Competitive and Strategic Analysis
The Home Depot Co. was founded in 1978 by four local home retailers – Bernard Marcus, Arthur Blank, Ron Brill, and Pat Farrah. When they first started this company, the sole purpose of this company was to help them to buy large quantity of house improvement product at the lower price. Soon they realized the core value of The Home Depot is to create a company that would keep alive the values that were important to them. Values like respect among all people, excellent customer service and giving back to communities and society. In the past three decades, this vision has become the unique corporation culture of The Home Depot, now the company is the largest home improvement retailer in United States, it has over two thousand store nationwide, with over 340,000 employees. The current CEO – Frank Blake, who has been managing the home improvement retailer empire since 2007, under his watch, the company has been growing about 4% in average, even during the financial crisis in 2008, The Home Depot is one of the few companies extended its business that year. There are nine members on the board right now, eight of the board members are independent director, which means each director has their own department to manage, and need to report to managing director on the monthly basic.
The slogan of Home Depot is “ More savings, more doing,” which encourage customers to learn some house improvement skill on their own, therefore when customer spend more time in the store, more likely that they will spend more money in the store. When the store can consistently sell large quantity of goods, it will have the power to negotiate the price with supplier and eventually lower the price. The Home Depot stores are designed as large warehouse layout.
Employee training program(Human resource strategy)
Unlike most of the retailer stores in the industry, The Home Depot has very low employee turnover rate in the industry because of its generous employee benefit package. In The Home Depot, each employee works for the company over 6 years in average, 35% of the employee is with company over 10 years. On the company’s financial statement, the labor expense is about 30% of the total variable cost. The management of the company strongly believe that in order to provide good customer shopping experience, employee training is the key element to achieve the goal, therefore The Home Depot spent over $70 million on employee training program to ensure all stuffs in the store are properly trained and ready to answer any questions that customers may have.
The environment friendly strategy
For being the first retailer to establish environmental principles in 1991, to winning the EPA WaterSense 2013 retailer of the Year Award, Home Depot continue to lead by example, demonstrating to the industry that sustainability business practices are not only possible, they are good for the business. In the traditional house improvement industry, during the process, it will always create some level of pollution to the environment. According by the using some material during the house improvement process will have some long term negative impacts to our health. Every year, The Home Depot spent 2% -3% of the total budget on research about improve efficiencies in building, force improvement in technology and share best practices with retailer from around the country. From store operation, such as store design, waste reduction program, to its supply chain management. The Home Depot providing sustainable choices for our consumers and their families to enjoy.
In Home Depot, people can find almost all the tools for their house, the price range vary depend on the quality of tools. In comparison with The Home Depot’s main competitor – Low’s, The Home Depot is not only sell goods at the lower price, it wants to match all customer’s needs, therefore instead of only selling cheaper products, The Home Depot builds the partnership network with all its supplier and order very larger quantity of their product at the lower price, therefore customer can enjoy better quality of product at the cheaper price in Home Depot. Due the fact that some equipment are very expensive, Home Depot also has a payment program or leasing program to make house improvement more affordable to individual family.
When Frank Blake took over the company in 2007, he brought some new fresh ideas of The Home Depot, and those ideas now all became true, and the company stock price increase from $28 to $ 75 in the past five years, total increase over 250%, to attract more investors, the company increase their quarterly dividend for $0.23 to $0.39, with annual revenue of $74 billion, almost double the revenue of Low’s. In 2013 alone, Home Depot stock price has increased over 20%, and nearly 8% profit margin.
Our group choosesHome Depot as our quarter project study subject because we hope by study it; we can answer the following question:
How the management of Home Depot decides the strategy for the company?
What is the strategic difference between Home Depot and Low’s?
What is relationship between their corporate culture and company strategy?
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