An Analysis of Home Depot

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Introduction

 

Home Depot Incorporation is a US based firm company that sells home improvement products and services. The firm is the biggest retailer of home improvement products in the U.S (Gregory, 2017). It has its headquarters in Cobb, Atlanta, Georgia and operates through big retail establishments that are distributed in all states of the U.S, some parts of Canada, and Mexico. As of February 2016, Home Depot had over 2,700 retail outlets distributed across all the states of the US and the other two countries where the firm operates.

Besides the retail stores, Home Depot has the EXPO Design store that concentrates on expert customers. The Maintenance, Repair and Operations division of Home Depot primarily focuses on the sale of floor construction and finishing materials. National Waterworks that operates under the Repair and Maintenance division provides a wide range of plumbing and water works services. Through its 37 locations in 14 states, The Builder division of Home Depot deals with timber related construction. Home Depot contracted the Bros. Lumber Company to provide timber related services and materials in various locations and places in Georgia (Gregory, 2017). As such, this paper offers a critical analysis of Home Depot given that since its inception, the  firm has been able to survive amidst an unstable United States (U.S) economy in some instances and high competition due to a combination of factors.

A Brief History of Home Depot

Home Depot has been in operation for almost four decades. 1978 saw the establishment of Home Depot by four Americans Pat Farrah, Bernard Marcus, Arthur Blank and Ron Brill. In 1979, Home depot opened two stores in Atlanta and later two more stores sharing a rented space. Two years later, Home Depot opened the IPO and three years later, joined the stocks market trading as HD in the New York Stocks Exchange.

Later in the 1990s, the headquarters of Home Depot were moved to complex buildings on Paces Ferry Road in Cobb County of Georgia. The buildings have markings as B, C and D. In the year 2000, co-founders Marcus and Blank retired paving way for Robert Nardelli’s appointment as the CEO, chairman, and president. Robert’s concentration was to meet the profit and sales targets. Robert introduced the HD supply as a way to centralize sales and also to outmatch the greatest competitor Lowe’s but his successor failed to see the need of the unit and sold it for $8.5billion in 2007 (Paul, 2017).

Between 2008 and 2009, there was a massive downturn in the housing industry which made Home Depot close 54 nationwide stores and layoff thousands of employees. The sale of HD supply unit leads to a fall of more than $20 billion in two years. In 2012, a firm store that operated in China was as closed smaller chains dealing with specialized products remained open. Since 2013, Home Depot has seen a change of senior management and acquisition of new businesses such as Interline Brands which increased its managerial roles and returns (Paul, 2017). Over the years, changes in the management of the company, level of competition, and harsh economic tides have had a considerable impact on its operations thereby calling for an analysis.

The Organizational Structure of Home Depot

From time to time, Home Depot keeps on changing its hierarchy in authority and responsibility due to its entry in the global market. Home Depot has a strategically laid structure that that elaborates the connection between the different organs of the firm. The structure plays a major role in determining the nature and the effectiveness of the plans of the firm to connect with its customers. The structure forms a foundation through which strategies for growth and expansion are facilitated.

Characteristics of Home Depot’s Organizational Structure

To ensure effective management of its stores and retail outlets throughout the world, Home Depot’s organizational structure derives from the hierarchy, geographical locations of its businesses and functions of the global groups. Notably, the major outlets of Home Depot are situated in North America. However, the company’s hierarchical structure has seen the company spread its operations in other regions including Asia.

Global hierarchy

Though not much prominent in the Company’s structure, a form of hierarchy exists at the global and local levels of Home Depot’s stores. Notably, the hierarchy is much observed in the flow of authority and responsibilities. The heads of South, Western, and Northern based stores make reports to the Vice President who is in charge of the stores in the U.S. The Vice President, in turn, reports to the company CEO. In every Home Depot’s store, there is a manager who the employees of that report to (Paul, 2017). The global hierarchy structure adopted by the company ensures streamlines decision-making processes that seek to bolster the competitive edge of the

Physical and geographical divisions

Physical and geographical divisions constitute a notable characteristic of Home Depot’s organizational structure. The geographical divisions exist in countries where Home Depot operates.  The Stores division takes charge of the retail centers of Home Depot in a particular country. Therefore, the network of stores in different geographical divisions have been integral in fostering the delivery of the company’s goods and services globally.

Global functional groups

The functional groups of Home Depot help to address the specific needs of the business. The Human Resource Management Group takes charge of controlling the workforce for the realization of optimum productivity (Paul, 2017). The Merchandising group that has Décor and Building Materials groups is the service operational arm of Home Depot Company.

Analysis of Home Depot’s Organizational Structure, Critiques, and Strengths

Strengths

The structure adopted by Home Depot helps the organization to have a common point of control. The former CEO, Nardelli, put in place measures that strengthened centralized control. Further, the structure of Home Depot also inclines on functions and groups by the existence of functional groups (Paul, 2017). Home Depot shows emphasis on customization of products to comply with specific market conditions in different geographical locations.

Critiques

Irrespective of the market customization on geographical elements, the firm has a limited workforce of store managers. The case leads to the much centralization structure that was introduced by Nardelli. The response with immediacy to changing local conditions is frustrated by the structure as instructional information flows from the executive leadership. Therefore, there is need to reinforce the company’s workforce in a way that would enhance the flow of information regarding strategic decisions.

The Organizational Culture of Home Depot

Personal and group behaviors of employees in Home Depot set its organizational culture. There are values, norms and, policies that exist in Home Depot that affect the behavior of the employees thereby influencing the perceptions of customers. The employees of Home Depot display the firm’s outward look in an image that concentrates on satisfying the customer’s needs (Gregory, 2017). This feature is a major factor that has steered the competitive power of Home Depot.

Features of Home Depot’s Organizational Culture

Collaboration

The organizational culture of Home Depot elicits a communal attitude among the employees. The workers of stores are encouraged to work as a team. Through teamwork, there is increased efficiency as there is a focus on different methods of solving a problem. Notably, the company underlines the essence of establishing meaningful interpersonal relationships among its employees in a bid to foster a collaborative approach towards goal attainment. The teamwork approach also decreases instances of personal glory where individual achievements are often followed by expectations from the company.

Mastery of service delivery

Home Depot does not compromise on delivering quality services. By offering training programs and hiring of expert skills, the company ensures that high-quality services are offered to customers.  When customers are making decisions to make purchases on products such as timber or plumbing, experts in the stores offer guidance on the usage and maintenance of the products. As such, the company has won the trust of customers to a considerable degree.

Placement of priorities

In drafting the company’s strategies, Home Depot places the customers at the top, then the front-line support followed by field support and corporate support, respectively. The CEO is the last in the priority list. The adopted pyramid ensures inculcation of corporate values among all employees. Additionally, Home Depot’s culture puts emphasis on the company’s objectives to achieve its goals. The approach is important as the competitive advantage of the firm is based on capabilities of human resources.

Operations

Warehouses, Stores, and Retail Outlets

The average area of Home depot stores is 9.755Km2. Notably, the stores are organized differently for various operations. The largest stores are located in Union, New Jersey and in Anaheim Hills Califonia (Gregory, 2017). The stores have orange as the theme color. The layout of the different stores is in line with the volume of operations and thus, tailored to meet the needs of different markets.

Directorial Board

Currently, the firm has a board membership of 9 individuals, 8 of whom are independent.

They are executives include Bonnie G. Hill, Armando Codina, Karen Katen, Albert P. Carey, Duane Ackerman, David Batchelder, Frank Blake, Ari Bousbib, and Gregory Brenneman. The board has not been characterized by significant conflicts that could undermine the operations of Home Depot.

Marketing and Operations Management of Home Depot

Home Depot has dominated the home appliances sales industry from a combination of factors and marketing strategies.

Numerous Outlets and Better Stores

By 2008, Home Depot had a total of 2,274 outlets. Even without the addition of more stores for the next 7 years, sales continued to grow by over 30%. Instead of concentrating on increasing the number of stores, Home depot avoided a heavy expenditure that would come with the new stores’ establishment (Paul, 2007).

The marketing and business development arms of Home Depot concentrated on strategic operations that aimed at low cost and high returns. Professional contractors were targeted and were given long lasting tenures. Home Depot derives a 40% sale from the contractors. Home Depot has also invested heavily in e-commerce.

Elaborate Supply Chain and Stocks Management

Every outlet has about 30,000 to 40,000 different products. On the company’s website, over 0.7million products are available for sale.  As a way of increasing sale turnover, Home Depot came up with programs that aimed at saving on storage costs and to speed up the picking up time. To minimize customer interruption, Home Depot started conducting stacks taking when the stores are closed.

Acquisitions

Home Depot’s acquisition of Interline was met with stiff criticism but the decision helped the firm to consolidate the repair and maintenance operations. The decision paced Home Depot miles ahead of its competitors. The acquisition has grown the firm’s market position among the customers.

Response to Basic Need

In Abraham Maslow’s theory of the hierarchy of needs, housing is listed as a basic need. Home Depot identified the opportunity in this and gave the customers a feeling giving homes to the homeless (Paul, 2017). Seen as a corporate social responsibility (CSR), the company has gained popularity among many consumers.

Mobile-Phone Based Product Selection

A mobile phone is a basic component of human interactions. Home Depot captured this by allowing customers to make color selections which suit their home decorations and themes. It became to be widely accepted that choosing the best color mix is a bit troublesome for most people. The color project app allows customers to visualize how a certain appliance would look in their houses.

Precise Design of Its Goods and Services

The design of goods and services of Home Depot is emphasized on lowered prices and a compelling quality. This practice often gets customers attracted to the stores of the firm. The provision of expert services in fields such a lumbering and carpentry often leaves customers satisfied. The appealing designs make the company attract more customers globally and thus, bolster its competitiveness.

Home Depot’s 4Ps Mix

Home Depot’s 4Ps mix is a reflection of how the firm combines its efforts in the marketing industry blend with its competitive ability and sales strategies.

Product Mix

The main product of Home Depot is its retail service. It refers to the output of the organization to the potential buyers.

The following is a list of Home Depots products;

1. Home Depot’s house brands

2.      Retail service and professional advice

3.      Repair and maintenance services

4.      Professional Contracting.

Basically, Home Depot is a retail company for home improvement products and services such as electricity technical advice (Gregory, 2017). The company has also been appointed as the exclusive seller of some home use industrial products for third party companies.

Place Mix

The main points of sale for the firm’s products is its stores. Besides the physical stores, Home Depot has online stores and mobile apps accessible through the firm’s website. The place mix ensures that the company widens its market base.

Promotion Mix

Home Depot combines a number of tactics for its strategy which has bore fruits. Below is a number of longterm used tactics by the firm. Home Depot embraces sales promotions, a well-established corporate communication system, and direct sales to contractors to boost its promotional efforts (Paul, 2007). Further, it also employs commercial advertising through TV and point of sale stores to promote its products and services.

Pricing Strategy

Though the prices are determined by the competitor’s prices, Home Depot introduced “Every Day Low Price” which aims at providing optimum balance between price and quality. The reasonable prices have been crucial in increasing Home Depot’s sales.

Home Depot SWOT Analysis

Strengths

Home Depot prides an effective leadership that upholds the firm’s principles. The firm is greatly affected by strong macro-economic factors but has been able to stand even at revenues that were observed between 2008 and 2010. The strategy of cost saving by CEO Frank Blake saw the firm thrive in a major economic meltdown.

Home Depot has been able to produce more per space when compares to Lowe’s which gets slightly lower per square foot. The firm has mastered productivity by utilizing all the available space and notably the online space.

Home Depot derives its profits from a wide company portfolio. Through diversification of operations, the firm’s revenue has risen. The firm has the competitive advantage in that it is able to provide all home improvement services and products, unlike their competitors who have not flexed their marketing muscle.

Weaknesses

A big drawback for Home Depot is its macroeconomic scope. Its performance is greatly affected by The US economy in general. Any instability in the US economy has a great impact on Home Depot. Additionally, the player has high debt levels standing at -$16.9billion in the 2014 year of business. In future, the high debt levels would have negative implications.

Opportunities

Space for expansion: As of now, Home Depot has stores in Mexico, Canada and US. Though the current CEO concentration is improving productivity, Home Depot can still explore the opportunity in establishing in other countries. The closure of Home Depot’s store in China could have been a lesson that the firm could consider in future.

Threats

Home Depot is highly dependent on the macroeconomic scope of US. Due to the unpredictability of a national economy, it is, therefore, hard for the company to adapt itself readiness for an unknown. However, when the US economy is thriving, Home Depot should sail in that glory as a way to get ready for a future that is unknown.

Home Depot faces stiff competition especially from Lowe’s. High competition force Home Depot to lower its prices which directly lower the firm’s revenues.

Recommendations

Despite the threats, Home Depot could still explore the available opportunities and thrive even in hard Macroeconomic conditions. Home selling in the US is steadily increasing which should translate to growth Home Depot’s business.

Strategic Growth Plan for Home Depot

The generic strategy for Home Depot borrows much from the intensive development strategy. The generic strategy helps the company in its seizure of the market share. The growth strategy specifies the execution plan of seizing the market. The executive leadership helps in coordinating the generic and the growth strategy.

The Generic Strategy for Home Depot

The strategy derives much from Porters Model. Initially, it focused much on cost reduction as a way to attract customers and survive a stiff competition from other key players in the market. Currently, Home Depot uses broad differentiation that entails having a variety of specialized products and services to customers. Most of the employees who work in the Home Depot’s stores are experts in fields ranging from carpentry and plumbing who give professional advice.

Intensive Growth Strategy for Home Depot

 Penetrating the Market. Home depot applies various methods to penetrate the market as a way for strategic growth. From time to time, there are offers and discounts for certain products which aim at getting more customers.

Developing ProductsHome Depot introduces new products from time to time, a method through which new customers are obtained.

Expanding and Developing the MarketHome Depot has acquired a number of companies. The acquisition Interline in 2015 led to a new market of providing maintenance services.

The Influence of Home Depots Stakeholders on the Performance of its CSR

The program for addressing the social corporate responsibility of Home Depot has to depend on interests of the stakeholders. The customers and the employees are the main players in influencing the operations of the CSR organ of the firm. CSR activities rely much on the conditions of Home Depot’s business. The activities have to be matched against their relevance to the business.

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