This action might not be possible to undo. Are you sure you want to continue?
The Home Depot Mission Statement
The Home Depot is in the home improvement business and our goal is to provide the highest level of service, the broadest selection of products and the most competitive prices. We are a values-driven company and our eight core values include the following: Excellent customer service Taking care of our people Giving back Doing the "right" thing Creating shareholder value Respect for all people Entrepreneurial spirit Building strong relationships
The founders of The Home Depot had a vision, back when they opened the first store in Atlanta, Georgia in 1976: " a vision of warehouse stores filled with a wide assortment of products at the lowest prices with trained associates giving absolutely the best customer service in the industry."
Today, that vision is still the guiding force driving the Company's philosophy. The Company's Mission Statement reflect the Company's strong business focus and core corporate values, which govern everything that the Company does, from its strategies to its key tactics.
In addition, Home Depot's 1998 Annual Report states in its Company Overview that " The Home Depot is the world's largest home improvement retailer. We are credited as being the innovator of the home improvement industry, as well as offering a level of service unprecedented among warehouse-style retailers." The Overview goes on to say that "The Home Depot stores cater to do-it-yourselfers, as well as home improvement, construction and building maintenance professionals."
In critiquing a company's Mission Statement, Philip Kotler advises in his book, Marketing Management, that it is useful to as the fundamental questions recommended by management expert Peter Drucker: What is our business? Who is the customer? What is of value to the customer?
When juxtaposed against the above questions, The Home Depot Mission Statement demonstrates its high relevance and clarity for the following reasons: Even with the phenomenal growth of the Company, the addition of new product and service offerings to customers and the entry of competitors in the home improvement retailing industry over the past few decades, The Home Depot still reflects its clear sense of purpose by defining in straightforward terms in its Mission Statement what its business and
its goals are all about.
The Mission Statement explicitly identifies customer service as the number one core value of the Company. By stating that it offers premium service in the home improvement industry, the Mission Statement indicates that The Home Depot has a competitive advantage by identifying how the Company provides value to the customer.
As an addendum to the company's Mission Statement, the Company Overview clearly identifies The Home Depot stores' primary customers; such focused targeting is a reflection of the company's strong customer-centric orientation.
The Company also takes its sense of purpose to the next level by stating its plans to incorporate e-commerce capability into its current company website as well its plans to expand operations of its current 900 stores in the United States, Canada, Chile, Argentina and Puerto Rico, to a total of 1,900 stores in the Americas by the year 2003. This statement of the Company's future plans reflects the Company's sense of direction in maximizing opportunities for its business outside the domestic U. S. market as well as the huge potential of the Internet for its business.
By clearly stating in the Mission Statement that it is in the home improvement business, The Home Depot defines the major competitive scope of its business by stating its industry scope. By outlining its eight core values, The Home Depot is also defining its competence scope, the range of core competencies that it excels in as a Company.
2.2 Company Strengths and Weaknesses
but to attend to customers needs. . and garden and lawn products.000 kinds of building materials.High Importance) Home Depot’s reputation is among the top. sponsorship in a variety of sporting events. with 878 stores located in the United States. donating building supplies to disaster areas. if not the top of the home improvement industry. Company reputation is of ‘High’ importance. Market Share (Major Strength – High Importance) Home Depot. as seen in their mission statement. Everyday low prices combined with good customer service have enabled Home Depot to reach and maintain a top-of-the mind status among DIY home improvers and contractors alike. The sheer size of home depot and its large market share give Home Depot several advantages over its competitors. tools. Customer Satisfaction (Minor Strength – High Importance) Home Depot provides customer satisfaction through a variety of means. and a variety of environmental initiatives.Company Reputation (Major Strength . Home Depot accounts for roughly 10% to 11% of the DIY home improvement market. Apart from the everyday low pricing. home improvement supplies.000 to 50. each Home Depot outlet stocks approximately 40. Home Depot places a very strong emphasis on customer service. and Latin America. sponsorship in a variety of charities. Lowe’s Companies Inc. Personnel are trained to not only be knowledgeable in home improvement. Its second largest competitor. Home Depot also provides free consultation and free in store DIY training courses. has approximately half the number of stores (484). Canada. Home Depot’s marketing strategy also includes the highest advertisement spending by any company in the home improvement industry. Additionally. Market Share is of ‘High’ importance to Home Depot. A good company reputation ensures that customers trust Home Depot and remain loyal as returning customers. is the world largest home improvement retailer.
It is not a major strength in so far that. Home Depot is not perceived to be a provider of the highest quality products (Consumer Reports rating is 4 out of 5). Customer Retention (Major Strength – High Importance) Home Depot’s strength in customer retention comes from providing good customer value through a combination of price. This is primarily due to the fact the Home Depot markets itself as a provider of low prices. a DIY lifestyle has emerged among home improvers. A variety of products ranging in price and quality are available to consumers. Shopping at Home Depot is an integral part of their DIY hobby for many customers. . DIY home Improver can choose from several retail outlets. but to also keep them coming back as loyal customers. Customer Retention is of ‘High’ importance. There are DIY outlets competing with Home Depot in many geographical markets. customers find Home Depot outlets hard to navigate giving it a rating of (2 out of 5). they could easily switch to Home Depots competitors. selection. Unless customer retention is strong. It is important that the customers needs are met in order to ‘retain’ them as customers. the availability of different products varying in quality and price make this a minor strength. Home Depot’s customer service is rated as 4 out of 5 – identical to Lowes and Sears Hardware.Why then does this ranking only receive a ‘minor strength’ rating? According to a recent survey by Consumer Reports. Because of Home Depot. Customer Satisfaction is of ‘High’ importance. Product Quality (Minor Strength – High Importance) Home Depot offers a variety of national brand and proprietary products at reduced prices achieved through economies of scale. This combination has enabled Home Depot not only to attract many customers away from competing retail outlets. Additionally. There is room for improvement. When our group spoke to employees at the Long Island City Home Depot. To this end. several commented that they had 'regulars' who they knew by name. and superior service.
selection. on the spot truck rentals for customers. According to Consumer Reports. the service quality is only a ‘minor’ strength. Pricing Effectiveness (Major Strength – High Importance) As mentioned earlier. There is little perceived difference in the level of service between Home Depot and its main competitors. with room for improvement. Additionally. All customer service employees must undergo a two-week training period before becoming sales personnel. is ranked the same as Lowes and Sears Hardware. More important than price. their quality of service.26 billion compared to $12. and store navigation. and installation services. according to Consumer Reports. This illustrates the size of the economy of scale Home Depot has available to outprice the competition. Sales for Home Depot in nine months ending 10/31/99 were 29. Home Depot is the largest home improvement retail outlet and surpasses its nearest competitor buy nearly double the number of outlets. DIY home improvers like to use high quality products for their homes. The low prices Home Depot offers have been a major strength in attracting customers to its outlets. the quality of service is the single most important factor to them. Service Quality is of ‘High’ importance. Low prices are one of the important . Thus. Service Quality (Minor Strength – High Importance) Home Depot provides good quality customer service.Sears Hardware. The strong sales of Sears Craftsman tools is testament to the importance of perceived quality. Despite Home Depot’s strong emphasis on customer service. Pricing Effectiveness is of ‘High’ importance. with its line of ‘craftsman’ tools is perceived to be the provider of the highest quality products (5 out of 5). Home Depot provides free in-store training seminars for DIY projects.12 billion for its nearest competitor. Product Quality is of ‘High’ importance.
Although the system is functional and effective.000 documents a week between suppliers.Home Depot golf tournament. . Home Depot has seized on this even going so far as incorporating it into their slogan ‘Where low prices are just the beginning’. and Home Depot sponsored Nascar racing. Distribution Effectiveness is of ‘Medium’ importance. $89.customer value factors. Home Depot only began to take its first step toward creating a streamlined business communications network in October of 1999. distribution logistics is not a core competency of Home Depot. Promotions are used to remind consumers that ‘were still here’ and reinforce their presence in the consumers’ minds. and reduction of administrative costs. The reason why this is only medium for Home Depot is that the name ‘Home Depot’ is already well known and associated with low prices. and third party logistical providers. by sponsoring events like the Senior PGA . Promotion Effectiveness is of ‘Medium’ importance. customers can usually choose another similar one to use in its place. The reason for this is that Home Depot stocks over 47. Promotion Effectiveness (Major Strength – Med Importance) Home Depot’s advertising spending far exceeds that of any other retailer in the home improvement industry. Such as system is already being used by retailers such as Wal-Mart. If one item runs out. As the largest DIY retailer. the maintaining of leaner inventories. The company uses electronic data interchange (EDI) to transfer 900.000 items in their stores. it does not allow for suppliers to see store-by-store information which results in shorter lead times. carriers. Home Depot has carefully targeted their audience – male homeowners. Distribution Effectiveness (Neutral – Med Importance) Currently.2 million for the first half of 1997. Many of these are similar items such hammers or nails. Home Depot does not have to make itself known to consumers.
Sales Force Effectiveness is of ‘High’ importance. In order to improve this rating to a ‘major’ strength. and financing. Home Depot has also been quick to introduce new products and services such as appliances. truck rental. Although the sales force is effective. Home Depot may have soured some of the relationships with their partners. Innovation Effectiveness (Minor Strength – Medium Importance) Home Depot has been innovative regarding the development of its new stores Villager and Expo. The delay in taking advantage of the Internet has also allowed smaller E-retailers of home improvement supplies to begin selling directly over the Internet ahead of Home Depots planned online store. and has treated it as a threat rather than opportunity. in-store seminars. targets smaller fix-it-up jobs while the Expo offers Ikea style DIY home furnishing. the Home Depot sales force would have to be perceived as better than its competitors. This not only includes the Home Depot retail outlet personnel. aimed and urban areas. On the other hand Home Depot has also been slow to react to the advent of Ecommerce. but also the sales force at Maintenance Warehouse and National blinds which operate through direct mail catalog and call center operations. As mentioned earlier. Lowe’s and other retailers have no such mandate. The Villager. the level of service provided by Home Depot is relatively high. and is one of their stated core competencies. By banning suppliers not to use the Internet to sell directly to consumers.Sales Force Effectiveness (Minor Strength – High Importance) Home Depot has a ‘minor strength’ ranking on Sales Force Effectiveness due to their well-trained and courteous staff. Their effectiveness has a direct impact on the level of service the customers receive. the rating is only ‘minor’ because there is little differentiation between Home Depot and its competitors with regards to customer service. . The sales force at Home Depot is the main provider of customer service.
the truth is that there is little perceived differentiation in consumers’ minds. Home Depot has an outstanding geographical coverage. Cost or Availability of Capital (Major Strength – High Importance) The total cash and short-term investments on the balance sheet as of the most recent quarter for Home Depot is $170. approximately three times as high as its nearest competitor Lowes. opening several new stores on short notice. This includes buying smaller chains. Cost or Availability of Capital is of ‘High’ importance. Geographical Coverage (Major Strength – High Importance) With almost twice as many stores as its nearest competitor.0 Million. or entering a price war with a nearby competitor. Additionally Home Depot has the highest Stock Price / Book Value ratio within the Retail Home Improvement industry. This is because Home Depot and Lowes constantly imitate each other’s innovations. Geographical Coverage is of ‘High’ importance. Because Home Depot has twice as many stores as its nearest competitor. Cash Flow (Major Strength – High Importance) . Although innovation is an important tool that Home Depot tries to use to differentiate itself from its competitors. well ahead of its competitors.Innovation Effectiveness is of ‘Medium’ importance. it has several key advantages in terms of economies of scale. This enables Home Depot to have low prices while maintaining profitability. Home Depot is also rapidly expanding into Canada and Latin America. Home Depots high availability of capital means that it can take swift action when opportunity presents itself.
and . The ratio of total current Assets for the most recent quarter divided by total current Liabilities for the same period is 1. See ‘Cost or Availability of capital’ for importance explanation. Home Depot’s debt is also spread out evenly between short and long term. it sells a much larger quantity of goods.25% for the next period. Its main competitor Lowes operates competitively with much less financial strength.95 for Wal-Mart. Home Depot has been able to ‘bully’ suppliers into lowering prices or staying off the Internet for direct sales to customers. it is not of utmost importance. Economies of scale is of ‘High’ importance. Home Depot enjoys large economies of scale that gives it a competitive advantage in the home improvement industry.42 of Lowe’s. proving that this is not of ‘high’ importance. many supplies have come to rely on Home Depot for a major portion of their sales.0 million.06 compared to . 1. Although Home Depot has high financial strength and stability. For this reason. Financial Stability (Major Strength – Medium Importance) Financial stability is also a major strength of Home Depot. and can command lower prices from suppliers. In fact. Because Home Depot has twice as many outlets as its nearest competitor. For the 9 months ending 10/31/99 net sales for Home Depot rose 27% and are widely forecast to rise between 22% .The total cash and short-term investments on the balance sheet as of the most recent quarter for Home Depot is $ 170.70. Combined with a strong rise in year-to-year sales. The most recently available Debt / Equity ration is a very low .55 for National Home Centers. Home Depots economies of scale enable it . Financial Stability is of ‘Medium’ importance. these factors make Home Depot extremely financially stable and widely considered to be a low-risk investment. Economies of Scale (Major Strength – High Importance) Being the largest retailer.
Dedicated Workforce is of ‘High’ importance. The fact is that Home Depot is the largest retailer and commands due influence over suppliers who depend on Home Depot for sales. Since Home Depot stocks a very high number of items.to maintain its lowest prices. Home Depot also has very knowledgeable employees as mentioned earlier. Ability to Produce on Time (Minor Strength – Medium Importance) Home Depot’s reliance on outside suppliers for goods (like most of its competitors) would normally make this neutral or a weakness. Home Depot has also began the installation of an advanced network system that would allow suppliers to track sales of merchandise outlet by outlet. the second such suit in two years. Home Depot also offers many proprietary products through joint ventures. there are usually alternatives available to customers if an item were to run out. Home Depot has a low employee turnover and offers training and other programs for advancement. Ability to produce on time is of ‘Medium’ importance. However a discrimination suit by employees. Able Dedicated Workforce (Minor Strength – High Importance) Originally this rating was considered to be a major strength. Economies of scale also offer Home Depot a large degree of power over its suppliers. as a minor strength until those issues can be resolved. as well as minimize inventory costs. who conduct the day to day interactions with customers. are the providers of that service. Having an Able. keeps this rating. Service quality is the most important customer value factor. Their ability and dedication is crucial to the level of service provided. This gives Home Depot a certain amount of leverage to get goods delivered to them on time. . This will greatly enhance Home Depots ability to produce goods on time. which slightly reduces their dependency on outside suppliers. Home Depot’s workforce.
in order to further solidify its position as the dominant player in the industry. layout. Dedicated Employees (Minor Strength – Medium Importance) The overall majority of Home Depot’s employees are dedicated. Home Depot is currently buying suppliers such as National Blinds and Apex. Their primary focus is making sure customers are attended to in the outlets.Visionary. . Thus this rating remains ‘neutral’. the regular sales personnel on the lowest levels are not empowered to make changes to the way Home Depot conducts its business. this rating is not a ‘major strength’. Since low income workers by nature are not particularity loyal. Furthermore. services. Capable Leadership (Major Strength – High Importance) Visionary and capable leadership has led Home Depot to generate over $30 billion in its 22nd year existence. this rating is only a ‘minor’ strength because there are no commission or incentive schemes for personnel who provide outstanding customer service. number of employees. This includes size. and new geographical territories like Canada and Latin America. Home Depot has steamrolled to the top of the retail home improvement industry by providing better value to customers through an innovative combination of low price and superior service. Entrepreneurial Orientation (Neutral – Medium Importance) The Management of Home Depot decides the structure of the outlets. This could not have been accomplished without strong management. etc. The expansion currently continues into new markets with the Villager and Expo stores. However. products. While this management has made some outstanding innovations in creating what Home Depot is today. Home Depot has accomplished this while remaining highly profitable and financially sound. location. All strategic decisions are made on the management level. This means that the majority of the sales force is per/hour workers who make near minimum wages.
3 Home Depot's Value Delivery Network Raw Materials – The selection of raw materials such as wood. this will give the company a competitive edge. When disaster strikes in areas near an outlet. 2. The manufacturers that Home Depot decides to carry in its stores will have a great impact on what the customers expect from the stores and its prices. If a company decides to carry products from a good manufacturer. Home Depot’s response to the development of E-commerce has also been questionable. which then influences customer opinion of the product. internal flexibility or responsiveness has often been slow. Once cited for using old-growth forest wood. The select of good quality raw materials begins the process of getting a good competitive edge.Flexibility or Responsiveness (Neutral – High Importance) Home depot has demonstrated flexibility and responsiveness on a variety of occasions. Home Depot usually responds immediately by donating materials and assisting in rebuilding. The type of manufacturer plays an important role in the production of a product. . The integration of a backbone messaging system has been undertaken only recently. Good quality materials that are used to make a product can have a great influence on the quality of the product. Some manufacturers may not be interested in producing a very high quality product. plastic and metal is a critical factor in the production of quality products. Manufacturers/Suppliers – These are the companies that take the raw materials and make a product. Home Depot speedily responded to the situation and transformed into a environmentally friendly company instituting an Executive Environmental Council. While responsiveness to image related matters has been fast. while others may be interested in that.
Most of the stores are in the U. Home Depot now has over 901 stores in the U. or not.S. and Chile. Canada. Once the distribution center has the product.000-50. it will have a great competitive advantage. which the manufacturers use to make their products. this gives the company an excellent competitive edge. Retail Stores – This is where all the different products are provided to the customers. This is very important in being able to deliver the products to the stores when the customers need them.. where the products are then sent to the retail stores. They can also signal to the company whether they like the stores by revisiting the stores. The company has 40 stores in five Canadian provinces. The customers may want low prices and good customer service. Georgia and the other on the West Coast. The customers give feedback to the company as to what they want by either buying a particular product. Home Depot has two large import products distribution centers. Puerto Rico.. Home Depot provides retail customers with 40. It is very important for the retail store to provide what the customer needs and wants. For these stores. Then the manufacturers supply the products to distribution center. . Being able to provide the things that the customer wants gives the retail store a good competitive edge. Customers – This is the end of the value-delivery network.Distribution Centers – This is an extremely critical point in the value delivery network.S. If the distribution center is able to process information very well and transport the products fast. If the company can respond efficiently to the reactions of the customers. with stores in 45 states.000 kinds of building materials. it will distribute it to several stores in the area who request it. and also opened stores in Chile and Puerto Rico in 1998. one in Savannah. The distribution centers are where the manufacturers send the product to. It must be able to process information from manufacturers as well as the stores. there is a supply chain starting with the raw materials. home improvement supplies and garden products.
The fact that New Penn is able to provide fast and reliable transportation of Home Depot’s products. Home Depot has acquired Apex Supply. For transportation of merchandise. Since new Penn is very reliable. and they also know that the delivery must be fast. Home Depot and i2 have decided on a solution to facilitate the transfer of information between the stores and the network of the 7000 suppliers. This system transfers over 900. due to the rapid expansion of the company. However. communication with its suppliers will be faster and more accurate. Home Depot uses New Penn Motor Express. New Penn is its LTL (Less-Than-Truckload) core carrier. With the implementation of i2.There are two things that Home Depot depends on to ensure that the products arrive at the stores in a timely manner. New Penn Motor Express provides reliable next-day Northeast regional service to make sure the merchandise is always in stock at Home Depot stores in that region. A reliable transportation system to bring the products to the correct places. a subsidiary of Arnold Industries. Presently. so that customers are satisfied. The improved information processing gives Home Depot a great competitive edge over its competitors in providing better service to the customers. hvac and other products. This is a significant move. the company selected i2 to enhance the system. The transportation company knows where to deliver the products for Home Depot. In addition. a wholesaler of plumbing. this gives Home Depot a very good competitive edge. because the information transfer will now be . it has decided to increase the efficiency of the EDI system. gives Home Depot a great competitive advantage. about the products that each store needs. Inc. Home Depot has an Electronic Data Interchange (EDI) system.000 documents per week to share information with its 7000 suppliers and to manage the transportation logistics. Both of these are an essential part of the supply chain: Information transfer from stores to suppliers. In October 1999.
giving the company a competitive advantage over those companies who have not done the same thing. it will make the transport of a product to the stores extremely efficient. The Home Depot has also developed superior efficiency in inventory management of its products. This helps to keep inventory costs down and contributes to making the prices of Home Depot products more competitive. The Home Depot develops and manages strategic partnerships with manufacturers to create products which are sold exclusively at Home Depot stores. the company recently entered completed agreements with John Deere for the exclusive rights to sell Scotts lawnmowers and with General Electric (GE) to sell Smart Water heaters. Managing this core business process is considered absolutely crucial to Home Depot's success.much faster with the use of a common EDI system. Although this acquisition was primarily to strengthen their reaches in the professional trade. Inventory Management To further fulfill the promise of offering low prices to its customers. With the most current information available. For example. . For instance. demand governs supply of products at Home Depot stores. This strategy in new product realization is an important tool for Home Depot to maintain its competitive advantage in creating and selling new product offerings for its customers.4 Company Core Business Processes Home Depot effectively utilizes the following core business processes: New Product Realization Apart from sourcing national brands from manufacturers to sell in its store locations. The company employs electronic data interchange (EDI) with its vendors and distributors to better manage inventory and supply at its store locations. 2. in order to ensure the smooth management of business relationships over the transition to the year 2000. The end goal of this core business process remains the same: to offer quality products with the best value to Home Depot customers.
all Home Depot vendors and distributors were forewarned as early as 1996 to adhere to the company's rigid Year 2000 compliance policies to retain their partnership agreements with Home Depot. more traditional-like hardware stores. The Home Depot estimates that this market has a US$ 50 billion dollar potential. By recognizing that constant innovation of product and service offerings attracts new customers while retaining the loyalty of existing ones. The Home Depot has leveraged changing market conditions and demographics and implemented a number of corresponding customer acquisition initiatives: The Expo Design Centers were initially rolled out as test centers to specifically meet the needs of customers' extensive home remodeling/home renovation needs. Home expects to roll out 200 stores within the five to seven years. called Villager's Hardware stores. The Home Depot has established pilot test stores in the New Jersey area. The Home Depot has instituted customized services such as an enhanced ordering program. same-day delivery and individualized attention for clients. Customer Acquisition and Retention The Home Depot has been quick and adept at identifying opportunities for growing its business and investing in customer acquisition and retention. Beginning with eight stores in 1998. . In recognition of the unique needs of its secondary professional business customer market. For customers who need to do a quick repair job and prefer the quick convenience of making purchases in smaller.
Over two million children in the United States have enrolled since the program was launched in 1997. This service offering is estimated by Home Depot to have a US$20 billion dollar potential. primarily as a customer relations and sales retention tool. whereby children can practice using tools with small decorating projects and can pick up safety tips. House Minder is a free Internet-based home improvement reminder service to Home Depot website subscribers.For customers who are too busy or who do not have the time to do home improvement chores themselves. The Home Depot realizes the importance of customer loyalty and has also implemented a number of customer retention initiatives: Home Depot recognizes that customer loyalty can start early and has devised a Kids' Workshops at its store locations. the company rolled out an intensive four-week program entitled Home Depot University. For adults who are committed to do-it-yourself home improvement projects. Home Depot launched House Minder on its Internet website. . Home Depot's Tool Rental Centers provide customers with the option of renting tools for one-time home improvement projects or for customers who are unsure about making tools purchases and wish to test the tools first at home. The service provides customized product and service offering information to customers as well as house and lawn improvement reminders. The Home Depot offers At Home Services. The company is also deploying technology to optimize business from its customers. In addition. with its own staff providing materials and labor for activities as diverse as roof and windows replacement installations and carpet replacements.
the company openly welcomes customer suggestions and feedback. At the same time. technology plays an important role in the steady management of this core business process. In addition. with a 24-hour delivery system. All Home Depot associates have been trained to provide service which is unparalleled in the home improvement retailing industry. Customer inquiries that are channeled to its offices or to its website are promptly answered and handled efficiently. the associate is compelled to greet the customer courteously and offer his/her services accordingly. . In developing superior capability in managing these core processes. whereby if a Home Depot associate spots a customer within a 10-feet radius.feet policy" popularized by the management of supermarket retail chains. efficiently delivers products to customers' doorsteps. The Home Depot's impressive distribution network. The Home Depot has leveraged the value chain model in delivering value to its customers. In summary.The company has announced its intentions to add e-commerce capability to its existing website in the year 2000. Customer Service The Home Depot has adopted the "10. Order-to-Remittance As in inventory management. The company's EDI system facilitates in the receiving and approval of orders while serving as the main repository of information for the prompt and timely payment of vendors. The Home Depot has demonstrated that it has clearly identified its core business processes and has concentrated on improving all of these processes to emerge as the best service provider in its industry category.
By performing certain activities better and more cost-effectively than its competitors.sourcing of materials or products to bring into the business Operations .integrating these products as part of the company's product and service offerings Marketing and Sales . the firm has gained a competitive advantage. n adapting Porter's value chain model to The Home Depot. with managers negotiating with and developing strategic alliances with vendor partners for products sold in all Home Depot stores. The Home Depot effectively utilizes economies of scale in its inbound logistics activities by employing national-level merchandising strategies in sourcing products. it is necessary to examine the company's primary business activities: Inbound Logistics .shipping these products out Service . the value chain is a tool for firms to identify ways of creating customer value by examining the costs and performance of each of its value-creating activities and outlining ways to improve each activity's improvement.servicing customers Inbound Logistics In order to deliver on its promise to customers of offering products at everyday low prices at its stores.2.marketing these product and service offerings Outbound Logistics .5 Company Value Chain According to Michael Porter of Harvard University. .
This ability.products which are developed by and sold exclusively at Home Depot store locations . mainly. In addition to these high value national brands. The Home Depot has the ability to employ economies of scale in the sourcing and procurement of its products. Loews). In comparison to competitors within its industry category (e. because the customers go to the stores to shop. The Home Depot is able to generate cost savings in advertising because of economies of scale and at the same time.and integrates these products by actively marketing and selling these products as part of Home Depot's product and service offerings. However. in turn.Operations The Home Depot sources nationally-branded products from outside manufacturers to sell at a low cost in its stores. create customer value through local adaptation of promotional campaigns. individual store locations do have a degree of autonomy and financial independence to execute store-level seasonal or tactical sales promotional campaigns.g. Marketing and Sales While The Home Depot employs economies of scale in its overall national-level strategic marketing and advertising campaigns. Because of the its sheer size and the volume of its purchases from suppliers and manufacturers. The Home Depot . The Home Depot has significant share-of-voice in national-level television. as an option for customers who prefer to have their goods delivered. Outbound Logistics The nature of the retail business means that The Home Depot store locations do minimal shipping and distribution traffic. the company also offers proprietary brands . print and other above-the-line media. directly results in The Home Depot’s capacity to deliver customer value through low cost quality products.
In addition. store by store. one of The Home Depot's subsidiaries.6 Value Delivery Process: Strategic and Tactical Marketing The twenty-two year old Home Depot is today a wealthy company with reported net sales of $ 30. providing services to Home Depot store locations. listening to their customers and employees. are located in the company’s corporate headquarters in Atlanta. Georgia. For six consecutive years the company has been ranked .has carefully built up a distribution network which has the capability to deliver products to customers' homes within 24 hours. thereby enabling them to make decisions that respond quickly to the unique needs of target customers. support departments for Human Resources. The Home Depot is able to deliver on what it sees is its core value proposition to its customers: superior service. Finance. Service The Home Depot places extra emphasis on its primary business goal: to serve its customers' needs by market. Support Activities The Home Depot takes a centralized approach to corporate company management. 2. Legal and Procurement. the Special Order Center of National Blinds and Wallpaper.2 billion for fiscal 1998. The company's divisional merchants and managers are expected to spend more time on the store's floors. Planning. By taking a decentralized approach to store and merchandising operations. provides delivery of custom wallpaper and blinds products and services.
Before activating manufactures and suppliers the research department recognizes the demand and supply present in the market. And even there the product is still watched. On the other hand Expo and Villager’s Hardware are designed especially for do-it-yourselfers that do small fix-it projects and prefer convenient store locations with quick in-and-out service. The center proves popular especially among non-constructors. targets it and develops its offer’s value positioning. Presently Villager’s is a small piece of the . Choosing the value: customer segmentation. With a watchful eye for comments and suggestions the company responds to their preferences and needs like larger quantities or same day on-site delivery. Also. the Home Depot serves two segments of the market: the professional business customers as well as individual do-it-yourselfers. value positioning. It is a onestop solution for the completion of the whole project.by Fortune magazine as America’s Most Admired Specialty Store that gives its customers lowest prices and highest level of customer service. Customer segmentation As the world’s largest home improvement retailer. the stores provide training classes in do-it-yourself home improvement projects. Both strategic and tactical marketing guard the product along the way from the minds of the planners through manufacturer’s plants and the Home Depot shelves to the customer’s houses. market selection / focus. How did they get so high? The Home Depot value delivery process is well thought out and efficiently implemented. Within the strategic phase the company segments the market. The stores have a design center staffed by professional designers who offer free in store consultation for projects ranging from lightening and room designing.
Home Depot. So it positions itself as the cheapest and most convenient place to shop. For instance. Ontario the Home Depot had to provide a horse and buggy barn on store property for the Mennonite customers. Home Depot's programs remain focused on retaining the dominant status among DIY-ers The company collects data about the customers’ product and service preferences through their HomeMinder. . Also. remodlers and other professional customers are still evolving. Value positioning Once the company invests in the research of the market it wants to retain its current customers. It delivers to subscribers customized information and reminders for home and lawn maintenance and improvement. a religious group that does not use motor vehicles. It is a low price but high volume distributor with the slogan: ‘Low prices are just the beginning’. Market selection / focus The company's marketing efforts to reach contractors. But the expectation is that the experience collected in these stores together with the company’s brand recognition and good reputation will open the door to a market worth $50 billion. The Home Depot is not striving for the highest margin possible. The collected data does not end with pure business considerations. a free home improvement Web page. in Waterloo. The research explores the customs of the community that the company wants to serve.
it joined the Foundation for the Certified Forest Products Council. The company net margin is only 5. Therefore. the company uses recycled products. pricing. packaged and labeled in environment friendly manner. sourcing / making.8% so it can take pride in offering its customers best deals. distributing / servicing. The Home Depot has earned Fortune’s magazine recognition also for its prices. When a product is being developed many obvious technical specifications are taken into consideration. In 1998 the company formed an Executive Environmental Council which is accountable for integrating the environmental planning with every aspect of the Home Depot business. Since the Home Depot endorses certification of wood and wood products. In the first part the company focuses on providing the value. the Home Depot runs a well streamlined company and customers benefit from it. It is committed to conserving the environment by selling products that are manufactured. companies within the retail home improvement industry make prices competitive. A dominant one is environmental. For the Home Depot price is a powerful weapon to defend itself. The company’s policy compensates low prices with volume. Carpeting is manufactured from recycled plastic while steel framework is fabricated from castoff appliances and automobiles. consumer preferences are given weight. service development. With operating expenses of 22% of sales. To be accepted by the consumers the Home Depot developed many principles. Pricing Once the product is developed the company decides on its price. Also. the council controls waste management. and explores alternative product and timber sourcing. Also. Sheetrock and particleboard are made from discarded paper.Provide the value: product development. Product development A tactical phase follows the strategic one. The company buys its products directly from suppliers and only marks it up enough to cover overall expenses. Also apart from these. .
The Home Depot has many proprietary brands developed by and sold only at its stores. billing accuracy and overall customer service. Rigid stationary power tools that appeal mainly to do-it—yourself woodworking enthusiasts. licensed firms operate distribution logistics. safety. Distributing / Servicing New Penn Motor Express. . due to volume and requirements of distribution. The company chooses LTL Core Carrier of the Year upon basis of a comprehensive quality that measures 21 attributes of LTL service in areas such as speed of transit.Sourcing / Making Once the pricing stage is completed the making and sourcing phase begins. 3. a subsidiary of Arnold Industries Inc. 2. EDI. The generic products supplement nationally branded merchandise. In the future. Presently. on-time delivery. the company plans to run its own network. The Home Depot is among the largest users of LTL service in the nation with over 4 million LTL shipments per year. Bret Rudeseal called New Penn 'an important link in our supply chain'. GESmartWater water heaters and softeners. Lawn tractors in cooperation with John Deere. Home Depot Director of Transportation. During fiscal 1998 the company introduced three new product lines: 1. was named the 1998 LTL (less-than-truckload) Core Carrier of the Year by the Home Depot.
Communicate the value: sales force. 2. A good example of excellence comes from an ex-merchant in Villager’s Hardware division David Cahn. Respect Training for all associates – helps make vendors. Open Door Policy encourages honest communication without fear of retaliation. Employees are trained in many skills. His experience and skills are due to the Home Depot employment and training. employees and customers respected. and advertising. all necessary to serve a customer. religious and physical differences to reach better understanding and thus to strengthen the company. the Internet home improvement destination. According to management 86% of all phone calls got answered in 20 seconds and over 95% in less than one minute. Managing Inclusion – shows the managers how to come over gender. Sales force The second stage of tactical marketing consists in communicating the value of a product to the market. The programs include: 1. race. Leadership Training for 21-st Century – it teaches how to work together in diverse communities. sales promotion. The Home Depot recruits its sales forces from the local communities to reflect the local culture. Sales promotion . On January 10. The Home Depot’s customer services representatives (csr) gained a great appreciation. 3. First sales forces are utilized. 2000 he was appointed Vice-President of iRenovate. Importantly csr turnover is less than 10% and more than 40% moving up the career ladder.
. The Home Depot takes a holistic approach. which at that time had not even opened yet. South Dakota.g. the company volunteers came to rescue with donated saws and delivered clean-up supplies. The housing concentration is supported by more than 50 locally active organizations e. When a tornado struck Spencer. Citizens Committee for New York City. Trade magazine Advertising Age includes the chain in its ranking of the top 'megabrands' just ahead of Kmart and right behind Mazda. Inc. The youth at risk issue is tackled by another as numerous set of organizations e. DARE. Home Depot spends on advertising about $90million. The major charitable focuses are affordable housing and at risk youth. The company volunteers reach the affected areas with supplies. and NASCAR Tony Steward are a few examples. Accessible Housing Service. The low-price image continues to win consumers. HomeCorp.Sales promotion is also done through the help in community projects or disaster areas. .g. Home Depot's value-focused advertising has worked for the retailer. Advertising 'Where low prices are just the beginning'. or Mid City Redevelopment Alliance. The company wants to be associated with groups whose spirit and philosophy mirror its dedication to teamwork and excellence. It prepares responses and rebuilds. Home Depot's ad spending far exceeds that of any other retailer in the home improvement industry. making Home Depot a household name in every sense. Also the company has a philanthropic budget of more than $15 million for 1999 which is directed back to the communities the Home Depot serves. The company works on those issues through various founded organizations. a small town four hours from the Home Depot’s nearest store. US and Canadian Olympic Team. or Crippled Children Society. the Olympic jobs opportunities program. According to Media Reporting.
0.” 2. bath.I. Careful and well researched steps throughout the way makes the marketing less of “the process of taking the guesswork out of a hunch.S. 12.55 .27 Lowe’s Companies Inc Second largest DIY Retailer with 484 stores mostly in Eastern U. Home Warehouse Sells kitchen. plumbing.Through the well thought and organized strategies the Home Depot makes a successful value delivery.12 D. 0. and paints through 14 stores in Ohio.Y.S.10 Home Base DIY home improvement with 84 Stores in the Western U. 4.7 Stock Price / Book Value All figures reflect the most recent quarter Home Depot The Largest DIY home improvement retailer in America with 878 Stores.
Sells mostly wood for home improvement through its 101 stores. Roebuck & Co. 0. 1.08 Wickes Inc. Tractor Supply Company Retail farm store chain with 243 stores.S. Inc. name. Sells building materials through 154 stores located in Western U.24 Sears Hardware Stores 1.66 Wolohan Lumber Company Sells lumber and building materials through its 56 stores.84 84 Specialty home Improvement stores which fall under the Sears.72 Payless Cashways. 1. 0.70 . 0.National Home Centers Retail home improvement with 8 stores in Arkansas.
we can see that this indicator is 2. Apart from having wellstructured debt.Home Depot. The higher the value.The Stock Price divided by Book Value is often used as an indicator of a company’s financial strength. Home Depot has $170 million available in cash and short-term investments. In the case of Home Depot. Home Depot’s consistent growth and strong profits have also made the stock a favorite among the S&P 500 listings. The reason for this lies in the fact that Home Depot is financially sound. Back to Table of Contents . and over 10 times higher than most of the remaining companies.5 times higher than that of its nearest competitor Lowe’s.  www.com  The Economist: Pocket International Business Terms. the more financially sound the company is considered.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.