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 world’s 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 Depot’s 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.

1
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 “America’s 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.

2
 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 Depot’s Values and Vision

Associates are central to Home Depot’s 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 Depot’s 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.

5
 • Don’t 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 Joe DeAngelo Dennis Donovan Frank Fernandez

Vice President Executive VP Executive VP Executive VP
Investor Relations & President THD Supply Human Resources Secretary & General Counsel

Frank Blake Brad Shaw

Harvey Seegers Bob DeRodes
Executive VP Senior VP
President Executive VP
Business Development Corporate Communications
Home Depot Direct Chief Information Officer
& Corporate Operations & External Affairs

Five Forces Model of Competition

TomRivals
Taylor
Executive VP
Carol Tome
Executive VP
Annette Verschuren
Regional President Canada
As & the
Merchandising world’s
Marketing largest
& Chiefhome
Financial improvement
Officer retailer, Home
& Division President Depot’s
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 Depot’s competition is also embodied in other such

retailers as: Sears, Ace Hardware, Frank’s Nursery, and Lowes.

Home Depot’s competition (except Lowes) primarily focus on one

aspect of their expansive product offerings. For example, Sears would

7
specialize in selling Craftsman tools to Home Depot’s offering; likewise

Frank’s Nursery competes directly with Home Depot’s garden center.

Lowe’s Companies is Home Depot’s 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-it-

yourself 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 supplier’s sales. These

concessions have gone a long way in driving down the cost of home

improvement as well as further increasing Home Depot’s 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 company’s 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.

8
 More recently, Home Depot has also begun to redefine the

market in which they operate. This redefinition has opened up the buy-

it-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 one’s home is one that is ageless.

A substitute to Home Depot’s 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 Depot’s strengths

include:

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

Home Depot’s 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 customer’s minds when it comes to home

improvement. Home Depot’s 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 “company’s 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 2002’s 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 Depot’s 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 Depot’s 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 Depot’s 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

Depot’s 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 Depot’s market share.

Home Depot’s 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 Depot’s 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 Depot’s 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 product’s

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 won’t 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 company’s 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 Depot’s 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 company’s

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 Deere’s in their stores. Expect

more of these joint ventures to come in the future.

Strategic Group Map

HIGH

P Ace Hardware
R True Value

23
I
C
E

HomeBase Inc
Hughes Supply
Low
es
Woloham
Lumber Home Depot

LOW
Diverse
Limited Selection Selection

Diversified Line of
Products

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 Depot’s 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. Adjustments need to made to increase the stock

price. 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

Glassware

Raw materials Raw materials Raw materials

gathered from manufactured manufactured
Texas and in Baton in Europe and
Ohio. Rouge, La. the Far East.

Plumbing Shipments
Fiber glass
products arrive via
yarns
shipped to Muir’s Cartage
manufactured
“YoW” (Your Carrier to Port
by Owens
“other” of Charleston
Corporation.
Warehouse). or Savannah
Harbor.
Shipments also
“YoW” acts as arrive by air
Yarns are then a master freight.
sent to New distributor of
York for the specialty
further plumbing
construction. items. Shipments
arrive at Home
Depot Imports
Rolls of fiber Products are Distribution
glass are shipped and Center in
shipped to distributed to Savannah,
Saintgeobain in Home Depot Georgia.
Dover, Ohio, Retail Stores.
where they are
slit to retail
Material,
size.
receiving,
incoming
product storage
Home Depot and order
then buys picking
direct from activities are
Saintgobain. conducted
using
conventional
distribution
techniques.

28
 These three examples depicted in the value chain represent the

flow

of the product cycle. Home Depot is able to provide everyday

AGV’s
low prices due to their ability to eliminate distributors. Instead,
(Automatic
Home Depot has their own line of distributors to reduce costs Guided
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,Québec 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,

China’s 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/

34
• 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-EA42-4BF5-

9BEA7043E5609C98.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

35