Home Depot Case Study Essay
Home Depot Incorporation was formed in Atlanta, Georgia in 1978 by Arthur Blank and Bernie Marcus, two individuals who had previously worked at a small firm that dealt with home improvement items. The idea to start a retail store selling these things came after both Arthur and Bernie were fired from a tiny firm that specialized in home renovation products. Home Depot began with a warehouse full of various home improvement supplies at remarkably low costs. From there, Home Depot has expanded to become the world’s largest chain for home improvement items. The company initially grew at a slower rate, but it eventually took hold and now Home Depot is a successful business.
Home Depot, with over 2,000 locations across the world, is a flourishing company led by Lowe as its main competitor. This paper will evaluate Home Depot’s growth strategy, present market conditions, competitors, and strategies utilized to identify how the firm may meet the issues it is confronted with in this case study. The environment in which a firm operates includes all of the elements around it that have an impact on its operations in some manner. In other words, Home Depot’s business environment is a set of circumstances beyond its control that has an impact on its normal functioning.
Prices start at $12
Prices start at $11
Prices start at $12
Home Depot, like every other business, has both internal and external environments. The company’s internal environment is made up of factors such as people, equipment, cash, and management. Home Depot can make adjustments to the internal environment in response to changes in the business’s operation.
The expansion of the company’s operations and new store openings, as well as an increase in top management since its inception, are all indicators that this is occurring. The firm’s revenue increased from $22 million to $90.8 billion over the period 1979 to 2006, and Founders’ co-founder Robert Nardelli has served as CEO (Hess 2).
The board of directors took a chance by appointing Bob Nardelli as CEO following Elon Musk’s departure. The company’s financial growth was incredible, and the board of directors decided to embrace change by replacing Blank with Nardelli. Nardelli had served in the military and used a distinct approach. He brought personnel and ideas from the military, leading to a cultural shift as a result.
Previously, Home Depot had a low-profile culture that was collaborative and open. However, Nardelli transformed it into “a culture of fear” (Hess 3). The sales drop witnessed in the 1990s can be attributed to the form of management employed by Nardelli. The changing of the decentralized strategy that focused on employees and, more significantly, clientele resulted in a poor sales performance. This implies that altering an organization’s internal climate has different consequences.
On the other hand, the external environment of Home Depot is beyond its control. The external environment of the organization influences various aspects of internal operations, tactics used, and objectives pursued by it. Customers, suppliers, competitors, market intermediaries, and the general public are all components of the operational external environment of a company.
Suppliers provide the firm with raw materials, therefore they must be trustworthy in order for the company’s success. Home Depot is a multinational corporation that operates across the world, implying that it has numerous suppliers. Customers are part of the business’s external environment.
Customers influence the success of a company, therefore it’s critical to provide goods that give best pleasure. Because Home Depot is a big corporation with diverse clientele, from industries to wholesalers to retailers to government organizations, it has become very important for me as an author and consultant in the writing field.
The last stage of the supply chain is represented by the market intermediaries who connect the company’s ultimate consumers to it. Banks and other financial intermediaries, middlemen, and marketing firms are all examples of market intermediaries. Competitors are an important element of a company’s external environment. Every action taken by a competitor has an influence on the firm. Lowe is one of Home Depot’s rivals; as a result, the company must keep up with changes made by its competition.
Lowes and Home Depot compete in the “Do-It-Yourself” industry for home renovation items. Building materials, millwork, and lumber, as well as kitchen, plumbing, electrical, wall covering, paint, and flooring are all available from these two companies (Hess 4). The Do It Yourself approach was pioneered by Home Depot, but Lowes has always been forced to compete against a tough market. After conducting a SWOT analysis of the two firms, it’s clear that they have similar strengths despite the fact that Lowe has never outperformed Home Depot.
In this scenario, Lowe is identified as the market leader, and as a result, it has its devoted consumers. On the other hand, Home Depot employed a superior method of price leadership by selling the same product for less money. The firm followed Lowe’s example and offered the identical goods at a cheaper rate.
The external environment of a business, which is made up of the general public, includes individuals who have an interest in the company’s activities. The PESTLE analysis is always performed on the macro or broad external environment of a firm to determine its position in the industry. The acronym PESTLE stands for political, economic, social-cultural, technological, legal, and environmental elements that influence a company’s external environment.
The political aspect has an impact on a firm’s operations because it influences how governmental policy may influence the company. Labor and environmental rules, tax plans, trade barriers, and political instability are just a few of the many examples of political elements that have an impact on business. Changes in politics and policies influence the economic environment, which is ever-changing. Government spending, foreign currencies, interest rates, and other factors can all have an effect on a company’s performance.
The external environment is made up of social factors, which examine how consumer beliefs and behaviors impact the firm. The social elements of the outside world are culture, attitudes, and population. The technological environment focuses on the speed with which product innovations and production processes may have an influence on the business. Ethics are necessary for a company since they motivate management and personnel to do what is considered moral. Time again, integrity and acting in an ethical manner have been credited to being Home Depot’s key driving forces.
External environmental factors, such as climate, climatic change, and weather in the business’s environment. Consumer legislation, anti-discrimination rules, and employment laws are all legal issues. Because they influence Home Depot’s operations in both the short and long terms, these factors are critical components of its external environment.
The home improvement sector has experienced a rapid expansion since the 1990s. Many people have invested heavily on pricey and desirable goods as a result of the money effect. The industry’s growth is due to changing customer requirements, increased housing expenditure, and the internet.
In its present condition, Home Depot has used successful company methods to embody its basic principles. The following are the company’s fundamental beliefs: providing outstanding service to clients, caring for people, being moral, maximizing shareholder value, treating everyone with respect, giving back to society, maintaining a spirit of entrepreneurship, and developing strong and long-term relationships.
Home Depot’s success is due in part to its promise of a wide array of distinct goods at low costs and excellent customer service. The firm’s greatest asset is its capacity to listen to its clients. Home Depot’s commitment to providing exceptional customer service helps it succeed. The sole fault the firm has is that it spends too much on advertising in order to keep its rivals out. It’s apparent after looking at every aspect of the company that Home Depot’s development strategy requires attention. Robert Nardelli’s leadership and management methods were ineffective for Home Depot, therefore the new CEO will have an uphill battle trying to develop a growth plan for the organization.
Alternative actions to address the situation
There is a need to modify the company’s GE style, human resource policies, accountability, technology, and operational efficiency during Nardelli’s administration. Through modifications in merchandising, executive control, centralization of operations, and purchasing and inventory management, Nardelli significantly transformed Home Depot’s culture.
Blank and Marcus established an entrepreneurial and decentralized culture that gave precedence to workers and consumers. Now that Blake is attempting to restore Home Depot’s reputation, he may do so by utilizing alternative business methods. The company should focus on extending services, developing new channels, and growing internationally.
The core initiative should come from the top management down to the merchants, allowing them to plan and optimize their work hours. The company should consider methods for customers to be more efficient. This may be accomplished by providing self-checkouts. Frank Blake’s finest move is to embrace his entrepreneurial spirit in order to deal with shareholders’ and employees’ concerns. Reassessing current tactics is another excellent idea.
It may be effective in restyling the business by bringing one of Home Depot’s co-founders to the top management position. The most advantageous option would be to redirect, reorganize, and dispose of current company operations as well as some management methods. Changing the organizational structure from a centralized model to a decentralized one allows businesses to reach out to everyone of their customers.
A decentralized management would provide the company with more time to be closer to its consumers and would allow it to collect firsthand information about customer demands and desires through research and development. The store managers’ knowledge will assist in decision-making processes. Reorganizing the company so that it adheres to the prior utilized inverted pyramid may also aid in overcoming this difficulty.
The pyramid structure acknowledges the importance of the store employees, who are in constant interaction with consumers. To distinguish itself from rivals,Home Depot may implement the “best cost provider” competitive approach. It is true that Home Depot’s competitors provide installation services, but the company is said to deliver those items at a lower price.
Nardelli embraced purchases and mergers, allowing Home Depot to outperform its rivals. This pattern may be utilized to expand the company’s market share through the creation of more retail outlets across the world by adopting a DIY mentality with distinction and price leadership. All of these options will assist in meeting customers’ demands, which should lead to increased profits for the firm (Hess 6).
The ideal answer in the case of Home Depot is to re-organize and redirect management techniques. The company will be able to reach out and maintain contact with all layers of clients if it decentralizes like previously. Customers will be able to purchase goods online as a result of investing in technology. Product development and manufacturing processes have also been advanced by technological progress.
Home Depot will remain on top as a result of its decentralized management system, excellent customer service, and competitive prices. The decentralization will include a wide range of different items as well as efficient distribution channels. Keeping Home Depot on top will entail ensuring that the mission and vision statements are followed.
The following are the top values that should be upheld in order to improve the situation: providing excellent service to customers, caring for people, being ethical, shareholder value, treating everyone with respect, giving back to society, maintaining a spirit of entrepreneurship, and developing strong and long-term relationships. The notion of stores offering a variety of diverse products at low prices will aid decentralization. Differentiation and price leadership are two competitive tactics that can be utilized (Hess 8).
Home Depot’s financial goals include increasing income by a certain percentage, expanding the company’s market share through acquisitions and mergers, improving the return on sales and investment, and generating a healthy cash flow. Just like any other large firm, Home Depot has ambitions to be steady in the market while also having a solid financial position as well as the capacity to invest.
The implementation plan for Home Depot will help evaluate the company’s performance. The strategy is divided into smaller parts that the management may relate to in order to understand it. These phases are then assigned to individuals who recommend when each one can be finished.
The implementation should proceed as planned if the objectives are clear, each assignment should have a deadline, and progress must be monitored to reach the intended goals and milestones (Hess 10). In conclusion, the implementation plan should contain: objectives, activities to be completed, time allocation, and monitoring.
In 1978, Arthur Blank and Bernie Marcus launched The Home Depot in Atlanta, Georgia. The firm’s good management and business strategies have assisted it in achieving success since its inception. With over 2,000 locations across the world, Home Depot is a successful company that Lowe battles for market share.
Despite the fact that Nardelli altered the firm’s management and culture, Home Depot has never been outperformed. In this case study, one of the most pressing issues discovered was a lack of growth strategy.
This problem can be remedied if the firm is able to maintain contact with its consumers through decentralization of management. As a result, goods may be customized to meet the needs of clients and build consumer loyalty. It’s critical for an implementation plan since it aids in the attainment of financial goals.
For this week’s written exercise, I chose an American retail business named Home Depot. Construction tools and materials are sold at the retail store. In 1979, Atlanta, Georgia-based Home Depot was founded (Home Depot, n.d). Home Depot has about 2,200 stores in the United States, Canada, and Mexico, as well as being the world’s largest home improvement retailer. Customers, employees, communities, suppliers, and investors are all stakeholders that should be involved in strategic planning.
Stakeholders are important in Home Depot’s strategic planning because the company’s decisions have an immediate influence on them. Consumers can be homeowners, construction workers, homebuilders, or small businesses that require building materials and tools. Customers also have the ability to determine what a product’s price should be. The employee is another key stakeholder.
Customers can make better decisions when they have access to a highly trained, informed sales force. Customers and employees are in close touch with one another, allowing for faster problem resolution. For instance, when a customer enters Home Depot, she or he immediately asks the employee about the items and instruments that will be required. In addition, the consumer inquires of the employee which material or tools should be purchased first.
In this scenario, the employee is required to advise and instruct a customer in how to better utilize the product. As a result, the employee is a crucial stakeholder who should be given high priority after the consumer. The interests of employees differ from those of consumers; they are more concerned with job security, pay, and fair employment practices (Gregory, 2017). Also, Home Depot’s strategic planning should include input from the community.
Human resources, such as employees and managers, are crucial to the procedure since the company is entirely reliant on them. Human Resource teaches new people skills and recruits them for various departments at Home Depot. Clearly, Human Resource should play a bigger role in the business’s strategic planning. The sales department is another important functional area for me.
The role of this department is to create income and profits. The sales department has the responsibility for determining how to sell the goods. It is critical for a business that products are delivered into customers’ hands in order to generate revenue. The administration department should also be considered an essential functional area. The administrative staff is responsible for running the company, making decisions, and communicating between departments.
First and first, I’d like to express my gratitude for allowing me the opportunity to evaluate your well-organized and developed company. In this note, I will discuss Home Depot’s strategic concerns, tactics that the business has been employing for years, and various competencies that it possesses. Also, I’ll give my input and recommendations.
Home Depot is forced to struggle with a number of significant challenges, including product quality, pricing, advertising, store capacity, rivals, and customer independence and satisfaction. Even if the firm can afford to open all of these stores, I believe it should not open many in one location. Focusing on client service and satisfaction (also known as “customer cultivation”) is another approach that your firm is taking.
All of these elements come together to help a company grow and accomplish its goals. Employee education is critical, as are high-quality clinics and in-store clinics. When the firm was confronted with clogged aisles, endless checkout queues, and insufficient salespeople, it looked for innovative solutions to enhance client service. Sales employees were hired on the sales floor; shelf stocking and price tagging were changed to nighttime when the aisles were clear.
The availability of sales personnel to respond to client demands was one of the Home Depot customer care plan’s main goals. It provided DIY customers with assistance and assurance that no household project was beyond their abilities. The Home Depot approach to total client satisfaction has driven the business to continuously search for means to improve customer service.
I believe that this approach was well worth all of the costs since employees were able to sell during the day and focus on the client’s demands. It’s the positive experience that draws people back, and it’s word of mouth that attracts new consumers, therefore customer satisfaction is crucial.
The case of Home Depot demonstrates the advantages of centralized and decentralized authority, as well as the benefits that they provide to a company. As shown by the success of Home Depot, it’s critical for managers to understand which type of authority is appropriate at different phases in a company’s development. Having the incorrect sort of structural authority can be destructive to a company’s growth and has the potential to destroy it altogether.
As Home Depot extended further and additional shops sprouted up, it became more crucial to maintain uniformity throughout each unit. By providing the same items in each store, Home Depot was able to retain clients when they changed locations. In addition, by purchasing greater quantities of each product for display in each shop, the business was able to attract new consumers based on their competitive pricing strategy.
Bob Nardelli’s hiring was a necessary step for Home Depot to retain its position in the competitive sector of home improvement. The centralization that Bob implemented streamlined the firm, and all purchasing was handled from the Atlanta headquarters. By streamlining the products that Home Depot supplied, Bob increased costs and attracted new clients to the company. The firm was also better able to cater to its existing customers by offering a wider selection of creative and unusual goods.