Company Background
The Home Depot, Inc., commonly known as Home Depot, was established in 1978, and it opened its first store in 1979 in Atlanta, Georgia. The company is a home improvement with construction products and services. Bernie Marcus and Arthur Blank had a vision of creating one-stop shopping for customers focused on the ‘do-it-yourself’ idea.
Since its establishment, The Home Depot has been able to provide the best customer experience in the industry and offering customer guidance on home improvements and repairs. Home Depot owners focused on creating knowledge through training and later on offered clinics to their clients to ensure that customers could adopt the ‘do-it-yourself’ approach. Consequently, the company was able to transform the industry through cost-saving, expertise, and introducing the necessary tools for customers.
The company ensures that customers get the right assortment, prices, quantities, as well as support from trained employees. The Home Depot focuses on ‘whatever it takes’ to create strong customer relationships with customers.
The company experienced unprecedented growth in the 1980s when it listed on NASDAQ and later transferred to the New York Stock Exchange (The Home Depot, Inc., 2015). Since then, The Home Depot has focused on regional expansion with the first store in Canada in 1994. It has adopted strategic acquisition to enhance regional expansion in North and South America.
Today, The Home Depot is found in China. It works with industry-leading companies to provide exclusive varieties of products and services to customers.
Mission and Value Statement
The Home Depot Mission and Value statement are responsible for guiding the actions and beliefs of the company’s stakeholders every day. The company recognizes that its values are “the core fabric responsible for its unique culture and success” (The Home Depot, Inc., 2015). Also, The Home Depot claims that these values are part of its competitive advantage where it operates while “entrepreneurial spirit and pride of its associates are components of its main culture” (The Home Depot, Inc., 2015). Thus, the company strives to provide the best selections based on value to customers. These values include the following (The Home Depot, Inc., 2015):
- Excellent customer service
- Taking care of our people
- Giving back
- Doing the “right” thing
- Creating shareholder value
- Respect for all people
- Entrepreneurial spirit
- Building strong relationships
Vision
The vision of The Home Depot founders was to establish home-improvement superstores, superior to any other available stores. Thus, they had a distinct vision to “create a company that would keep alive the values that were important to us – values like respect among all people, excellent customer service, and giving back to communities and society” (The Home Depot, Inc., 2015).
Environmental Scan
It is observed that Home Depot, just like any other retailer, faces significant economic situations in the industry. Therefore, the most important external environmental factor is the economy, which presents a positive impact when it is growing. For instance, foreign exchange rate fluctuations affect consumers’ purchasing powers about imported goods. Overall, when the economy is growing, there are more jobs and a considerable increase in home consumer spending, which is a good thing for the market performance of The Home Depot (Lauchlan, 2015).
Generally, environmental factors affect the operations of the company. They include trends in furniture and home furnishings, electronics and electronic supplies, building materials, garden equipment, and other related goods. Any change in a particular sector’s demand affects the industry, including economic reasons, as well as state and federal government policy (Goodman, 2009).
Besides, the labor market has a direct effect on Home Depot’s performance overall because the company has an extensive network of stores and employs thousands of employees. Changes in their demand for compensation and related issues, such as unionization, will affect its performance.
The company also has notable internal strengths and weaknesses, which could increase or break its performance. The major strengths of The Home Depot are its brand reputation, the quality of products that the company offers in its retail stores, and the focus on customer service. It has also been investing in research and development. Consequently, the company has been able to create a competitive advantage in the U.S. home retail industry. Moreover, Home Depot continuously focuses on marketing and improved customer relationships to grow its brand.
Sustained focus on ensuring that its prices remain competitively low has forced the company to work closely with its supply chain partners to gain significant insights into inventory management, which has enabled it to invest in different technologies, enhance operations excellence and customer intimacy. Today, the company has outperformed its peers in customer excellence. It relies on technology to ensure that customers have different shopping options. Customers can shop online and pick goods at the store. They also have options for checking out at mobile checkout points within stores while employees at The Home Depot have been trained to offer the best service and focus on the long-term effect of their interaction rather than short-term price savings.
The most critical drawback for the company is that it has not increased the diversification of its product portfolio. That is, The Home Depot has relatively stayed the same in terms of what it offers to the customers, while its rivals could experiment with different ranges of goods. Also, it lacks bargain power because of dependent on large suppliers for its inventory. Besides, faulty products by manufacturers that are sold through The Home Depot outlets could be recalled. When this happens, the reputation of the retailer suffers.
The company has vital resources to support its operations. The Home Depot has lucrative store locations combined with a high number of stores. These resources create a competitive edge due to economies of scale and easy access to customers. The second resource is the excellent customer service at the company. A third valuable resource for the company is its skilled labor supply. Finally, the culture at The Home Depot, which is driven by a leadership and management team also forms a part of the company’s resources.
Home Depot’s competitive position and possibilities have also been assessed. The company differentiates its products and services by caring about its interaction with customers and, therefore, it has created operational excellence. It also shows significant potentials in best practices and threshold competencies in the retail business. Further, the company has established distribution and inventory management systems that provide it with the necessary economies of scale.
The company does not segment customers but rather analyze their purchasing patterns and developed a solution that allows it to meet the client’s expectations before they get to the store and whenever they are in its stores. The Home Depot embraces a long-term perspective on customers’ interaction and has benchmarks to ensure the gains made in improved interactions are sustained throughout its stores. It also invests in employee training and management training in the same area of customer services to improve the employees’ people skills and enhance the shopping service that the company offers. The company’s major competitors include Lowe’s Companies Inc., Menard, Inc., and The Sherwin-William Company. None of the competitors has achieved strategic success to match The Home Depot.
The Home Depot has a centralized structure where all executive decisions and operational decisions follow a hierarchy arrangement. All decisions regarding store expansion, investments, distribution, and suppliers’ engagement, as well as employee relations issues, are handled centrally. Besides, communication is official while the personality of the CEO transcends the whole organization. A centralized structure also contributes to career advancement because of managed promotion, ensures an effective focus on employee concerns, and supports decision-making.
A Review of Financial Data / Performance Summary
During the financial year 2014, the company recorded increased sales growth just like in the previous four years. All the major divisions of the US, Mexico, and Canada have been performing well. The Home Depot noted that its store sales increased to 5.3 percent while total sales also jumped to 5.5 percent. Sales in the US increased across stores by 6.1 percent. Still, diluted earnings per share increased to 25.3 percent.
The Home Depot also opened more stores between the fiscal year 2012 and 2014 from 2,256 to 2,269 respectively. Its operating margin has increased to 12.6 percent in the fiscal year 2014 from 10.4 percent in the financial year 2012. At the same time, the Return on Invested Capital has risen from 17 percent in 2012 to 24.9 percent in the fiscal year 2014.
*Amounts in billions, except for diluted earnings per share and store count
As a dominant retailer in the United States, with about 60% of the revenues and a growing stock price, the company needs to ensure that it retains its growth momentum (Barrows, 2015).
A Recommendation for the Best Strategy
The Home Depot must consider establishing its online stores within other online stores that are already established. It continues to lag behind other businesses like Amazon that have a fully established online retail store. The current model of buying online and picking at the store is good and has served The Home Depot well for a while, but the concept is easy to copy and does not give the company a significant boost in its competitiveness (Edmiston, 2015).
Home Depot continues to define the value for customers, and it should continue using the strategy to exceed customers’ expectations.
The Home Depot entered its market with an emphasis on low prices for conventional consumer goods daily, and it has been able to defend its market position with the same strategy. However, other companies are also using the same strategy. Thus, it will have to embrace customer service improvements and pursue a generic strategy of differentiation.
Home Depot should enhance customer experiences beyond checking out services.
The best grand strategy for The Home Depot is market growth. This low-risk approach will allow it to focus on growing its market as a retail business, with the focus being on the expansion of the current business. However, any expansion strategy should be cost-effective.
Overall, the recommended strategies for The Home Depot are to sustain the growth momentum, focus on differentiation in its customer service, implement new technological solutions, and collect information from customers for analysis (Nasir, 2015). Consequently, The Home Depot will improve decision-making, realize cost-savings, shipping efficiency, sustain customer experiences, and improve competitive edge.
Implementation and Contingency Plan
Changes in technologies
References
Barrows, D. (2015). Home Depot (HD) stock is worth the stretched valuation. Web.
Edmiston, D. (2015). Strategic digital marketing. Journal of Product & Brand Management, 24(1), 90-91.
Goodman, J. A. (2009). Strategic customer service. New York, NY: AMACOM.
Lauchlan, S. (2015). Digital transformation progress report – Home Depot builds a digital future. Web.
Nasir, S. (2015). Customer relationship management in the digital era. Hershey, PA: Business Science Reference.
The Home Depot, Inc. (2015). About The Home Depot. Web.