Business Analysis of Home Depot

The Home Depot was founded in 1978 by Bernie Marcus and Arthur Blank. Along with investment banker Ken Langone and merchandising guru Pat Farrah, the founders’ vision of one-stop shopping for the do-it-yourselfer came to fruition when they opened the first two Home Depot stores on June 22, 1979, in Atlanta, Georgia (“The Home Depot”, 2011). From the start, associates were able to offer the best customer service in the industry, guiding customers through projects such as laying tile, changing a fill valve or handling a power tool.

Not only did store associates undergo rigorous product knowledge training, but they also began offering clinics so customers could learn how to do it themselves.The Home Depot revolutionized the home improvement industry by bringing the know-how and the tools to the consumer and by saving them money” (“The Home Depot”, 2011). The Home Depot is the fastest growing retailer in U.S.

history. The 1980s and 1990s showed tremendous growth for the company, with 1989 marking the celebration of its 100th store opening. “The company arrived in Canada with the acquisition of Aikenhead’s home improvement centers in 1994, and in Mexico in 2001 through the acquisition of Total HOME. In 2006, the company extended its reach to China by acquiring The Home Way, a 12 store chain”. (“The Home Depot” 2011)From the beginning, The Home Depot developed strategic product alliances directly with manufacturers to deliver the most exclusive assortments to customers. “Through a combination of national brands and proprietary products like Ryobi® tools, RIDGID® tools, BEHR® paint, LG® appliances, and Toro® and Cub Cadet® lawn equipment, the company sets the standard for innovative merchandise for the do-it-yourselfer and the professional contractor” (“The Home Depot”, 2011).

The following will be an analysis of The Home Depot in its strengths, weakness, opportunities, threats and trends (SWOTT). This will let people know where the company is now and the possibilities of where it might go. StrengthsSize The size of the company is significant to the bargaining power the company holds over its vendors. The largest home improvement retailer operates 2,248 across the U.S.

, Canada, Mexico, and China. Home Depot’s size creates a low-cost position that puts the company in a dominant competitive position. “The companies scale generates significant bargaining power with vendor when it comes to products, advertising and rent among other things” (“Datamonitor” 2011). The company provides value and instills customer loyalty by passing the saving along to the customer.

Home Depot stores are visited by 22 million people a day.Diversified Stores, Products and Service Portfolio Diversification of products and services and the wide network of stores improve sales and increase profitability. 40,000 different products falling into four categories mainly plumbing, electrical and kitchens; hardware and seasonal; building materials, lumber and millwork; and paint and flooring. In addition the company offers installation services. Installations are performed by pre-screened independent contractors.

With the large number of stores if an item is out of stock at one location it can be shipped in from another many located in the same geographic area.Supply chain transformation. Home Depot has committed itself to a supply chain transformation. In distribution the company has moved to the Rapid Deployment Centers. Prior to this change 80% of merchandise was supplied to the store using the Direct To Store and Transfer Facilities methods.

The Rapid Deployment Centers has advantages over the other two methods. With Direct to Store and Transfer Facilities there are require vendor minimums while this is not the case for Rapid Deployment. Therefore the sales order will match demand and not vendor minimum and cut arrival times by 25%.“Home Depot also continued to implement new merchandising tools that provide better forecasting capabilities and assortment management. The company aims to implement efficient assortment management, foresting, replenishing and space planning to increase the appeal of its merchandise. Also, the localized assortment capabilities and effective seasonal inventory planning will lead to fewer markdowns which will have a positive impact on the margins.

The company will be able to customize the pricing according to each store's merchandise performance” (Datamonitor 2011).