Home Depot

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Presented by Katie Carpenter John Miller Ben
Freeburg
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Performance Summary

• Home Depot has performed strongly as a home
  improvement retailer. They own a 24 share of
  the Do-it-yourself market. They have received
  many accolades including Retailer of the Year in
  1988, Most Admired Corporation in 1995 with a
  ranking of fifth overall and again in 1996 with a
  higher ranking of second. In addition, they
  ranked first in rate of return over the past ten
  years with 39. Net sales have steadily
  increased while general and administrative
  expenses have decreased. The only concern is the
  continued rapid growth strategy the corporation
  is pursuing.

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Strategic Posture

• Mission
• To be a leading innovator of the home
  improvement industry while offering a level of
  service unprecedented among warehouse-style
  retailers. To be the most successful retailer in
  the next millennium by respecting and valuing all
  shareholders interests.

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Strategic Posture

• Objectives
• Open approximately 137 new stores in 1998.
• Enter new markets in Alaska, Ohio, Wisconsin,
  Virginia, Puerto Rico, Saskatchewan, Ontario, and
  Chile.
• Capture 10 of the professional market.
• Decrease Employee turnover to 20.
• Bring total number of associates to 315,000 in a
  four year span to meet the growth strategy
  demands.

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Strategic Posture

• Strategies
• 1. Growth Strategy
• 2. Low Cost Leader
• 3. Technological Leadership Strategy

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Strategic Posture

• Policies
• 1. Decentralized management
• and decision making
• 2. High level of employee
• commitment and
• enthusiasm
• 3. Encourage a
• entrepreneurial and
• innovative spirit
• 4. Feel good store
• 5. Strive to be a corporate
• citizen
• 6. Wide breadth of products

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Strategic Managers

• Home Depots board of directors and top
  management have greatly contributed to the
  success of the company. The structure of the
  board of directors and the top management is key
  to the success of Home Depot. The board of
  directors is well diversified. This group
  consists of three directors who have been with
  the company since its inception. The other eight
  directors come from an array of other industries
  including aeronautics, military, beverages,
  communications, academics, and banking and
  investments. This diversity allows for a number
  of outsiders to bring new ideas, knowledge, and
  experience to the board.

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Strategic Managers

• The top management consists of employees who
  have been promoted within the company to their
  current positions. These employees have had
  experience in several locations and positions
  which allows them to provide the board of
  directors with specified ideas and problems for
  each area of the market this company pursues.

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Opportunities

• Growth in professional market
• Smaller rural markets
• Demographic shifts, senior market expanding
• Change in pace of living, consulting
• Growth in DIY market, up 67 in 1997
• Growth in homeowner market
• Foreign market

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Threats

• Local opposition
• Y2K
• Lawsuits
• Entrance into recession dependent markets
• Environmental Awareness
• Government housing/zoning regulations
• Competition, saturated markets

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Porters Competitive Factors

• Threat of Substitution High
• Small specialized stores
• Hardware stores
• Lowes, Eagle
• Decreased differentiation with generic products

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Porters Competitive Factors

• 2. Threat of New Entrants Low
• Established market presence
• Enormous start-up costs
• Major learning curve for large retail providers

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Porters Competitive Factors

• 3. Rivalry among competitors High
• Low number of competitors
• Mergers and acquisitions

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Porters Competitive Factors

• 4. Power of Other Players Moderate
• Financially stable competitors
• Community/Environmental Action
• Suppliers

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Strengths

• 39 Rate of Return on Investments
• Decentralized management and decision making
• Core market is recession proof (DIY)
• Technology (EDI, UPC, SDCN, POS)
• Product mix top of the line, unique

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StrengthsCustomer Service
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Strengths

• Employment opportunities
• Uniform store structure
• Efficient cost structure
• Marketing (name recognition, sponsorships,
  community involvement)
• Supplier relationships

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Weaknesses

• Employee turnover costs
• Rapid expansion
• Failed business ventures crossroads
• Professional market share

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Analysis of Strategic Factors

• Change in pace of life (opportunity)
• Foreign Market (opportunity)
• Competition, saturated markets (threat)
• Efficient cost structure (strength)
• Professional market share (weakness)

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Alternatives

• Market Development
• Foreign
• Smaller rural markets
• Professional market

• Concentric Diversification
• Construction contractors
• Realtors
• Interior Design

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Alternatives

• Vertical Integration
• Supply channel

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Recommendation

• The recommendation for Home Depot is to
  implement a market development strategy in the
  professional market. The company should pursue
  this strategy because of the high level of
  competition and saturation in current DIY market.
  In addition, Home Depot can utilize the
  efficient cost structures in place to enter the
  professional market to increase the market share
  to 10. The volatility and lack of information
  in the foreign market is cause for concern
  therefore, Home Depot will research this market
  while entering the professional market.

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Implementation

• Structure
• decentralized management
• direct channel of communication between
  contractors and Home Depot managers
• professional market department
• Systems
• Develop existing technologies
• Personal selling
• Symbolic Behavior
• Evaluations
• Newsletters to contractor organizations,
  employees

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Implementation

• Staff
• Knowledgeable, experienced, ability to cater to
  needs of professional contractors.
• Shared Values
• Adhere to Home Depots mission and policies
• Skills
• Customer service
• Timely delivery and service
• Product variety

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Evaluation and Control

• The market development strategy will be
  evaluated through market share, costs, and the
  retention rate of professional contractors over a
  2-3 year period. The goals to be attained
  include controlling 15 of the professional
  market, increasing profit margins to 5.2 or
  higher, and establishing a loyal customer base.
  In addition, Home Depot will compare these goals
  to the competition in order to evaluate the
  effectiveness of this strategy.

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