Home Depot Case Analysis

The Home Depot, Incorporated.

Internal Environment

Home Depot is a large-scale home improvement retail store. The company was founded by Bernard Marcus, Arthur Blank (CEO), and Kenneth G. Lagone in Atlanta, GA during 1979. Funding for this company came from an investment firm Invemed of New York among several other private investors. Within the next eleven years HD started its horizontal growth by expanding to Florida in 1981. After growth into multiple U.S. states, founders Marcus, Blank, and Lagone started the movement to open retail stores internationally. It moved into Mexico by 1998 by acquiring the company Aikenhead’s Home Improvement Warehouse. Also during the 1990’s the company moved into Puerto Rico and Canada, as well as outside the continental U.S. Some of the companies acquired by HD over the many years of operations include Apex Supply Company, Contractors’ Warehouse, Creative Touch Interiors, National Waterworks, White Cap Construction, Williams Brothers Lumber, Hughes Supply, among numerous other businesses. Other companies acquired between 2001 to 2006 totaled forty businesses; twenty-one of these firms are purchased during 2005. At the end of calendar year 2000, Arthur Blank moved to chairman of the board, who was replaced by Robert Nardelli who came from General Electric.

Nardelli then began making several changes to the policy and structure surrounding the environment of Home Depot. He started reducing the number of employees having full time positions by nearly 22% replacing those with part-time employees particularly students. These part time personnel did not have the “know-how” for the do-it-yourself customers trying to perform home improvement projects. He also began hiring many other employees from General Electric, and started filling them in the management positions. Management Incentive Plans were instilled in the company to reward management for achieving financial and non-financial objectives established by the annual goals. However, non-management employees are not eligible for incentives because top management believes that staffing will focus on the professional customers and the individual customers will not receive adequate service.

The company operates in the retail industry selling numerous products including: Building materials, lumber, millwork, plumbing, electrical, kitchen, hardware, paint, flooring, and wall covering. Home Depot’s main customers are the D-I-Y (Do-It-Yourself) and D-I-F-M (Do-It-For-Me) customers, as well as professionals such as construction workers. The main functions of the company are retailing merchandise as well as MRO (Maintenance, Repair, and Operations) that assists multifamily housing, hospitality, and lodging facilities.

The strategy deployed by Home Depot, Inc. at the current period consists of the 3Es: Enhancing the Core, Expanding the Business, and Expanding the Market. Enhancing the core focuses on modernizing updated product line. Some of the activities in this focus include increasing the average ticket paid by customers and improving productivity from existing employees. Expanding the business focuses on expanding the company into multiple channels by selling new products and services. Internet sales, catalogs, among other methods were deployed to achieve the expanding business focus of the company strategy. Expanding the market refers to growth in new areas to better serve existing customers and attracts new ones by opening stores in countries the company doesn’t effectively compete in. Achieving this focus is attempted by offering building supplies and retailing products to the D-I-Y, D-I-F-M, and professional customers, ultimately resulting in increased sales and horizontal growth. Home depot follows the three steps to achieve this strategy: excellent customer service, everyday low pricing, and a wide variety of products. These strategies and goals are a result of the financial desires and customer perception the company wishes to attain.

Home Depot, Inc. has a variety of financial goals they are pursuing to achieve by the year 2010. One of the goals is to increase sales to $200 billion in the U.S. for the D-I-Y market, and $250 billion internationally for the same market. The company would like to increase the service market (or the D-I-F-M) to $110 billion in revenues and $410 billion in the professional market.

The company is performing well in the industry. They currently hold the majority of the market share in the industry and are striving to increase the barriers to entry by increasing the amounts of capital