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ANALYSIS # 1 1. COMPANY BACKGROUND The Home Depot Inc. was founded in 1978 and is the worlds largest home improvement retailer and the second largest retailer in the United States. The sales for the fiscal year 2000 were $ 45. 7 billion, compared to $ 38. 4 billion in fiscal 1999.
As of January 2001, the company was operating 1, 134 retail stores in forty-seven states, six Canadian provinces, Puerto Rico, Chile and Argentina. Home Depot stores sell a wide assortment of building materials, home improvement and garden products. Twenty-six EXPO Design Center stores sell products and services primarily for design and renovation projects. Additionally, the company operates four Villagers Hardware test stores, which offer products for home enhancement and small projects.
In mid-year, Home Depot also launched a Home Depot Floor Store, located in Plano, Texas. Home Depot stores serve three primary customer groups: do-it-yourself (D-I-Y) customers, who are typically homeowners that purchase products and complete their own projects and installations; buy-it-yourself (B-I-Y) customers, who are typically homeowners that purchase materials themselves and hire third parties to complete the project and / or installation; and professional customers, who are professional repair re-modelers, general contractors and tradesmen. The Company also offers products through two direct marketing subsidiaries: Maintenance Warehouse and National Blinds and Wallpaper. The Maintenance Warehouse subsidiary is one of the leading mail marketers of maintenance, repair and operations products serving primarily the multi-family housing and lodging facilities management market. The companys National Blinds and Wallpaper subsidiary is a telephone mail order service for wallpaper and custom window treatments.
Home Depot stores average approximately 108, 000 square feet of enclosed space, with an additional approximately 24, 000 square feet in the outside garden area. The basic EXPO Design center is approximately 90, 000 square feet. Newly acquired companies, Georgia Lighting Inc. and Apex Supply Company Inc. , are each operated by Home Depot Inc. as a wholly owned subsidiary.
Georgia Lighting, a leading specialty lighting designer, distributor and retailer, has six retail locations. Apex Supply Company is a wholesale supplier of plumbing, HVAC and other related professional products, with twenty-one locations in Georgia, Tennessee and South Carolina. The co-founder of Home Depot Inc. retired as co-chairman on May 30, 2001. Arthur Blank, 58 years old, ran Home Depot since its inception in 1978 and was chief executive from May 1997 to December 2000. He will not seek re-election to the board.
Co-founder Bernie Marcus, 71, the companys other co-chairman, is expected to continue as chairman. Blank decided to retire sooner than he had planned, primarily because of what he called the successful transition of leadership to CEO Robert Nardelli, a former General Electric Co. executive and the first outsider at Home Depots helm. Nardelli, 52, replaced Blank as CEO on December 5, 2000.
When Blank was CEO, sales more than doubled to $ 45. 7 billion last year from fiscal 1996, and the stock price almost quadrupled, helping to make Home Depot sixth on the Fortune magazines list of most Admired Companies in America. The magazine also ranked Home Depot as Americas Most Admired Specialty Retailer for eight consecutive years. Home Depots stock is traded on the New York Stock Exchange and is included in the Dow Jones Industrial Average and Standard & Poors 500 Index. The executive officers direct the departmental, operational, merchandising, finance etc. functions, and they provide the support to all the members of staff to ensure that they follow the goals of the company and this will lead to profitability. The executive officers and directors are there to ensure that the company does not lose customers. 2.
MAIN STRENGTHS Home Depot has done many things since 1978 to lead to the success it is experiencing today. Some of these strengths will be highlighted in the following paragraphs. 1) A major strength of Home Depot is its ability to embrace change and be creative. Home Depot grew from one store in 1978, to 1, 134 at the end of fiscal 2000. This was made possible by their diversified operations.
Home depot has a very wide customer base in both the US and abroad. Basically, Home Depot has customers in both North and South America. Home Depot is able to be successful because they listen to their customers. Home Depot continuously analyses their operations, and based on customers requests and suggestions, they improve on them.
Due to these strong qualities, Home Depot will be able to continue to increase the number of stores they operate, both locally and abroad. This store growth will be possible due to the extensive market research done by Home Depots management and staff. In addition, by having a large amount of stores, a specialty retailer can enjoy increased buying power that gives them clout in making demands on manufacturers, such as for volume discounts, co-operative advertising, and merchandise pricing and ticketing prior to shipment. These lower product costs can be passed on to the consumer in the form of lower prices.
Home Depot is a case in point. With nearly $ 50 billion in home improvement sales, it is able to garner significant concessions from its vendors. Another way retailers seek to gain market share is by developing different store concepts that appeal to various demographic groups or income brackets, example, Home Depot has its upscale EXPO design centers. 2) Another strength of Home Depot is the optimism of both management and staff. Even though Home Depot is constantly changing their methods of operations and their products, they still maintain a high level of customer service. Home Depot also does not have a problem in changing its top management as they see fit, in order to keep up their success in the home improvement market. Home Depot therefore employs both management and staff from any industry, who they perceive, will add to the happiness of the customers and investors. 3) Yet another strength of Home Depot is their ability to realize that customers are on a day-to-day lease, always with increasing needs and expectations.
This means that Home Depot realizes that it is easy to gain customers, but it is just as easy (if not easier) to lose them. With this in mind, Home Depot recognizes the need to continue to listen to their customers, and constantly try to improve the level of service and products available in order to please them. Due to the increase in competition from other firms in the industry, Home Depot has implemented a program called Service Performance Improvement Program (SPI), which allows most of inventory handling to be done after the stores are closed. This makes it easier for customer service agents to make the customers shopping experience easier and more delightful. The SPI will be put in place in all Home Depot stores by the end of fiscal 2001. 4) Home Depot allows customers to buy products for their home at a deeper discount than from traditional hardware stores.
This is a strength based on the fact that Home Depot has established a top position in the home improvement market, hence, consumers have a sense of brand loyalty towards Home Depot. They have a history of selling quality merchandise at low prices. This attribute has allowed Home Depot to have a strong history, continuous growth and innovation, strong balance sheet figures and unmatched resources. Based on the financial statements for the fiscal year 2000, Home depot was cash flow positive for the first time in history. This indicates that Home Depot is a net generator of cash, and not a net cash consumer. Based on the strengths outlined above, Home Depot can still be expected to see positive growth.
The young new CEO, Robert Nardelli, will be able to analyze Home Depots present success tactics and improve on them based on modern technology and the whole new globalization procedure. 3. MAIN WEAKNESSES Home depot internally is at a stake of a major risk that could even get them bankrupt, if not handled carefully. This major weakness is the fact that Home Depot handles a lot of dangerous and hazardous equipment and materials. All employees and visiting customers are at a continuous risk of becoming harmed with any of these.
Therefore, Home Depot is subject to many restrictions and laws needed to be adapt at all their location and at all of their equipment. If they dont follow properly these regulations they could be easily sue or banned. The Occupational Safety and Health Act of 1970, and the Consumer Product Safety Act of 1972, play a major role in this matter. The cost of their insurances and liabilities are extremely high, and any accident can make it even higher.
Another weakness confronted by Home Depot will have to deal with their suppliers. Many of their merchandise is labeled and packed by them. Home Depot however, has some products distributed by other intermediaries. Any disagreement with any of these suppliers could cost them on an increase of their prices, or in the termination of their supply. On the other hand, Home Depot plays such an important role in the market and has such a big market share for hardware and machinery retailing, that in this cases the suppliers are at a more risk of loosing a big costumer, than Home Depot loosing a supplier. However the risk of any of these companies becoming bankrupt is another possibility, but there why the reason why they had been slowly acquiring subsidiaries, and/ or joining other companies too. 4.
MAIN OPPORTUNITIES Even tough, Home Depot entered the e-commerce business later than their competitors, it yet shows how they keep up with the latest trends. Home Depot began offering its products online, only until 5 months after Lowes did. However their entrance was strong. Although Home Depot launched only until April of 2001, while Lowes was on it since November 2000, Home Depot was able to surpass Lowe by 6, 000 products sold in one month.
While Lowes products sold onl...
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