During the lesson we had the opportunity to read quickly through some of the cases. The reason why we have chosen the Home Depot case is first of all that the home improvement industry appealed to us.
Maybe not the industry itself, but the fact that we have never written a paper or did research for the home improvement industry. By choosing the Home Depot case to write a paper about, seemed a good way to us to enlarge our knowledge about the (US) home improvement industry. The knowledge gained might prove to be useful in the future.The case about Home Depot gave a lot of information, from the history till the corporate culture. Although a lot of information was in the case, we had to do a substantial amount of research on the internet. The research on the internet was mainly to look for information about Home Depot self as well as for some theory.
For most of the theory used, we had several books, ranging from the strategic management book used in the course to a book about organisational behaviour.In this study we will answer several questions with subjects ranging from strengths, weaknesses, opportunities and threats of Home Depot till the corporate culture and corporate strategies. The answers on these questions together will answer the overall question, which can be read in the next chapter. The conclusion will deal with the answer of the overall question. Recommendations from our point of view are included in the conclusion.The chapters following the conclusion will contain the answers to the several questions.
Problem definition.How is Home Depot performing and can they continue like that?The question above is our overall question. Using the answers of several questions listed below, we will come to an answer to the overall question. Not only an answer will be given, we will also share some recommendations for Home Depot. These recommendations are, according to us, the path Home Depot should follow to stay market leader in a fierce competitive industry.
The following questions will be answered:-What are the opportunities and threats facing Home Depot?-What are the strengths and weaknesses of Home Depot?-What are the strategic factors facing Home Depot?-Does Home Depot have any core competencies? If yes, what are they?-Does Home Depot have a distinctive competency? If yes, what is it?-What core competencies do Home Depot posses that can be transferred to the professional contractor market? To the planned smaller stores? To going international?-What are the similarities and differences of the two chains (large box stores and the 25.000 square feet stores)? We will give these similarities and differences in a chart.-What conditions were necessary to stimulate the growth of the home improvement industry?-Would you purchase Home Depot stock? Why (not)?-What competitive strategy is Home Depot following?-What corporate strategy is the company following? Why?-What is the importance of corporate culture to Home Depot? Can it be transferred to the new smaller stores? Internationally?-How important are the current strategic managers to the success of Home Depot?The first question will be answered with the EFAS (External Factor Analysis Summary), the second will be answered with the IFAS (Internal Factor Analysis Summary) and the answer to the third question will contain a summary of the first to, put into the SFAS (Strategic Factor Analysis Summary). The definitions will be explained in the dedicated chapters. What we can say already is that the EFAS and IFAS were designed to deal with criticisms of the famous SWOT analysis. Some of these criticisms are; that the SWOT generates lengthy lists, uses no weight to reflect priorities and there is no logical link to strategy implementation.
Summary.In the summary we will summarise briefly all the questions and the corresponding answers. For the first three questions and the question about the two store chains, we would like to refer to the corresponding chapters (External Analysis of Home Depot, Internal analysis of Home Depot, Strategic factors and Large box (endless selection) versus smaller stores ((convenience)), because the charts are in our opinion a good summary of the questions.-Does Home Depot have any core competencies? If yes, what are they?The core competencies of Home Depot are that things where they are extremely good in. Core competencies are often called core capabilities.
Home Depot's its core competencies are their rapid expansion, which was possible because of their very strong balance sheet situation. Then in terms of their customer service, they posses high skilled and helpful personnel. They give professional clinics and demonstrations of methods and techniques of performing a job safely and efficiently. Their personnel is in some stores 24 hours a day available. With their computerised systems, like barcode scanning and minicomputers, the checkout lines are not that long. Further on, they've got their own truck rental and tool rental service.
Price is their next core competency.They know prices of the competition through professional shoppers. This price competency, Home Depot is able to reach, because it can gain products from over 5,700 vendors/suppliers. Their wide product range is the next core competency. Home Depot owns a product range with which they can supply all the participants in the home improvement industry. They do that with a product range with 40,000 to 50,000 products in different variations.
Their Human Resource Policy which supplies them with the next core competency and that is their strategy to get highly skilled personnel via using several kinds of methods during the interviewing process and training period of the employees. Giving those employees a certain kind of salary doesn't make the customers feel that they are very important or less important. Last but not least is Home Depot's tremendous buying power, which they reach through their market leadership and their quantity of stores.-Does Home Depot has a distinctive competency? If yes, what is it?Home Depot's distinctive competencies will be their rapid expansion over the past years, their pricing of the products and their wide product range. These three factors all meet the three required facts to be a distinctive competency.
These facts are:-The customer perceived value that must be there in disproportionate contribution-Being unique and superior over your competitors-Something that can be used to develop new products/services or to enter new markets-What core competency does Home Depot posses that can be transferred to the professional contractor market? To the planned smaller stores? To going international?The core competencies Home Depot can transfer to the professional contractor market are their:-Customer service-Product range-Low prices-Human Resource Policy-Buying PowerThe core competencies Home Depot can transfer to the planned smaller stores are their:-Customer service-Product Range (limited to the products that will sell in that area)-Low Prices-Human Resource PolicyThe core competencies Home Depot can transfer to the international market:We think that Home Depot can transfer with the same competencies they are on the US market already. Only thing they have to watch out for, is the difference in culture for which they maybe have to change the competency a bit.-What conditions were necessary to stimulate the growth of the home improvement industry?There were several conditions which have stimulated the growth of the home improvement industry. The first one is the economy. For the last 8 years (at least till 2001) the most influence on the growth of the home improvement industry.
In a good, growing economy a lot of people feel the need to refurbish/ renovate their houses. A substantial amount wants to do that themselves. More and more customers, more sales, more growth of the home improvement industry.Technical advancement is another item that stimulated the growth of the home improvement industry.
Because of the application of for example scanning systems to improve checkout time and productivity improvement programs processes went among others quicker, became more attractive to go to a home improvement store. More attractive to go to one of the stores, more customers, more sales, more growth of the home improvement industry.A third factor that stimulated the growth of the home improvement industry was the good divided market. Good divided between the larger retailers (like Home Depot) and smaller competitors. Of course there was competition between the larger ones and the between the smaller competitors, but in general there can be said that it was a rather peaceful environment, which stimulated for growth.The fourth factor, which helped to stimulate the growth of the home improvement industry, was the changing needs of customers.
The customer needs changed from spending, spending, spending to a more quality value. This quality could be offered, home improvement became (more) interesting, more customers, more sales, resulting in growth of the home improvement industry.
