Company Analysis: Home Depot and Menards

Introduction

Company descriptions

Home Depot Company and Menard Stores are firms that operate within the US retail industry. Home Depot was founded in 1978 in Marietta Georgia while Menard Store was founded in 1962. In their operation, both firms deal with the provision of home improvement products. Home Depot Company has its headquarter located in Cobb County, Georgia while Menards is at Eau Claire, Wisconsin. These firms have adopted a different capital structure in their operation. For instance, Menard Store is a private limited company while Home Depot is a public limited company. As a result, Home Depot’s shares are publicly traded at New York Stock Exchange Market. Home Depot has a human resource base of 322,000 while Menards has 45,000 employees. During the financial year which ended in 2009, Home Depot had a net income of $ 2.26 million while Menards had revenue of $ 8 billion.

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In its operation, Home Depot has managed to develop a relatively high competitive advantage within the retail industry. This has enabled the firm to survive in an environment characterized by intense competition. Currently, the firm is the largest retailer which deals with home improvement products. In addition, the store is ranked as the 2nd largest retail firm in the United States while Menards Store is ranked 3rr (Young 1).

Market segmentation

The success of a firm is determined by the effectiveness with which the firm targets or segments it’s market. According to Croft (1) market segmentation is defined as the process through which a firm identifies diverse potential customers to whom it can market its products or services. Through market segmentation, the firm’s efficiency in marketing is improved since the end-user is satisfied. Market targeting or segmentation arises from the existence of resource scarcity which limits the firm’s capacity to supply products to the entire market. In addition, market segmentation provides the firm with the capacity to improve its competitive position. In its operation, Home Depot has incorporated the concept of market targeting or segmentation. This has been achieved through consideration of diversity in consumers’ needs.

According to Croft (1), the hand tools market is categorized into a number of segments which include industrial, DIY and professional users. The store serves three customer categories. These include do-it-yourself, buy-it-yourself, and professional customers. D-I-Y customers are customers who purchase materials but they execute the projects. On the other hand, the B-I-Y customer includes homeowners who purchase the necessary home improvement materials by themselves but hire 3rd parties to undertake installation on their behalf. The professional customers relate to customers whose role includes repair re-modelers, tradesmen, and general contractors. Similarly, Menards Store has also segmented its market by integrating diversity in product requirements amongst the consumers. This has been attained through the integration of the D-I-Y concept. According to Hansward (para. 5), Home Depot and Menards Stores are amongst the most popular home improvement stores which have incorporated the DIY strategy in selling to their customers.

Marketing strategies

For firms within the retail sector to attain a competitive edge, it is paramount for the respective management team to formulate and implement effective marketing strategies. Some of these strategies should relate to pricing, promotion, distribution and the product. In their operation, both Home Depot and Menards Stores have developed marketing strategies. The respective marketing strategies with reference to the marketing mix are analyzed below.

Product

In an effort to ensure that their customers achieve a high level of satisfaction, both Home Depot and Menards Stores have integrated the concept of product diversity. In addition, both firms are committed to ensuring that the products they supply to the consumers are of high quality. Homes Deport merchandises in an assortment of home improvement products. Some of these materials include building and garden products. The home improvement products include tools, lumber, home appliances, lumber, paint, and other hard ware products. As a result, the customers achieve a convenient shopping experience by shopping under one roof.

Menard Stores also deals with an assortment of home improvement products. To attain product diversity effectively, the firm has a number of departments. These include the following;

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  • building materials
  • millwork
  • wall and floor covering
  • plumbing hardware
  • cabinets.

In addition, the firm also supplies a variety of home appliances such as toasters, refrigerators, microwaves. With regard to marketing its garden products, Menard has got garden showrooms and outdoor lawns. Menards have managed to develop a relatively highly competitive advantage in marketing its products compared to Home Depot. This arises from the fact that the firm has got outdoor lumberyards in all its stores. This enables the customers to view and select the various products (Datamonitor 11). The ultimate result is that the firm is able to attract customers. Home Depot has formulated a strategy aimed at increasing its product line. To cope with intense competition from Home Depot; Menard Store increased its product range by including dishwashers and cooking ranges. In 1999, the firm diversified its operations by including two main services which include installation services and supplying credit cards to the customers (Datamonitor 7).

In their operation, both Menards and Home Depot Store do not only merchandise exclusive products but also sell their own products. This has been achieved through the incorporation of product innovation.

Pricing strategy

Consumers are price-sensitive in their decision-making process. On the other hand, it is their objective to maximize their utility level in their consumption pattern. In their marketing process, both Home Depot and Menards are committed to ensuring that they become competitive through effective pricing. Home Depot usually sets the price of its products at a relatively low point compared to its competitors. To attain this, Home Depot has integrated warehouse pricing into its pricing strategy. This strategy operates on the concept of issuing a wide range of popular items in large quantities. As a result, customers’ savings increase due to the discounts received.

On the other hand, Menards has over the years become successful in the home improvement retailing through the incorporation of a low-cost leadership strategy. Low-cost leadership has been enhanced by the integration of the guarantee policy (low price). In its operation, Menards is committed to this policy. As a result, customers are guaranteed competitive prices by shopping at the store daily (Datamonitor 11). According to a study conducted by Datamonitor, if a consumer finds the price of a product to be low at a given store compared to that of the competitor, the firm beats its competitor’s price by a margin of 11%. This means that guarantee policy plays a significant role in attracting customers.

During the current global economic recession, the consumers’ purchasing power was greatly reduced. In order to survive within such an environment, it is paramount for management teams to consider formulating and implementing relevant strategies.

Home Depot store responded to the financial crisis by implementing an aggressive pricing strategy. The key objective of integrating this strategy is to attract customers to shop at the store. This enabled the firm to survive within the volatile environment.

Promotion strategy

Creating market awareness is vital for the success of the firm. This is due to the fact that product awareness is the first step towards the consumers making a purchase decision regarding a product or service. One of the ways through which a firm can attain efficiency in creating market awareness is through the integration of Integrated Market Communication (IMC). IMC entails diverse market awareness techniques. In their operation, both firms have integrated IMC concepts. Over the years, both firms utilized traditional methods of creating market awareness. This was attained through advertising using traditional methods. The firms mainly relied on television as the key medium of creating market awareness. A well-formulated slogan was used in the advertisements so as to create a psychological effecMenard’se consumers’ minds. Menards slogan has been in existence for the past 20 years. However, Home Depmany has undergone a number of changes. It has made Home Depot to be effective in marketing by appealing to consumers’ changes in tastes and preferences.

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In an effort to attain a high competitive edge with regard to marketing, these firms have integrated electronic commerce. One of the ways through which this is attained includes the development of a website through which the firms conduct online marketing. For example, through Menard.com, the firm’s customers can evaluate their orders. Menard’s promotion strategy also integrates the use of the 2 for 1 giveaway strategy (Brae para. 3). Home Depot’s promotion strategy is also enhanced through the development of the company website. Through the website, the firm is able to provide the customers with relevant product information. This has been attained upon consideration of an increment in the rate with which individual consumers are integrating technology in their consumption patterns. For example, through the website, Home Depot is able to provide its customers with information related to the amount of material required to complete a given project. In addition, the firm offers its customers information related to the products that are available in all its stores.

Distribution strategy

In the 21st century, the intensity of competition has increased within the retail industry. This has resulted from increased economic liberalization, globalization, and technological innovation. To deal with competition and it is paramount for firms to be effective in distributing their products to the entire market. Home Depot has attained this through the establishment of 2,193 distributional outlets in various regions within the US. On the other hand, Menard has only established 200 stores in the US. This gives the firm a high market position compared to Menard with regard to distribution. Due to the large scale of operation, Home Depot is able to receive better trading terms from its business partners. These benefits trickle down to the consumers in terms of low prices (Datamonitor 12). To increase its market coverage, the firm has integrated the concept of acquisition and the formation of strategic alliances. This enables the firm to distribute its products to a wide range of customers.

Home Depot has also integrated electronic commerce technology in distributing its products. This is attained through the development of an online sales program through the company website. On the other hand, both Home Depot and Menard have developed an effective distribution strategy that ensures that the products purchased are delivered to the customers within one day.

In order to compete with Home Depot effectively, Menards Store management team has formulated a strategy aimed at establishing an online store. This will enable the firm to access a wide market. The online store will specifically deal with 3 special order categories which include lighting and fans, window treatment, and bath and kitchen. The firm is also committed to enhancing its online retail as a distribution strategy by increasing its investment. By the end of 2010, it is expected that the firm’s spending on online retail will be $144 billion. In addition, it is also projected that 71% of the total online users will conduct online shopping. This means that there is a high probability of the firm attaining a high market share by enhancing its product distribution.

Conclusion

From the analysis above, it is evident that Home Depot has managed to attain a high market position compared to Menard Store within the US retail industry. This results from effective formulation and implementation of marketing and operational strategies. Some of the strategies considered relate to market segmentation and market strategies. Through the formulation and implementation of effective marketing strategies, both Home Depot and Menards have managed to survive within the US retail industry despite the intensity of competition.

Works Cited

Brae, Canlen. “Marketing Menards: simple graphics, a goofy pitchman and motor sports form promotional backbone.” High Beam Business. 2004. Web.

Croft, Michael. “ Market segmentation: step by step guide to profitable new business.” New York: Routledge. 1994. Web.

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Datamonitor. “Menards incorporation: company profile.” 2007. Web.

Young, Eric. “Home Depot’s self improvement: company business and marketing.” BNET. 2000. Web.

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