Home Depot
The paper describes the history and the background of the Home Depot putting into consideration its financial performance in the past and in the recent years. It will also discuss the importance of vision and mission statement in companies and as such it will explain the mission and vision statement of the Home Depot. The paper will go on to describe the objectives and the strategies that are used to achieve those objectives in the company. It will explain the five generic competitive strategies that are being pursued by The Home Depot. The competitive environment of the company will also be analyzed and the competitors of the Home Depot will be pointed out. The paper will look into the financial ratios and the internal environment of the company which includes the strengths, weaknesses, opportunities and threats faced by Home Depot. Lastly, the paper will assess how Home Depot has executed its strategies and also evaluate how effective the strategies are for the company.
Home Depot is the biggest home improvement retailer company in the world, and is also the third biggest retailer in the United States. The stores of Home Depot sell a variety of home improvement, lawn and garden products and also an assortment of the building materials. Home Depot’s fiscal 2011 made retail sales amounting to $70.4 billion and $3.9 billion of earnings. Home Depot owns more than 2,200 stores in the United States (which include Puerto Rico, United States Virgin Islands and territory of Guam), Mexico, China and Canada. The stock of Home Depot is traded in the New York Stock Exchange and is also in the 500 index of Standard & Poor and in Dow Jones industrial average.
Since Home Depot opened its doors in the year 1979, the company has always given back to the communities in which it operates and this has been the passion for its associates. In the year 2002, Home Depot Foundation was formed in order to serve as a charitable department and also to improve the Company’s community building goals by providing the resources to help the nonprofit organizations. By partnering with the local nonprofit organizations and the Team Depot’s efforts, the associated volunteers of Home Depot focus on refurbishing and repairing facilities and homes that serve the disadvantaged individuals and families.
The stores for EXPO Design Center offer full interior installation and design services to help its customers in re-modeling projects and home décor. EXPO Design Center stores have design showrooms that have full size displays to assist the customers in visualizing the end results of interior design project. Mostly, the customers at the Design Center Stores are between the middle to upper income and are in the do-it-for-me group of customers who usually purchase commodities for installation by others. As a result, the Home Depot Company provides the installation services for most of its products in the stores. Also, the company’s trade customers are mostly custom builders, designers, architects and re-modelers. The stores for the EXPO Design Center offer installation services and interior design products in: baths, kitchen, flooring, patio, appliances, lighting, décor, decorative fabrics, home storage, window treatments and accessories.
Robert Nardelli was appointed as the president, chief executive officer and the chairman of Home Depot. In January 2007, Robert Nardelli was then succeeded by Frank Blake. By then, Home Depot had over 355,000 workers and had 2,141 big box stores that were spread all over the United States, Canada, China and Mexico and was still the biggest home improvement and Retailing Company that existed in the United States.
Mission statements are company’s articulation to their employees, customers and the world of its purpose to the people. Businesses are in existence so as to make money, maximize shareholder value and profits but mission statements are more about the front than the bottom line. For businesses to be successful, they have to own broad and clear missions that are acceptable to the public and also tell them why the missions would be beneficial to conduct business with the company. Mission statements should be a representative of company’s vision of the manner in which it would like to be viewed by its clients.
Generally, mission statements include the statement of the purpose, the business statement and the indication of the values of the company. The purpose statement states the purpose of the company. An example is a car company whose purpose is to manufacture cars. Business statement would describe how the company would manufacture the cars. The portion of values represents the common values that are shared all over the company and also how the values contribute to the end product. Ideal mission statements are supposed to be inspiring also to the employees.
Instead of having a single short mission statement, the Home Depot company has 8 corporate values which are designed in order to guide all the actions of its workers in the company at every level. Following the website of Home Depot, the corporate values include:Taking care of our people. The key to the success of Home Depot is treating its customers well. This is done by encouraging associates to take risks and speak up, by rewarding and recognizing good performance and by the developing and leading the people so that they may grow. Doing the right thing, Home Depot insists on practicing good judgment through "doing the right thing" rather than just "doing things right." The company strives to understand the effect of its decisions and also takes responsibility of its actions.
Giving back to our communities, One of the crucial roles of the fabric section of The Home Depot is giving its talents, time resources and energy to worthwhile causes to the society and the communities. Excellent customer service, In addition to its service, quality product, selection and price, the company goes an extra mile to provide to its customers knowledgeable advices on its merchandise to assist them achieve the maximum benefit. Building strong relationships: These are built on integrity, honesty and trust. Home Depot listens and also responds to the needs of its customers, communities, associates and vendors by treating them as their partners.
Creating shareholder value, Investors who provide the necessary capital to facilitate the company’s growth expects and need a return on investment. Home Depot is committed to doing exactly that. Respect for all people: For the company to remain successful, the associates work in an environment free of harassment, discrimination and of mutual respect where every associate is considered to be part of Home Depot team.
Entrepreneurial spirit, The associates of Home Depot are encouraged to initiate innovative and creative ways to serve customers and also improve management.
Vision statements for companies are important in the following six ways. It is very helpful in the process of bridging the future and the present of an organization. It is a source of inspiration for the reason that it gives an organization hope for the future. The third one is that it forms the criteria for making decision in the management of a company. Fourthly, it is an explanation to the significance of the company and the ways in which it will improve the market place in which the company participates in. The fifth is that it describes what has to be achieved or done if the organization is to become successful and it creates the commitment and the interest of a company. Lastly, a vision statement of a company helps to define the goals and actions that will be helpful in the achievement of the vision.
Good vision statements should be able to enhance the development of new products that are inspiring and also the development of the existing products. Visions statement should aspire to serve the customers using defined portfolios that have been set by the management. Vision statements should have the ability to provide work environments that are friendly for both the employees and also the employers. It should also ensure that there is sustainable growth of the organization so as benefit its stakeholders. It is very important for the customers to know what the company they are getting their products from through their vision statement and thus every company should ensure that they develop a relevant vision statement for the company.
The vision statement of Home Depot is as follows: “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.” This is a very attractive mission statement and most of the customers as it is very clear on what the company aims to do for its customers and what they are to expect when the interact with the company.
The Home Depot Company is in the industry of supplier of construction and home improvement services and products. One of the main changes that are expected to impact the industry of Home Depot and the operating environments in the coming ten years, is the brisk expansion that is taking place in new house building and house sales in the U.S. The boom in the house sales and constructions will definitely go on in the coming years since the interest rates are have remained to be attractive in getting house loans. The boom is expected to increase the Home Depot Sales and this will improve the position of the company as the biggest home improvement retailer all over the world. The following are some of the long-term objectives which the Home Depot Company is planning to achieve.
President, CEO and the chairman Bob Nardelli and the employees of Home Depot have plans for the future of the company. Following the Webbot website, Nardelli said that “Over the next five years, Home Depot expects to grow and maintain its leadership position in home improvement retail all over the world”. He continues to say that “At the same time, we expect to become the nation’s largest diversified wholesale distributor, become number one in services and will dramatically increase our direct to consumer channels. Our 2006 initiatives demonstrate that we are well on our way to accomplishing our goals”. The following are the long-term objectives of the Home Depot:
- Attaining an annual sales growth of 9-12%
- Open other new 400 to 500 stores which would increase the revenues of the company by up to $8 billion.
- Continuous product innovation and store organization and a brand selection that has been greatly improved.
- Growing, expanding into new markets and increasing the market penetration internationally.
- Acquisition of the “Hughes Supply”. This is aimed to adding the supply of Home Depot’s strong position in non-industrial facility maintenance, supply and plumbing, waterworks and also increased growth in platforms like industrial pipes, electrical, valves and fittings distribution.
The competitive strategy of a company mostly deals with the specific game plan of the management in order to compete successfully. It involves the efforts to please its customers, the defensive and offensive moves to counter its rivals, the responses to the conditions that prevail currently, the initiatives to strengthen the company’s position in the market and the approach to attain a competitive advantage against the rivals. Companies should be very imaginative in the creation of competitive strategies so as to win the favor of the customers.
Companies should aim at doing significantly better jobs than those of their rival. They should provide what their customers are looking for and as such they are able to secure an upper hand especially in the market place. Companies attain competitive advantages when they have some type of an edge against their rivals in attracting the buyers and coping with the competitive forces. There exists several channels to competitive advantage but they mostly revolve around giving their buyers what they think is superior compared to what is being offered by the rivals.
Home depot is pursuing the following generic competitive strategies:
Low-cost provider strategy- this involves striving to attain lower costs than the rivals and ability to appeal to a wide spectrum of buyers mostly through underpricing the rivals.
Broad differentiation strategy- it seeks to differentiate the products of the company by offering its products in a way that appeals to a broad spectrum of customers.
Best-cost provider strategy- gives buyers more value for their money through incorporation of excellent attributes of products at lower prices than those of the rivals; the aim is to have the best prices and costs as compared to the offering of the rival’s products with the attributes that are comparable.
Focused strategy based on low costs- entails concentrating on narrow customer segment and outdoing the rivals by having lower costs as compared to rivals and hence the ability to serve members at low prices.
Focused strategy based on differentiation- involves concentrating on narrow customer segment and offering customized attributes which meet the customer’s requirements and tastes better than the products of the rivals.
Strength
Brand awareness- Home Depot is the largest company in home improvement retail industry. Such dominance helps in boosting brand awareness for the private brands. The brand awareness is for the Home Depot company especially since recent studies indicate that 80% of the shoppers have positive attitudes on private brand labels and some people perceive the quality as being superior.
Rapid Deployment Centers- Home Depot utilizes the Rapid Deployment Centers and as a result, it enjoys improved transportation and also a reduced lead time from the notification time of need to the time of inventory replacement.
Weaknesses
The negative comparable store sale figures- The company has continued to registers a decline in the same store sales to 8.7% in the year 2009 as compared to the 6.7% in 2008 and this a significant decrease in operational productivity.
Product recalls-Recently, the Home Depot has found it necessary to recall several of its products. The recalls join other recalls that had been initiated in the years before. This indicates poor quality control by the company and has impacted negatively on image of Home Depot.
Opportunities
Reorganization initiatives- The Home Depot Company has responded properly to the harsh economic condition through readjustment of its business focus and practices. The new focus has seen renewed efforts to increase the productivity at the existing stores.
The increased demand for power tools-There is forecasted increase in the demand of power tools by over 3% which amounts to $15.1. Home Depot is in better position to take this advantage of the growing demand.
The growth of online purchasing- Online revenues are projected to rise by 4.1% in sales. Since the revenues can be attained through online sales, Home Depot will have the benefits through reduction in the operating costs.
Threats
Rise in the customer service complaints- in the recent time, the customers of Home Depot have met employees who do not have proper understanding of product utility or store inventory. This will have an adverse impact on Home Depot.
Government investigations and litigation-The image of the Home Depot brand is likely to suffer negatively from the government investigations and inquiries on alleged recordkeeping violations.
Home Depot decided to close down the hardware chain’s operation in China and also stopped building other new stores in the U.S. The company has benefited a lot by executing the strategy. At the end of the year 2011, The Home Depot Company had earned revenue totaling to $70.4 billion which was an up of 3.5% from the previous year. As of October 2012, a single share of Home Depot was costing more than $60 which is a 70% increase from the same time in 2011.
Stopping big projects for the betterment of the company is not the only strategy that Home Depot has been using. Home Depot is using major operation changes. The company has restored the employees benefits which had been slashed before and has also set to get the customer service reputation that had been damaged back up and also cut costs without killing the morale of the workers. The Home Depot Company is also shaking up its strategies by sharpening its focus on specialty stores. The company opened a paint and flooring store and a home decorations outlet in Tianjin that would cater for shopping preferences and other specific needs for the consumers. Home Depot also has plans to start online operations with a partner in china but no names have been mentioned.
Home Depot also has plans on increasing the utilization of the Rapid Deployment Centers. These help in the use of single purchase orders, to consolidate the needs of the product and rapidly replenish the inventories to the stores from the central locations. The implementation of the strategy will be helpful in improving transportation and it will also reduce the lead time from notification to the replacement of the inventory.
References
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Home Depot. (2010, July 4). Retrieved from The History of Corporate: http://www.thehistoryofcorporate.com/companies-by-industry/traderetail/the-home-depot/
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