HOME DEPOT INTRODUCTION:

The Home Depot is an American retailer of home improvement and construction

products and services. Headquartered in Vinings, just outside Atlanta in unincorporated
Cobb County, Georgia, the Home Depot employs more than 355,000 people and operates
2,141 big-box format stores across the United States (including the 50 U.S. states, the
District of Columbia, Puerto Rico, the Virgin Islands and Guam), Canada (ten provinces),
Mexico and China. Currently, the world's second largest Home Depot opened on
November 14, 2007 on the island of Guam.

Established in 1978 by Bernie Marcus and Arthur Blank, the Home Depot Corporation
opened its first store in Atlanta, becoming the worlds largest home improvement retailer.
They are now the second largest retailer in the United States, offering 40,000 to 50,000
different types of home improvement supplies, building materials, and lawn and garden
products. They carry a wide assortment of low-cost products, and offer expert advice and
exceptional customer service.
As an innovator of the home improvement industry, Home Depot has expanded into
Canada, Mexico, Argentina, Chile, and Puerto Rico. Currently there are 1,459 stores
including fifty EXPO Design Centers, one Floor Store, and three Home Depot Landscape
Supply stores.

Home Depot caters to Do-It-Yourself customers, as well as home

improvement, construction and building maintenance professionals.

Home Depots stock went public in 1981 and is traded in the New York Stock Exchange
under the ticker symbol, "HD". It is included in the Dow Jones Industrial Average and
the Standard and Poor's 500 Index.

The Home Improvement sector in general is in the growth stage of its life cycle. Even in
the weak economic environment, low interest rates have allowed the real estate sector to
survive. As a result, home ownership has reached new highs, and the housing industry
thrived.
In August 2002, Home Depot was ranked first in "Quality of Earnings" by Merrill Lynch
in a study of large, publicly traded companies. Home Depot reported net sales for fiscal
2001 of $53.6 billion and employs approximately 280,000 people. Fortune Magazine has
ranked them as Americas Most Admired Specialty Retailer. Business Week cited
Home Depot as Ten Best Boards in the U.S.
In October 10, 2002, Home Depot announced they are opening two sourcing offices in
Shanghai and Shenzhen.

According to Vice President of Global Sourcing, Duane

Goodwin, this will allow Home Depot to enhance their opportunities to purchase more
goods directly from their manufacturers, as well as rapidly expand their purchasing
throughout China and Asia.

HISTORY OF HOME DEPOT:

The Home Depot was formed in 1979 by Bernie Marcus and
Arthur Blank in Atlanta, Georgia. Home Depot virtually revolutionized
the do-it-yourself home improvement industry in the United States
almost overnight.

The two entrepreneurs opened their stores which

were no frills warehouses. In 1998 the average Home Depot carried

35,000 products. Products varied from well known national brands to
propriety Home Depot brands.

Home Depot held its IPO in 1981 and listed on the New York
Stock Exchange three years later under the ticker HD. Home Depot
reached

$1 billion in sales in 1986. Sales of $20 billion were reached

in 1997 making them the fastest growing home improvement retailer

with an average annual growth in sales of 119% during said period.

EXCLUSIVE BRANDS

The Home Depot carries several exclusive brands, including:

Hampton Bay (lighting, ceiling fans & patio furniture)

Pegasus (kitchen and bath items)

Glacier Bay (faucets and bath)

RIDGID (power tools)

Husky (tools)

Vigoro (fertilizer)

Ryobi (power tools)

Millstead

Mill's Pride

Workforce

Thomasville cabinetry

Behr (paint)

Ralph Lauren paint

.
3

Home Depots Values and Vision

Associates are central to Home Depots success and their values are
part of the fabric of the company. Values are beliefs that do not
change over time. They are what they believe in, they do, and they
govern their decisions on a day-to-day basis. They are the principles
and standards for the framework upon which Home Depot is built.
Home Depots unique culture is built on associate dedication and a
commitment to an orange-blooded entrepreneurial spirit.
Taking care of our people: The key to their success is treating
people well. They do this by encouraging associates to speak up and
take risks, by recognizing and rewarding good performance and by
leading and developing people so they may grow.
Giving back to our communities: An important part of the fabric
of The Home Depot is giving their time, talents, energy and resources
to worthwhile causes in our communities and society.
Doing the right thing: They exercise good judgement by "doing
the right thing" instead of just "doing things right." We strive to
understand the impact of our decisions, and we accept responsibility
for our actions.
4

Excellent customer service: Along with their quality products,

service, price and selection, they must go the extra mile to give
customers knowledgeable advice about merchandise and to help them
use those products to their maximum benefit.
Creating shareholder value: The investors who provide the
capital necessary to allow the company to grow need and expect a
return on their investment. They are committed to providing it.
Building strong relationships: Strong relationships are built on
trust, honesty and integrity. They listen and respond to the needs of
customers, associates, communities and vendors, treating them as
partners.
Entrepreneurial spirit: Home Depot associates are encouraged to
initiate creative and innovative ways of serving our customers and
improving the business and to spread best practices throughout the
company.
Respect for all people: In order to remain successful, our
associates must work in an environment of mutual respect, free of
discrimination and harassment where each associate is regarded as a
part of the Home Depot team.

PRINCIPLES OF THE HOME DEPOT

Committed to operating a safe environment for our customers and associates.

Never walk by a customer or fellow associate without speaking.

Dont spend money on a fancy environment; that would make our prices higher.

Train our associates so they can pass knowledge on to our customers.

Want associates to build relationships with customers, to educate the customers,

and to give the customers the confidence to complete their projects.

Stay flexible and make changes based on the customer needs and wants.

Make an effort to never lose a sale.

Objectives and Strategies

In 2002, Home Depot maintained its long-term objectives for
continuous growth and expansion. CEO, Robert Nardelli, plans on the
opening of 200 new Home Depot stores in the U.S. in 2003.

In

addition, Home Depot will increase investments in technology and

store modernization, as well as sustain its control through its vertical
growth strategy in its value chain (Home Depot).
With a strategy to enhance its core retail network through
innovative and unique merchandise, Home Depot is committed to the
changing needs of the home improvement market (Home Depot). The
company began to tap the residential homebuilders market with the
2002 acquisition of three of the top 10 turnkey providers of installed
flooring.
Using a customer-back initiative in decision-making, Home Depot
is dedicated to building relationships with the customers, whether they
are

the

do-it-yourselfers

(DIY),

the

do-it-for-me

(DIFM),

the
6

professional, or one of many emerging customer segments (Annual

Report).

Home Depot is pledges to provide service and products

second to none (Home Depot) (Annual Report).

ORGANISATION STRUCTURE:

Bob Nardinelli
Chairman, President & CEO

Diane Dayhoff
Vice President
Investor Relations

Joe DeAngelo
Executive VP
& President THD Supply

Frank Blake
Executive VP
Business Development
& Corporate Operations

Harvey Seegers
President
Home Depot Direct

Dennis Donovan
Executive VP
Human Resources

Bob DeRodes
Executive VP
Chief Information Officer

Frank Fernandez
Executive VP
Secretary & General Counsel

Brad Shaw
Senior VP
Corporate Communications
& External Affairs

Five Forces Model of Competition

Tom
Taylor
Rivals
Executive VP
As & the
worlds
Merchandising
Marketing

Carol Tome
Executive VP
largest
& Chiefhome
Financial improvement
Officer

Annette Verschuren
Regional President Canada
retailer,
Home
Depots
& Division President
EXPO

competition runs the gamut of lumber yards, specialty interior stores

that concentrate on one aspect of the home, i.e. kitchens, lighting,
flooring, etc. Home Depots competition is also embodied in other such
retailers as: Sears, Ace Hardware, Franks Nursery, and Lowes.
Home Depots competition (except Lowes) primarily focus on one
aspect of their expansive product offerings. For example, Sears would

specialize in selling Craftsman tools to Home Depots offering; likewise

Franks Nursery competes directly with Home Depots garden center.
Lowes Companies is Home Depots largest competitor. Home
Depot and Lowes have very similar product offerings and large
warehouse formats. In many major markets Lowes and Home Depot
stores go head to head both vying for the patronage of the do-ityourself customer.

Suppliers
Home Depot maintains relationships with many suppliers that stock
Home Depot stores with over 30,000 different products. Although
Home Depot has a significant amount of suppliers they are still able to
force them into offering price concessions due to the fact that Home
Depot makes up a large portion of the suppliers sales. These
concessions have gone a long way in driving down the cost of home
improvement as well as further increasing Home Depots margins and
competitiveness with Lowes and others in hotly contested markets.

Buyers
At the time of the case, Home Depot has 3 distinct customer
segments.
Since the companys incorporation, they have been primarily
focused with the do-it-yourself (DIY) customers. These customers are
non-professional consumers interested in doing their own home
improvement projects.

More recently, Home Depot has also begun to redefine the

market in which they operate. This redefinition has opened up the buyit-yourself and professional customer segments to Home Depot.
Specifically the buy-it-yourself customer segment are those
consumers that like to pick out the materials being used in their
homes, but want a professional to install them.
Moreover the professional customer segment that Home Depot
now associates itself with are contractors, electricians, plumbers,
landscapers, etc. This group has been able to get Home Depot to offer
products in larger quantities due to their larger scale projects.

Substitutes
Substitute products pose a grave threat to many companies. However,
Home Depot does not have many substitutes. People will always be
houses and the desire to improve ones home is one that is ageless.
A substitute to Home Depots in store home improvement
classes is the vast resources of the internet. With a few clicks of a
button, a customer can find How To instructions as well as plans for
various types of projects.
Another substitute that the Home Depot should be aware of is
the purchase of new homes. With new homes people will have a much
lower need to purchase home improvement supplies.

New Entrants
9

New entrants to the home improvement will find it very difficult to

compete directly with Home Depot and or Lowes. A company that is
new to the market will face a vast difference in economies of scale that
they may not necessarily be able to overcome. Also new entrants will
be faced with trying to compete head to head with Lowes and the
Home Depot or they will be forced to specialize in a certain product
category.
The barriers to entry include the following considerations: large
product selection, highly trained employees, large startup capital,
prime real estate, strong regional recognition, and unwavering
customer loyalty.

SWOT Analysis
Strengths

Home Depot has many competitive strengths that make them a

very difficult company to compete against. Home Depots strengths

include:

Business model
Well known brand name
Extensive product offerings
Ability to grow

Home Depots business model, the first of its kind in the home
improvement industry has revolutionized the way customers shop for
home improvement products. Their business model is simple. Sell
home improvement products and services to DIY, BIY, and professional

10

customers in huge spacious warehouses that boast a wide variety of

products with sales associates that are educated and knowledgeable
about home improvement (case). This is all done with low prices as the
primary driver.
The Home Depot name has become synonymous with home
improvement. This association has been forged over a long time of
being number one in customers minds when it comes to home
improvement. Home Depots orange aprons, low prices, knowledgeable
associates, and warehouse like stores have all contributed to a very
strong brand image.
It is no secret that if you want anything having to do with home
improvement the first place to go is Home Depot. Home Depot has
distinguished itself as the home improvement warehouse that has
what you are looking for when it comes to home improvement. Their
extensive product lines have made Home Depot the one stop shopping
in home improvement.
Since the beginning, Home Depot has demonstrated its desire to
become the largest home improvement retailer in the world. Home
Depot has planned on growth rates of 21%-22% growth rates in the
number of stores over the next several years. By 2003 Home Depot
plans on having over 1900 stores (case).

Weaknesses
Counterbalancing the strengths of Home Depot, it also has a
couple of key weaknesses that need to be addressed.
11

Growth has both a blessing and a headache for Home Depot. As

the have expanded aggressively into new markets, they have seen
their operating expenses rise in direct proportion with their growth in
revenue. While this is would be expected in most instances. This
means that Home Depot is not capitalizing on economies of scale in
logistics and distribution provided to them by their market saturation
strategy.

Opportunities
Home Depot has been known for creating opportunity through
community awareness and charitable contributions. They have made
strenuous efforts to make an impact in the community.

By being

involved in the community they are able to give themselves a good

image. They might claim they are doing this out of the goodness of
the companys heart, but everyone knows it is only dollars signs
corporations see. Home Depot claims they have a social obligation to
help out.

During a recession it is said that Home Depot maintains constant

business because customers are more likely to pay cheap prices for
materials and fix problems themselves. This is a definite opportunity
because this puts Home Depot at an advantage over other competitors
and industries. During the years of 2000-2002, Home Depot constantly
increased earnings. This is quite amazing during a recession. They
also benefited from 2002s building and real estate expansion.

This
12

was caused by the steep decrease in interest rates. Homeowners were

able to refinance their homes, save money on a monthly basis, and put
money back into their homes (Home Channel News Newsfax.) Some of
this money was spent at Home Depot stores across the country.

Home Depot bases store locations on demographic studies. It was

demographic research as an ongoing opportunity.

In 2002, Home

Depot increased their number of stores to over 1000. Its stores are
located in populated areas and are close together to some other
competitors. Home Depot also put stores in areas that are populated
with Do It Yourselfers, such as many southern areas.

These

Southern customers have a strong sense of cultural appreciation for

quality.

Home Depot has also recently (2000-2002) explored the

global Market.

They have started opening stores in Mexico and

Canada, and opened resource stores in China.

Because of Home Depots size they have some interesting

opportunities available to them. With a solid foothold in North America,
Home Depot will set its sights on other world markets to further
expand and spread its business risk across many diverse world
markets. Expansion will be the primary focus for growth into the year
2000.

13

Home Depot has an opportunity in the global sourcing of their products

as their scope and reach becomes global. Sourcing from other
countries may significantly grow their gross margin.
Home Depots Service Performance Improvement (SPI) program is due
to deliver huge paybacks in productivity of night team workers. Other
IT projects pose great opportunities to increase efficiency, decrease
costs and further increase margins.

Threats
Some major threats came about from the years 2000-2002.
September 11, 2001 and Enron crashing created a downward spiral for
the United States economy. This affected almost every industry. Even
though Home Depot maintained constant numbers during this time,
they always had to worry about how fast to expand. At this time there
were many Americans leaving the country going off to war, and most
Americans wanted to protect every penny not knowing what was to
come.

During a time of recession, companies have to be wary of

customer spending.

Another major threat to Home Depot is its competition, specially

with Lowes. Lowes is Home Depots only competitor that competes on
a consistent basis at the national level. During 2000-2002 they have
expanded almost equally with Home Depot(curan).

This is a threat

because Home Depot does not want a company with almost the same
resources selling goods at almost the same prices. Lowes should
14

continue to grow at the same pace as Home Depot, so this will be

something to watch out for.

Because of the competitive nature of the retail industry, Home

Depots success depends on price, store location, customer service,
and wide product selections. In each market that Home Depot serves
there is a plethora of specialty home improvement stores that have the
potential to cutting into Home Depots market share.
Home Depots overlap with primary competitor, Lowes, poses a
potential threat. In the minds of consumers, Home Depot may be seen
as interchangeable with Lowes which would in turn decrease customer
loyalty. Also when a Lowes enters a market that is only served by
Home Depot, Home Depots sales have a tendency to decrease by up
to 15%.
As Home Depot and Lowes continue to compete head to head in
primary markets and both continue their strategy of market saturation,
the awareness of US market saturation becomes a very real possibility.
According to Datamonitor, The US home center potential is valued at
approximately 3,500 stores. With Home Depot and Lowes opening a
combined 300 stores a year, the industry could reach saturation in the
next few years. Threats can be divided in following categories:
Threat of New Entrants
The threat of new entrants is very unlikely.

This industry if very

mature and whenever a

15

new competitor tries entering the market, Home Depot or Lowes puts
up a store right next to the new store knowing they will take most of its
business. There is no way a new competitor can compete with the big
companies of this industry.

These companies have already made a

name for themselves and customers are going to go there instead of

anywhere else.

Also, these new companies do not have the capital to

compete with Home Depot.

Home Depot has been consistently

reducing costs. This has helped them sell their products at lower costs
than its competitors.

Rivalry Among Existing Firms

Home Depot has about 10 true competitors, and of those Lowes Cos
Inc is the only Competitor that really competes on the national level.
Other Competitors include:

Ace Hardware, Homebase Inc., Hughes

Supply, Woloham Lumber, and True Value Company. This just shows
that Home Depots competition is far off the pace they are setting for
the industry. Home Depot has no equal competition.
This industry has not shown signs of growth with regards to up and
coming competitors. No other competitor has the sheer size of Home
Depot and this allows the company to sell their goods at lower prices
than companies of smaller sizes.

Home Depot is also able to sell a

more diversified line of products because of their corporate size and

resources. Customers usually know exactly where the nearest Home

16

Depot is and will search for their wanted products there instead of
going to an Ace Hardware which has a smaller selection.

This is

almost always the case except for instances where customers have
store loyalty and refuse to shop anywhere else.
There are not many fixed costs associated with this industry. Home
Depot and its competitors do not have set schedules to which they are
restricted.

Home Depot has the option to buy goods and resources

when they need them. Through logistics they are able to decide the
when, where and how much questions linked to the supply and
demand of their products.

Home Depot has been able to increase their market share by

opening up more stores across the country. By 2002 they had 1,050
stores open across the United States and Canada. This is 170 percent
more than Lowes, which is its closest competitor. This increase allows
them to lower prices. There really are only a few exit barriers in this
industry.

There are not many companies selling in this market and

most of these companies have their set market share. With the real
estate market and new property, these companies are going to grow
over the coming years. The only thing these smaller companies have
to worry about is Home Depot taking more of the market share by
opening up a store near them (Home Depot).

17

Threat of Substitute Products or Services

There are really no substitute services that can be created in this
industry.

The only substitute services are companies that only sell

lumber and would deliver that lumber at cheap costs to the customers.
These places are not very well known so this hurts them. This makes it
hard to create a substitute service that can compete with the low costs
Home Depot offers.
Bargaining Power of the Buyer
The buyer always has power in deciding the price of the product that is
for sale. This buyer is taken from the general population and then the
prices are based on supply and demand. Home Depot sells thousands
of products at very low costs compared to the competition. When you
sell you goods at low costs there is not much lower the products
selling price can go. For the most part the buyer is very satisfied when
buying a product from Home Depot. They go to Home Depot because
they know what they want and make the purchase.

There are not

negotiations on the floor to lower the price of the product.

Bargaining Power of the Supplier
The supplier also has power in the price they sell their products at.
They want to keep their products at a price that they will make profits
on while not going over a threshold in which buyers wont want to
purchase the different items. Home Depot sets its prices at levels to
beat out the competition.

Even if Home Depot does not make that

18

much profit on one product, the company will make it up with the
quantity of products they sell compared to their competitors. This is a
major advantage big suppliers have, because they can keep customers
from the competition.
Relative Power of Other Stakeholders
Other stakeholders are always going influence the industry.

These

stakeholders have invested money into the company, so they are

going to influence final decisions.

When Home Depot goes into

contracts with other companies to sell their products in their stores,

these companies have a say in how their product will be sold.
Communities also have a say, because there are city and state
regulations in which Home Depot must abide.

The shareholders have

some say in the decision process. Most shareholders hold a very little
share so they will not have much of a say compared to the bigger
shareholders. This is very common with Home Depot, because of the
size of the company and that it is publicly traded.

Industry Key Success Factors

In the competitive home improvement industry there are several key
success factors to be considered:

Relative Price of Products

Brand Image/Reputation
Executive Management
Use of Technology
19

 Distribution Network
Financial Resources
The price a company charges for its products and services is vital to
the successfully competing. If a company prices itself way below the
competition in order to undercut the existing prices in the industry and
is unable to recoup lost margins, then it will suffer as much as it would
have if they priced their products way out of the reach of their target
customer.
Brand image in the home improvement industry is vitally
important because you do not want to lose customers to your
competition. Home Depot has positioned its brand more towards men
and professionals as Lowes targets the women of the family with their
cleaner, better lit stores.
The strength of a companys distribution network is of utmost
importance in the home improvement industry. The company that has
the most stores and can get the most product out to the customer
(profitably) is the industry winner.
The financial might of a particular competitor allows them to
invest in programs that would potentially save them money, or grow
their sales. A financially stable company is critical in an industry where
growth is the name of the game.

20

Competitive Strength Assessment

In the competitive strength assessment, the industry key success
factors were used to analyze the competitive strengths of Home Depot,
Lowes and Ace Hardware. Please see exhibit 1 for the actual strength
assessment.
From the competitive strength assessment we have learned that
Home Depot is the best positioned company in the home improvement
industry. Lowes is not far behind Home Depot. The major difference
between Home Depot and Lowes was Home Depots advantage in
financial strength and possessing a powerful brand.
Ace Hardware is a non-contender; however they had far more
stores than Home Depot in 2000. The main difference is the fact that
one Home Depot store has a much higher volume of sales than a
typical Ace Hardware Store. Most of the other points were a wash, as
Home Depot won in all but one of the most important categories.

Preliminary Statement of Strategic Issues Priority Matrix

Global
Community
Demographics
High
Expansion
Awareness
Studies
Keep
buying
supplies
from Strategic Joint Domestic
Medium overseas
Venture Alliance Threat
Non-Domestic
Low
Threat
Low Priority
21

Medium Priority
High Priority
Companies often try to predict future environmental trends that
could possibly have an impact on their market. Home Depot and its
competitors share these trends; and it is up to each companys
management to monitor its external environment. It is very hard to
monitor all of the external factors. However, if conquered, this will be
a benefit and a step up on the competition. Home Depot does have an
advantage over its competitors because of their size. They are able to
dedicate more employees and money predicting future environmental
trends.

There are many trends in this industry that can effect what the
different companies look like.

One trend in this industry is getting

resources from overseas companies. Some of the companies in this

industry stay loyal to American companies and buy all of their
resources from them.

Companies like Home Depot buy over 96

percent of wood overseas, because the wood is cheaper. This allows

the company to sell products at lower prices.

Another trend in the United States is other companies and builders

bypassing the retailers and buying supplies from the manufacturer or
wholesaler.

This could have an impact on Home Depot and the

22

market, if customers started buying supplies from wholesalers. This is

unlikely, but it is something to definitely worry about.

A trend that will have low occurrence and probability is competition

from a Non-Domestic Competitor.

Americans appreciate domestic

companies and Home Depot is a proud American symbol that

dominates the industry.

It is very unlikely they will fall victim to a

foreign competitor in the near to distant future. Home Depot has to

worry about Domestic threats but with little worry. Home Depot has
captured a majority of the market share and it is also unlikely that any
domestic company will catch them.
Home Depot has made many joint ventures with companies to sell only
their products in their stores.

This is very common with retailers

because this secures big time contracts and large amounts of income.
For example, in 2002 Home Depot and John Deere made an agreement
that Home Depot will only sell John Deeres in their stores.

Expect

more of these joint ventures to come in the future.

Strategic Group Map
HIGH

P
R

Ace Hardware
True Value
23

I
C
E
HomeBase Inc
Hughes Supply
Low
es
Woloham
Lumber

Home Depot

LOW
Diverse
Selection

Limited Selection
Diversified
Products

Line

of

This strategic map shows that Home Depot has a more diversified
product line and sells their products at lower prices. Companies such
as Ace Hardware and True Vale cannot compete on the same level
because they do not have the capital to compete. Woloham Lumber is
very limited in its product line, but they do sell their wood as cheap as
Home Depot.

Important Issues
It is important to note that as Home Depot has grown so quickly, it
has been able to garner significant concessions in prices from
suppliers. Home Depot has also been able to establish and successfully
execute a market saturation strategy coupled with low prices and high

24

service. Being able to execute on these three pillars has been the
hallmark of Home Depots strategy and will carry the company into the
future.
As Home Depot continues to expand, the cost of prime real
estate will rise as they compete head to head with their main
competitor, Lowes. Also tied to the market saturation strategy, Home
Depot stores may realize a cannibalization of sales when a nearby
store opens its doors.
While expanding internationally, Home Depot will be careful to
pay close attention to local building customs, laws, and regulations.
Maintaining solid returns on investment and financial health will be
a primary concern. More interestingly, Home Depot plans on investing
significant amounts of money in their human capital to maintain their
consistently high marks in customer service and knowledge of home
improvement projects.
Marketing Issues
Home Depot, Inc. is big on customer service and providing expertise
to the DIY consumer.

To achieve this, only the most qualified and

knowledgeable associates are hired to provide the best customer

service possible.

Also, in order to attract the largest consumer

outreach possible, the company provides only the best quality

products with everyday lowest prices because of direct purchasing
from suppliers.

25

Financial Issues
Since the company was founded, revenues have significantly
increased from year to year. Some major financials for 2002 are as
follows:
Revenue: $58.2B
Gross Margin: 31%
Net Earnings: $3.7B
EPS: $1.56
While these numbers look good, some adjustments need to be
made internally.
price.

Adjustments need to made to increase the stock

The chairman of Home Depot, Inc. said that he was

disappointed in the way the stock price performed which in return had
a negative impact on employees and shareholders.
R & D Issues
The company is big on having only the most up to date technology
implemented within each store.

This year the company tripled the

amount spent on R&D to construct better systems, condense

operations, and to implement a digital business system.
Operation Issues
In the past, the company would stock shelves during store hours.
To make the shopping experience more enjoyable, they created a SPI
(Service Performance Improvement). This means that stocking shelves
will be done after hours to reduce clutter in the aisles. Home Depot,
Inc. also opened four new Transit Facilities and built two new Import
Distribution Centers.

Another improvement to some stores includes

26

the self-checkout system. This reduces the time the customer has to
spend waiting in line and allows a constant flow of people to be
checked out of the store.
HR Issues
Home Depot, Inc. strives to achieve the highest company morale.
During 2002, management surveyed associates and employees and
found that 70% planned to further their careers at Home Depot, Inc.
While this percentage is higher than some leading competitors, adjustments
need to be made to raise the retention rate. During the year management also provided
better pay and benefits to ensure satisfaction among employees. Aside from pleasing just
workers, the company gives back to local communities. They participate in projects
such as Habitat for Humanity and they have provided athletes jobs with full-time pay and
benefits during their training for the Olympics. Home Depot also provides employees
classes for aerobics, dieting, and to help them quit smoking.

27

Corporate Value Chain Analysis

Plumbing

House Wares

Raw materials
gathered from
Texas and
Ohio.

Raw materials
manufactured
in Baton
Rouge, La.

Raw materials
manufactured
in Europe and
the Far East.

Fiber glass
yarns
manufactured
by Owens
Corporation.

Plumbing
products
shipped to
YoW (Your
other
Warehouse).

Yarns are then

sent to New
York for
further
construction.

YoW acts as
a master
distributor of
the specialty
plumbing
items.

Shipments
arrive via
Muirs Cartage
Carrier to Port
of Charleston
or Savannah
Harbor.
Shipments also
arrive by air
freight.

Glassware

Rolls of fiber
glass are
shipped to
Saintgeobain in
Dover, Ohio,
where they are
slit to retail
size.

Home Depot
then buys
direct from
Saintgobain.

Products are
shipped and
distributed to
Home Depot
Retail Stores.

Shipments
arrive at Home
Depot Imports
Distribution
Center in
Savannah,
Georgia.

Material,
receiving,
incoming
product storage
and order
picking
activities are
conducted
using
conventional
distribution
techniques.
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These three examples depicted in the value chain represent the

flow
of the product cycle. Home Depot is able to provide everyday
AGVs
low prices due to their ability to eliminate distributors. Instead,
(Automatic
Guided
Home Depot has their own line of distributors to reduce costs
Vehicles) are
used to relieve
materials
handling
congestion.

Products are
shipped to
Home Depot
Retail Stores.

The Home Depot internationally

The Home Depot is the world's largest home improvement
specialty retailer, with more than 2,200 retail stores in the United
States, Puerto Rico, U.S. Virgin Islands, Canada, Mexico and China. As
of the end of the third quarter of 2007, our 236 international
operations represent 10.6 percent of our store base.
The Company is already the largest home improvement retailer in both
Canada and Mexico, in addition to the U.S. The Home Depot entered
Canada in 1994 and Mexico in 2001 through a combination of
acquisitions and organic growth. Both markets are examples of how
29

The

Home

Depot

combines

its

vast

knowledge

of

the

home

improvement industry with the needs, shopping trends and customs of

each unique geography to best serve customers. In December 2006,
The Home Depot acquired The Home
Home Depot Canada is the Canadian unit of the Home Depot and
one of Canada's top home improvement retailers. The Canadian
operation consists of 159 stores and employs over 30,000 people in
Canada. Home Depot Canada has stores in all ten Canadian provinces
and serves territorial Nunavut, Northwest Territories, and Yukon
through electronic means (Online and catalog sales).
The Canadian unit was created with the purchase of Aikenhead
Hardware. Home Depot management has an ambitious plan to
overtake its biggest competitor, Rona, which has about four times as
many stores. However, many of Rona's stores are smaller than the
typical Home Depot store. In terms of big box stores, the Home Depot
has many more stores than Rona. The Home Depot will also face
competition from Lowe's as they move into the Canadian market in
2007; Lowe's first Canadian outlets will be located in Ontario.
Since 1994, The Home Depot Canada has been offering its
customers the ultimate home improvement shopping experience for
do-it-yourselfers, do-it-for-me customers and home improvement
construction and building maintenance professionals. The Home Depot
Canada stores have design centres staffed by professionals who offer

30

free in-store consultation for home improvement projects, ranging from

lighting to computer-assisted design for kitchens and decks, as well as
on-site Tool Rental Centres.
At-A-Glance
Leadership: Annette M. Verschuren President, The Home Depot
Canada and Asia.
Number of Stores:160 in 10 Canadian provinces (Alberta, British
Columbia, Manitoba, NewBrunswick, Newfoundland, Nova Scotia,
Ontario, Prince Edward Island,Qubec and Saskatchewan)
Number of Associates: More than 27,000
Format: 60,000 to 150,000 square foot retail facilities with 15,000 to
25,000
square foot garden centres
Mexico
Home Depot store in Mexico City, Mexico
The Home Depot entered Mexico in 2001, and has since become
one of the largest retailers in Mexico, operating more than 50 stores
with over 6,600 employees. Most of the Home Depot stores are located
in the same installations in which the extinct Home Marts were located.
Border town Home Depots attract some American consumers to make
their US dollar go further in purchases of mostly same home
improvement products in Home Depots of Tijuana, Mexicali, Ciudad
Juarez, Nuevo Laredo and Matamoros. In 2006, the Home Depot began

31

a program to offer Mexican employees to have "guest worker"

incentives for Mexican nationals and Latin Americans to easily, but
legally obtain employment in Home Depots across the US.
In May 2001, The Home Depot entered the Mexico market through
the acquisition of Total HOME, a four store home improvement chain,
from Monterrey-based ALFA, S.A. In 2002, the company acquired Del
Norte, a four-store home improvement chain. The Home Depot
increased its presence in Mexico in May2004, with the acquisition of
Home Mart, the second largest Mexican home improvement retailer.
Under that transaction, The Home Depot acquired 20 Home Mart
locations. The Home Depot Mexico is the No.1 home improvement
retailer in Mexico.
At-A-Glance
Leadership: Ricardo Saldivar President, The Home Depot Mexico
Number of Stores: 64
(Q307)
Number of Associates: approximately 7,144
Format: 54,000, 66,000 and 77,000 square-foot retail facilities with
more than
20,000 products in each store
China
In December 2006, the Home Depot announced its acquisition of
the

Chinese

home

improvement

retailer

The

Home

Way. The

32

acquisition gave the Home Depot an immediate presence in China,

with 12 stores in six cities. Although China is ruled by the communist
party, the government allows the Home Depot to further deregulate its
practices, decide on matters liberally on employee benefits and labor
union membership in a socialist country.
In December 2006, The Home Depot acquired The Home Way,
Chinas first big box home improvementretailer. Founded in 1996,
The Home Way was the first big box home improvement retail chain
in China.
Its 12 stores, which average 90,000 square feet of selling space, are
operated across six cities in China.
The Home Way employs approximately 3,000 associates, of which
about 260 are located at the corporate
headquarters in Tianjin.
Currently, The Home Depot has sourcing operations in China staffed by
approximately 100 associates.
The Company has been sourcing products in China, such as lighting
fixtures, fans, flooring, bathaccessories, faucets, hardware and tools,
for more than 10 years.
At-A-Glance
Leadership: Annette Verschuren, president, The Home Depot Asia
Yves Chen, retail president, The Home Depot China

33

Number of Associates: Nearly 100 in sourcing offices; 3,000 in newly

acquired retail

operations

Number of Stores: 12

BIBLIOGRAPHY

http://www.homedepot.com/webapp/wcs/stores/servlet/HomeP
ageView?storeId=10051&catalogId=10053&langId=1&orig_ref=http%3A%2F%2Fwww.google.co.in%2Fsearch
%3Fhl%3Den%26q%3Dhome%2Bdepot%26btnG%3DGoogle
%2BSearch%26meta%3D

http://ir.homedepot.com/faq.cfm?FAQPage=FAQ

http://www.datadirect.com/company/customers/docs/
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http://www.homedepotfoundation.org/

http://www.microedge.com/products/casestudies/

http://www.prnewswire.com/mnr/homedepot/26373/docs/THD_
Canada_Mexico_China_Fact_Sheet.pdf

http://www.i2.com/assets/pdf/8B6C876F-EA42-4BF59BEA7043E5609C98.pdf

http://ir.homedepot.com/downloads/hd2007proxy-2182hd.pdf

220.227.141.26:81/Abha%20Rishi/RMM/Entry%20Strategies/Entry%20Strategies%20of
%20Top%20Retailer.doc

www.smarthome.duke.edu/downloads/smart_home_residency_commitment.doc

http://en.wikipedia.org/wiki/Home_depot

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