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Home Depot

Industry: Home Improvement
Full Case Report
BUS 800 Strategic Management
April 17th 2015
Pritpal Sandhu
500-456-795

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2). The second issue Home Depot and the home improvement industry is faced with is how to react when poor economic conditions arise.0).4). other factors such as high unemployment and interest rate fluctuation can further adversely affect demand for home improvement products & services because consumers are less likely to focus on improving their homes when their unemployed or when the cost of credit is too expensive for them (E. the Lowe’s stock price has risen from $20. thus decreasing demand for home improvement materials. They offer a wide selection of products and services at prices that competitors cannot match and the company's name has become synonymous with home improvement. Home Depot is faced with multiple serious issues that need to be addressed as soon as possible in order to stay competitive as an industry leader and maintain same growth rates as the past several years. Moreover. Lastly.5.1. Another indication of increased competition from Lowe’s is the increase in their revenues in the past few years. However. dominate the industry and account for 88 percent of total revenues.2). where Home Depot is located. we observe that the most attractive place on the map is the bottom-right. families. Home Depot is the industry leader and has revolutionized the home improvement industry. The first issue concerns the increased competitive pressure from Lowe’s in the past several years. Home Depot stores at time can be hard to navigate with its narrow aisles and overwhelming clutter displays which makes it very unattractive for most females. By analyzing the strategic map group. 2|Page . concern of poor economic conditions. Furthermore.25 in 2015 (I. and targeting women and family segment.1.INTRODUCTION The home improvement industry is comprised of firms offering products and services to different types of buyers who are looking to renovate their homes. Two large companies. we also see that Lowe’s is very close to the bottom-right as well which indicates increased competitive pressure (E. and even some men because most consumers prefer a more appealing and easy to navigate retail store (I. consumers are more likely to delay or not purchase home improvement products and services (E.3. the industry relies somewhat on residential construction market as well because if homes are not being built as much. Another issue is how to react if poor economic conditions arise because the home improvement industry is highly correlated to the housing market and economy conditions.0). then less products and services are needed. The industry is highly correlated to the stability of the housing market because when uncertainty arises in this market. The last issue that Home Depot needs to address involves their retail stores. Lowe’s revenues have grown over 12 percent from 2012 to 2014.64 in July 2010 to an all-time high of $76. This is a very important issue because Lowe’s retail stores are more appealing and easier to navigate which is one of the reasons why Lowe’s has increased competitive pressure on Home Depot over the past several years. Home Depot is facing some challenges. ANALYSIS Front Burning Issue: How to remain competitive and maintain growth as top home improvement retailer despite increased competitiveness. One of the biggest challenges their facing is the significant increase of competitive pressure from Lowe’s in the past several years.1. Home Depot and Lowe’s. Despite the success of the company.

S. mostly women and families. are     PROS Diversify the company from economic risks that might arise in North America due to poor economy conditions. can be hard to navigate because of its narrow aisles and overwhelming clutter displays which makes it very unattractive. Home Depot should expand internationally to emerging countries where demand for their products and services would be high. terrorism. sales. Plus. and the failure of local authorities to enforce contracts in the region.S. Investors might be frightened due to the increase of debt that will needed in ordered to finance the expansion. intimidated when entering the facility. Will allow Home Depot to cover even more geographical locations than Lowe’s thus increasing competitiveness. Increase company revenues. and net income that will help them remain industry leaders and fight off the increased competition from Lowe’s. at times. Political risks such as nationalization. 2) Redesign Retail Stores Home Depot’s retail stores need to be redesigned since many consumers. Regulatory risks such as environmental risks because most countries outside the U. Build a stronger reputation because HD will be helping emerging countries and consumers prefer companies that are socially responsible to companies that are not. the seizure of assets. 3|Page . Home Depot needs to resign their retail stores so it is easier to navigate for consumers and give a more appealing look. the company’s name has become synonymous with home improvement and is a very recognized company worldwide. can impact economic conditions in other countries. war. as the industry leader of home improvement. This is due to the fact that Home Depot.     CONS Poor economic conditions in the U. have higher environmental standards.ALTERNATIVES 1) International Expansion Home Depot currently only operates in North America with vendors around the world but they need to consider expanding internationally because it will be extremely beneficial for the company and help solve multiple issues that they are currently facing.

Appealing stores will attractive more females and families. Help save the environment. Also. 3) More Green Products Home Depot has over 1000 products and services that are more eco-friendly and as the world continues to head towards that direction. International expansion will allow the company to maintain its spectacular growth it has been achieving in past recent years and increase overall competitiveness. and targeting women and family segment. Furthermore. a well executive international expansion strategy can help Home Depot defend itself from increased competition from Lowe’s and increase competitiveness. Since redesigning is costly this will increase company debt if they choose to finance through debt (most likely will). Home Depot should also execute a retail redesign strategy that gives the stores a more appealing look to attract more women and family segments because many female consumers prefer to shop at Lowe’s instead because their stores are easier to navigate and more appealing. Lastly.  CONS Greener products tend to be more expensive than conventional products. this strategy will steal women segment from Lowe’s because they cannot complete with Home Depot’s price and overall increase competitiveness and stay as industry leader. 4|Page . which will attract consumers that are environment sensitive. Some consumers do not like change and may not like the new design. HD can possibly experience loss of profits in the short-term. In order to stay completive and maintain growth as top home improvement retailer.   PROS Build a stronger image of the company. Home Depot needs to expand internationally to emerging markets where demand for home improvement products and services are high. which will increase sales. Also. Thus. redesign of stores will steal female segment from Lowe’s and negatively affect their business. concern of poor economic conditions.  RECOMMENDATIONS How to remain competitive and maintain growth as top home improvement retailer despite increased competitiveness.     CONS Redesigning stores will be very costly. This is an excellent opportunity because Lowe’s has been experiencing significant growth over the past several years and placed pressure on Home Depot. since Home Depot’s business and the industry is highly correlated to economic conditions international expansion will help diversify the company from economic risks that may arise in the United States and North America. Home Depot needs to offer more economic-friendly products which will help them increase their competitiveness and build a stronger reputation.   PROS Makes it easier for consumers to find the products their looking for and overall more enjoyable experience.

. . . . It also relies on stability of housing market. It is highly depends on economic conditions and highly correlated to housing market. Industry is subjected 5|Page . Heath Care. interest rate fluctuation.5 Environmental .Companies in the home improvement industry have taken a large step in e commerce production by heavy investing in company websites.1 Political . Conclusion: Overall.Customers can access product ratings & reviews. purchase product.External Analysis 1.The home improvement stores industry is subjected to various federal. . residential construction. and more. . the U.The industry has recently experienced a large number of legislative & regulator initiatives and reforms.6 Legal . compare prices.Changes in regulations governing minimum wage can increase costs for companies.The industry’s financial performance significantly depends on economic conditions including changes in GDP. state.Other factors such as high unemployment. PETSEL ANALYSIS 1.S. 1.The home improvement stores industry is subjected to seasonal influences. .2 Economic . 1.Changes in income impact the industry because consumer shy away from discretionary home improvement products and services.Lower availability of credit to some consumers has an unfavourable affected sales. and home improvement markets.Government policy that affect the housing markets can adversely impact industry.Uncertainty in these markets impact consumer confidence causing them to delay purchase or determine not to purchase home improvement products & services. .Many customers research products online and then go into stores to view the product or talk to an associate before making the purchase.Highest volume of sales occurs in May-August and lowest volume of sales occur in November-February 1. and local laws & regulations that govern numerous aspects of their business. and Education Reconciliation Act of 2010 has also increased labor costs. home improvement industry is not very attractive. 1. 1. fuel & energy costs can further adversely affect demand for home improvement products & services.Healthcare reform under the Patient Protection and Affordable Care Act. as well as increased enforcement of existing laws & regulations.4 Technological .3 Social . .

Industry experiences slight growth rate over the years but can significantly increase or decrease since its highly correlated to housing market . Moreover. ECONOMIC FEATURES 2.6 Production Capacity .2 Competition from Potential New Entrants: WEAK . Do-It-Yourself. (Home Depot & Lowe’s) . when housing market is performing well it attracts attention of opportunity-seeking new entrants. 2. 2.to interest rate fluctuation. 6|Page .5 Degree of Product Differentiation .Can result in competitive advantage for the firm Conclusion: The industry’s has three main types of buyers with their preference towards products relatively changing. 2. thus profit margin and prices are slightly above average. . and fuel & energy costs. 2. 3.Most industry members are partially integrated.Since industry is cyclical.Competition from potential new entrants in this this industry is weak. as consumers prefer environmentally friendly products. there have been an increase in law and regulations. firms need to quickly react to trend to stay competitive.The industry is not overcrowded with competitors.Industry is dominated by two large companies.1 Market Size & Growth Rate: . 3. 2.8 Vertical Integration . with technology advancing.Buyer needs are changing. 2. high unemployment rate. PORTER’S FIVE FORCES 3.Highly concentrated with two large companies accounting for 88% of total revenues. interest rates will increase and also negatively affect the industry. (Parts & components. companies need to heavily invest in ecommerce because many consumers want to access product information without physically having go to the store.The product of rival sellers are middling differentiated with rivals becoming more differentiated 2. if economic growth was to accelerate. Do-It-For-Me.3 Number of Rivals . and professional contractors . which have increased costs.Firms of this industry have high fixed costs and high storage costs.7 Pace of Technological Change Advancement of technology has caused companies to heavily invest in ecommerce and is almost mandatory to stay competitive 2.1 Competition from Rival Seller: WEAK .Competition among the home improvement industry is weak because two firms dominate the industry .4 Scope of Rivalry . Also.Industry members products weakly differentiated and costs to switch brands are low. Due to the change in demand for more environmentally friendly products. Furthermore.2 Buyer Needs & Requirements .The geographic are over which most companies complete against is multinational. wholesale distribution) .Three types of buyers in this industry.Home improvement market is relatively medium-sized .

Conclusion: The five forces model has displayed that the home improvement industry is not very competitive but it is very difficult for entrants to enter.5 Product and marketing innovations . 4. and distribution channels.7 Reduction in uncertainty and business model 7|Page .4 Technology change and manufacturing process innovations .The introduction of environmentally friendly products in this industry has rejuvenated industry growth and allowed product differentiation. 3. suppliers are forced to offering discounts because they make up such a large portion of their sales. tariff rates. 4.Do-It-For-Me customers also have no buying power.2 Emerging new Internet capabilities and applications . high capital requirement. .However.New entrants have to comply with government regulations.Internet shopping & Internet applications have impacted the home improvement industry. 3. read reviews. especially down the road.This helps firms decrease purchasing price and increase profit margins. 4. are historically volatile and subject to fluctuations. competitive pressure from suppliers is weak. Lastly.Consumers want to be able to research product. including lumber and other raw materials. 4.Since economy is heading towards more economic-friendly products. . which makes it extremely difficult and expense for newcomers to enter. plumbers. Furthermore. . 4. . competitive pressure from buyers is also weak because many consumers cannot negotiate prices. 4. and contractors are able to get purchase discounts due the large volume of purchase. which makes it attractive.Although barely any substitute products in this industry.Do-It-Yourself customers have no buying power when it comes to purchases. and view ratings online before spending time and going in stores to purchase. landscapers. 4. 3. professional customers such as electricians. thus decreasing housing market.5 Competitive Pressure from Buyer: WEAK . “Millennial” generation will soon want to start family’s thus increasing housing market and ultimately increase home improvement demand.Since two large companies dominate the home improvement industry.Baby Boomers already established and less-likely to reallocate.1 Changes in the industry long-term growth .The internet is one of the few substitute products because with a few clicks of a button.However. the internet has allowed consumers to find “How To” instructions. more environmentally friendly products are going to be in demand.3 Competition from Producers of Substitute Products: WEAK .6 Changes in cost and efficiency . since the industry is dominated by a few large players. DRIVING FORCES ANALYSIS 4. There are not many substitute products in this industry. .4 Competitive Pressure from Supplier: WEAK . Certain entry barriers are imposed by the industry.Not many substitute products in the home improvement industry. a customer can find “How To” instructions as well as plans for a project. .- Certain entry barriers are imposed by the industry such as entry barriers.Certain commodity products.3 Changes in who buys the product and how they use it . .

low prices & product selection ii) strong customer loyalty .700 in 2011 iii) national marketing and advertising 8|Page . 4. the driving forces are making competition less intense because of entry barriers and high storage costs. STRATEGIC GROUP MAP .high prices and narrow product selection ii) N/A iii) 1. . The reason Home Depot and Lowe’s can charge less for products is because they are very large and enjoy economies of scale.Retailers towards the Home bottom right enjoy better Depot position because they are Lowe’s able to sell products for less due to economies of scale. when new ecofriendly products are released. the industry demand for its products are usually increasing because consumers are able to access production information with just a few clicks. 6. the driving forces will increase profitability. Also. the best place on this map is the bottom right because companies have a wide selections in products and they are able to sell them for less compared. True Value and Ace Hardware likely struggle because they don’t offer variety of product selection and are more expensive. i). commodity prices subject to fluctuations. Product Authority. consumers drive demand up because these products will be more efficient and save money. i) Position ii)Competitive Advantage iii) Investment Lowe’s Home Improvement Ace Hardware True Value Corp.Two main factors of competition in home improvement industry are product selection & price. LOW PRICE HIGH - LOW PRODUCT SELECTION HIGH Conclusion: In summary.Uncertainty in the home improvement industry because it’s highly correlated to the housing market and other factors.300 stores in 2007 and 1. because this industry is dominated by a couple large companies. which results in competitive advantage.Firms closer to the right Corp side of map are smaller companies in the industry and companies Ace Hardware towards the bottom right are much larger. Also.strategic framework comprised of three key initiatives: Customer Service. Conclusion: Based on the driving forces analysis.8 Regulatory influences and government policy changes . FRAMEWORK OF COMPETITOR ANALYSIS Framework Indicators Current Strategy 6. and Disciplined Capital Allocation i) – heavily investing ecommerce . Overall.Increased government intervention to protect consumers.relatively medium to high prices and some product selection i)-increase brand recognition through national marketing and advertising ii). True Value .1. 5. Also. Home Depot and Lowe’s will prosper due to their position because they can attract more consumers.

the industry has recently experienced increase in regulations and increase in enforcement of existing laws and regulations. by having many retail stores. Conclusion: To stay competitive in the home improvement industry. . KEY SUCCESS FACTORS ANALYSIS 7. Ace Hardware and True Value are struggling to come up with strategies to compete with the larger companies.3 Capabilities i) Strengths ii) Weaknesses i) strong power over suppliers & buyers ii) Opened up too many retail stores Assumption No information Not meeting objectives -revenue declined by over 22% from 2007-2010 i) strong customer loyalty Not meeting objectives -steady growth from 04-06 but then declined in 07-10 i) N/A ii)N/A ii) Cannot reach majority of market due to small size No information No information Conclusion: The home improvement industry is very competitive and analyzing the chart above we can see that Lowe’s is enjoying the industry compared it its competitors. government policy affecting housing market can have significant impacts on the industry. home improvement industry is not attractive for many reasons. Due to advancements in technology. 7. Secondly. firms are able to get the product to the consumer quicker. Weak competitive forces are increasing profitability for existing companies but profitability for new entrants are highly unlikely due to entry barriers and high capital requirements imposed by industry. The industry is harshly impacted if economy worsens. INDUSTRY OUTLOOK In terms of economics. 8.S.Companies need to have outstanding customer service in order to gain repeat customers.Retailers need to adapt to advancing technology because many customers prefer online shopping or want to be able to research product before purchasing it.2 Distribution Network .4 Customer Service . Lastly.2 Objectives Meeting objectives -overall has seen 35% increase in past year 6.Strength of a company’s distribution network extremely important because the company that has the most stores can get the product to customers quicker.iii) created WebFOCUS Application and reached over 10. Having a wide variety of products will lead to more competitiveness as well. changes in consumer income can impact industry because consumers shy away from discretionary products.3 Technology . Also.000 users 6. consumers want to have instant access to product information and unable to deliver this can hurt company competitiveness. The industry is dominated by two companies which gives them power over suppliers and buyers and ultimately increases profit margins. 7.Wide range of product is vital to stay competitive in this industry. U. the industry highly depends on economic conditions and highly correlated to the housing market.1 Relative Price of Products & Product Selection . 7. 9|Page .This is the most important key success factor in the home improvement industry because most consumers are very price sensitive. Thirdly. companies must be able to offer low prices because consumers are very price sensitive. Firstly. Lastly. not many substitute products exist in the industry making it even more profitable for existing firms. 7. future profitability is unstable for companies. which makes it more competitive. Thus.

6% 13.7% Key Financial Ratios Liquidity Current Solvency Debt-to-Asset Debt-to-equity Profitability Income Margin ROA 21.6% 26.5% Gross Profit 2014.1% 9.Key Financial Ratios Year 10 | P a g e 0. .Common Sized Income Statement .2 Key Financial Ratios (Figure 2) 0.3% .8% 0.4% 65.2% -8.6% 34.Debt-to-equity ratio has also been constant except in 2014 when it doubled. .0% 34.4% Other Exp 3.8% 1.5% over past five years.However.5% Figure 2 .42 1.2% 0. 2014 2013 Year 2012 2011 2010 CAGR 1. The company’s strategy is working very well to deliver on the industry key success factors.1% 2.7% 66.33 1.Liquidity: Improving liquidity position.2% 26.0% 14. net profit margins improved by Net Income 6.5% 4.3% 33.2% 65.2% 11.60% 34.6% 11.3% 33.6% 0.Activity: Average collection period improved from 68.5% 34.0% 11.9% 3.8% 34. 1. FINANCIAL ANALYSIS 1.3% COGS improving throughout the years of 201034.9% 0.55 1.1% -0. Home Depot occupied a stronger market position than their rivals and this is unlikely to change because they offer lower prices than their competitors and have a wider selection of products which results in a competitive advantage. and Net Income all 65.8% OPEX 1.9% 4.34 in 2010 and increased to 1.34 1. current ratio was 1.7% 0. Inventory turnover also increased by 0.65 days to 56.3% 1.3% 0. .37.34 1.4% 0.57% 15.9% 9. high growth of liquidity is a signal of not being able to convert cash into meaningful investments.1% 25.7% 21. The introduction of ecofriendly products has rejuvenated the industry and increased profitability.6% -2.8% 2.5% 3.8% 6.8% 13.Solvency: Debt-to-asset ratio has been constant over the past few years but increased ten percent from 2013-2014.4% . Gross Profit.5% 6.0% 25.3% 34.Profitability: Recovering since Taxes recession.5% 65.0% 5.1 Common Sized Income Statement Year (Figure 1) 2014 2013 2012 2011 2010 CAGR . .2% 36.58% 0.Industry profitability will be favourably affected by the prevailing driving forces in this industry because technology has enabled consumers’ instant access to products and service information and option to purchase online.1% 24.61% 26.42 in 2014Figure 1 .35.5% 34. They can offer lower prices because they are very large and enjoy economies of scale. 23.8% 0.COGS.

6% -3. Also. Quarterly dividends has nearly double in the past five years. PRESENT STRATEGY ASSESSMENT 2.5 cents to 47 cents from 2010 to 2014.Share price has over 300% growth since 2010. Mission. .57 53.37 2013 4.65 56. . looking at the share price of Home Depot in the past five years. Objectives 11 | P a g e CAGR 1.21 62.30 68.Stronger share price means Home Depot can distribute high dividend returns. The company’s average collection period decreased which is a good sign because they are able to collect money from consumers much quicker than in the past. However. The company has been solvent in the past few years but have significantly increased debt in 2014 which might frighten investors and shareholders.47 56. Home Depot seems to be in a heathy financial position.Inventory Turnover Average collection period 2014 4.65 Figure 3 – Activity Ratios 1.9% .Dividend payments increased from 22.In the past five years has seen significant growth in stock price.59 2012 4. Home Depot is relatively liquid as their current ratio has been inclining which allows them to respond to unplanned events without significant impact.54 2011 4.1 Vision. Conclusion: Overall. 2. it’s quite clear they don’t have much to be afraid of. as their revenue has been increasing and COGS have been decreasing.67 2010 4.3 Stock Price . . in the past five years they have been able to decrease operating expenses which increased net income.

the broadest selection of product.Strategic: In the past several years company has displayed superior profits compared to industry indicating successful implementation of strategy. .Financial: Balance sheet position illustrates improving liquidity and profitability but in recent years.- Vision/Mission Statement: offer the highest level of service.Lower prices attracts a larger customer base because most people are in the low-tomiddle class income class.Company collects accounts receivable in less days than previous years . . superior quality.2 Competitive Approach . and the most competitive prices.Income statement shows increases in revenue and net income while decrease in operating expenses. inventory turnover and more. 2. .Many other companies carry same products from same brands but Home Depot has many exclusive well-known brands unavailable at other retailers.Superior interconnected retail. Brand Recognition & Quality . Specific indicators show Home Depot is succeeding through strong KPI’s in constant CAGR growth in revenues. However. Few years after the economy and housing market picked up. The company also has exceptional level of service.3 Key Performance Indicators . SWOT ANALYSIS 3.Functional: Known for excellent customer service. and good supply chain management. net income.Strategic Objective: company focuses on interconnected retailing based on the view of providing seamless shopping experience across multiple channels.Financial Objectives: Building shareholder value through higher returns on invested capital.Competing companies struggle to match their low prices. Home Depot soared back to top performance as reflected in their stock price. . Business Model 12 | P a g e . .Brand exclusivity of respected products increase customer footfall. 3.Home Depot name has become synonymous with home improvement. 2. How well is the current strategy working?: Home Depot has demonstrated excellent execution of its strategy. The industry is highly correlated to the housing market and in 2008 the industry experienced hardship. since Home Depot is the industry leader they were able to minimize losses and remain profitable. as they are achieving faster growth compared to industry rivals and have greater market share than any competitors.Business: advantages include largest market share in home improvement industry. creates new demand.Offers good quality products at lower prices. shows company is less solvent than before. . and competitive prices. . and improves activity ratios such as inventory turnover. . . larger selection of products and offer prices that industry rivals cannot match. wide section on products. .1 Strengths (Completive Assets) Product Authority .

000 worth of inventory by switching out UPC codes on expensive item switch UPC codes from less expensive items. Conclusion: Based on the SWOT Analysis. 3.Provides strong focus during the training of their employees on safety. and professional customers with variety of products .Operates in only North America 3. . .Home depot at time can be hard to navigate with its narrow aisles and overwhelming clutter displays o Negatively impacts female demographics because women prefer a more appealing and easy to navigate retail. . Inc.Uses sophisticated selection of criterial to select people with customer-friendly orientation .6 billion in 2017.Home Depot’s business can be impacted by unemployment rates. . .Focus on selling home improvement products & services to do-it-yourself. Home Depot is an attractive company because their competitive advantages overshadows their competitive delicences. 3. Green Building Council to make more LEED-certified homes and neighbourhoods. do-it-for-me. leads to increase in growth and profits. projected 11 percent annual growth in green building materials in 2013 which translated into a demand of estimated $86. GCs more likely to purchase from specialty suppliers.Partnered with U.Many general contractors choose not to purchase material from Home Depot due to their “Wal-Mart” approach.4 External Threats .Market research from Freedonia Group.Home Depot focuses on male and professional segment of market but should consider women and families as well. . Home Depot is the industry 13 | P a g e . the enjoy economies of scale and have strong bargaining powers over suppliers and buyers. . Customer Service .Loop holes in return policy such as being able to return product within 90days of purchase without check product condition.S. . fluctuating interest rates and exchange rates .- First of its kind in the home improvement industry & revolutionized the way customers shop. Also.International expansion leads to more financial stability because while one country may suffer economically. . other countries may not.Since the company is very large.Subjected to seasonality where sales are very low during winter and high in spring/summer.Consumer fraud major threat for HD as two men were charged with stealing over $300.HD puts little effort in store appearance which drives many female customers away along with others.2 Weakness (Competitive Deficiencies) . .Heavily relies on economic conditions and highly correlated to the housing market and residential construction .3 Potential Market Opportunities .Increase in competition with Lowe’s in the past few years.

System Development and Technology High investments in ecommerce General Management Human Resources Management -Empowers associates to deliver excellent customer service through Customer FIRST training program -employed 356.regional buying linked to the corporate communities network .subjected to various federal.1 Value Chain Analrimary Activities 4.000 associates with 22.00 salaried and remainder hourly or temporarily . inventory control.1.2 Secondary Activities Product R&D. Due to Home Depot size.Satellite communications for both data and video transmission -recognized brand -offers installation services Steadily growth of sales in past several years -emails newsletters containing advice and announcements of events in their local stores -convenient store location to reach more customers Pleasant shopping environment leader and is able to offer competitive prices on a wider selection of products. and purchase order information exchange -point of sale bar code scanning . 5. Home Depot approach to the home improvement industry is very “Wall-Mart” like and this is driving their professional contractors segment away. Home Depot is able to deliver on its customer value proposition with continued success on service. With brand exclusivity.integrated integrated warehousing.1 Value Chain Analysis Primary Activities Inbound Logistics Operations Outbound Logistics Sales and Marketing Service -computerized and . Plus. 4. this will diverse the company since it heavily relies on economic conditions and housing markets in country they operate in. their stores can be hard to navigate and with narrow aisles can be intimidating especially for women and families. Also. COMPETITIVE STRENGTH ASSESSMENT 14 | P a g e . Through the vast factors presented. they can differentiate themselves by offering products not available elsewhere. However. they have some interesting opportunities such as expansion into emerging economies and internationally markets.electronic data interchangeable with vendors Online sales: website and ecommerce -professional advice in selecting and using products . 4. state. and local laws & regulations that govern numerous aspects of their business Conclusions: Through the company’s primary and secondary activities the customer value offered is high in comparison to the industry’s performance.

4 6 1.Conclusion: Based on the assessment. they can invest and create better quality products/services.5 4 0. Home Depot needs to rediscover other methods to remain industry leaders. 7.3 .8 7.Changes in income impact the industry because consumer shy away from discretionary home improvement products and services 15 | P a g e . With increase competitiveness from Lowe’s.2 8 1.2 assessment for Home Depot is that they need more improvements because Lowe’s is not far behind.8 Overall weighted competitive strength rating 1 8.2 7 5. increased competitiveness.1 5 1. However. Home Depot is clearly competitively stronger than key rivals in the industry.5 Financial resources 0.8 5 1. 1.6 8 1. and targeting women and family segment. They are able to outrank their competitors in every category and enjoy being industry leaders with an overall rating of 8.6 7 1.2 9 1. With strong financial resources. Question: How will we react if poor economic condition arise? How will we increase competitiveness to remain industry leader? How can we attract a more women and family demographic? Strategic Implication: The issue that Home Depot faces is maintaining their growth if poor economic conditions arise because the home improvement industry is highly correlated to economic conditions.5 Customer service capabilities 0.4 7 2. 6.2 .4 Reputation/image 0. and home improvement markets.2. stability of housing market. STRATEGIC ISSUE FOR MANAGERIAL ATTENTION Issue: How to remain competitive and maintain growth as top home improvement retailer despite concern of poor economic conditions.Financial performance significantly depends on economic conditions. residential construction.3 8 2. the strategic implantation from this SR=Strength Rating WS=Weighted Score Home Depot Lowe’s Ace Hardware Key Success Factors Importance Weighs SR WS SR WS SR WS Quality/product performance 0.5 1. They need to attract more women.3 8 2. Relevant Facts that Support the Strategic Issue External 1.

Competition among the home improvement industry is high.Industry tends to highly cyclical.5 .Advancement of technology has caused companies to heavily invest in ecommerce and is almost mandatory to stay competitive 3.Internet shopping & Internet applications have impacted the home improvement industry 4.5 .4 .Certain commodity products. Gross Profit.5% over past five years 1.6 .2 .Companies need to have outstanding customer service in order to gain repeat customers Internal 1. wide section on products.5 .2 Recovering since recession. net profit margins improved by 0.7 .1.4 Home depot at time can be hard to navigate with its narrow aisles and overwhelming clutter displays 16 | P a g e . including lumber and other raw materials.2 focuses on male and professional segment of market but should consider women and families as well 3. the internet has allowed consumers to find “How To” instructions 4.experienced a large number of legislative & regulator initiatives and reforms. shows company is less solvent than before 3. and competitive prices 2.6 .3 Balance sheet position illustrates improving liquidity and profitability but in recent years.1 COGS.Home improvement industry is cyclical & highly correlated with the housing market 4. 4.The home improvement stores industry is subjected to seasonal influences 1.4 .Although barely any substitute products in this industry.2 advantages include largest market share in home improvement industry. as well as increased enforcement of existing laws & regulations 2. are historically volatile and subject to fluctuations 7.1 .1. since it’s highly correlated with housing market 2.introduction of environmentally friendly products in this industry has rejuvenated industry 4.3 Share price has over 300% growth since 2010 2.2 .1 .product of rival sellers are middling differentiated with rivals becoming more differentiated 2. and Net Income all improving throughout the years of 2010-2014 1.Buyer needs are changing as consumers prefer environmentally friendly products 2.1 .most important key success factor in the home improvement industry because most consumers are very price sensitive 7.

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