive at Home
Depot Imports
Rolls of fiber Products are Distribution
glass are shipped and Center in
shipped to distributed to Savannah,
Saintgeobain in Home Depot Georgia.
Dover, Ohio, Retail Stores.
where they are
slit to retail
Material,
size.
receiving,
incoming
product storage
Home Depot and order
then buys picking
direct from activities are
Saintgobain. conducted
using
conventional
distribution
techniques.
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These three examples depicted in the value chain represent the
flow
AGV’s
low prices due to their ability to eliminate distributors. Instead,
(Automatic
Home Depot has their own line of distributors to reduce costs Guided
Vehicles) are
used to relieve
materials
handling
congestion.
Products are
shipped to
Home Depot
Retail Stores.
specialty retailer, with more than 2,200 retail stores in the United
States, Puerto Rico, U.S. Virgin Islands, Canada, Mexico and China. As
Canada and Mexico, in addition to the U.S. The Home Depot entered
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The Home Depot combines its vast knowledge of the home
Home Depot Canada is the Canadian unit of the Home Depot and
Canada. Home Depot Canada has stores in all ten Canadian provinces
overtake its biggest competitor, Rona, which has about four times as
many stores. However, many of Rona's stores are smaller than the
typical Home Depot store. In terms of big box stores, the Home Depot
has many more stores than Rona. The Home Depot will also face
Since 1994, The Home Depot Canada has been offering its
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free in-store consultation for home improvement projects, ranging from
At-A-Glance
25,000
Mexico
The Home Depot entered Mexico in 2001, and has since become
with over 6,600 employees. Most of the Home Depot stores are located
in the same installations in which the extinct Home Marts were located.
Juarez, Nuevo Laredo and Matamoros. In 2006, the Home Depot began
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a program to offer Mexican employees to have "guest worker"
In May 2001, The Home Depot entered the Mexico market through
retailer in Mexico.
At-A-Glance
Number of Stores: 64
(Q307)
more than
China
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acquisition gave the Home Depot an immediate presence in China,
party, the government allows the Home Depot to further deregulate its
The Home Way was the first “big box” home improvement retail chain
in China.
Its 12 stores, which average 90,000 square feet of selling space, are
headquarters in Tianjin.
At-A-Glance
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Number of Associates: Nearly 100 in sourcing offices; 3,000 in newly
Number of Stores: 12
BIBLIOGRAPHY
• http://www.homedepot.com/webapp/wcs/stores/servlet/HomeP
ageView?storeId=10051&catalogId=10053&langId=-
1&orig_ref=http%3A%2F%2Fwww.google.co.in%2Fsearch
%3Fhl%3Den%26q%3Dhome%2Bdepot%26btnG%3DGoogle
%2BSearch%26meta%3D
• http://ir.homedepot.com/faq.cfm?FAQPage=FAQ
• http://www.datadirect.com/company/customers/docs/
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• http://www.homedepotfoundation.org/
• http://www.microedge.com/products/casestudies/
• http://www.prnewswire.com/mnr/homedepot/26373/docs/THD_
Canada_Mexico_China_Fact_Sheet.pdf
• http://www.i2.com/assets/pdf/8B6C876F-EA42-4BF5-
9BEA7043E5609C98.pdf
• http://ir.homedepot.com/downloads/hd2007proxy-2182hd.pdf
• 220.227.141.26:81/Abha%20Rishi/RMM/Entry%20Strategies/Entry%20Strategies%20of
%20Top%20Retailer.doc
• www.smarthome.duke.edu/downloads/smart_home_residency_commitment.doc
• http://en.wikipedia.org/wiki/Home_depot
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