3. About Home Depot
ā¢ Founded in Marietta, Georgia in
1978
ā¢ Operates 2,300 large ābig boxā
stores across 50 states, Mexico,
Canada and China
ā¢ Offers 40,000 products and can
specially order up to 250,000 other
products and building materials
upon request
4. About Home Depot
ā¢ Sold ownership of EXPO Design
Center and Home Depot
Landscape Supply
ā Still offers some services such as
pre-screened contractors for
installation and home repair services
5. About Home Depot
ā¢ Largest retail home improvement
store in the United States
ā¢ Has 55% of the market cap in
home improvement industry
ā¢ HD had $66.18 billion in revenues
in 2009
ā Largest competitor, Loweās, had
$35.8 billion
6. Internal Analysis
ā¢ EXPO, THD Design Center, and
Yardbirds stores-2008
ā upscale group of home design and
hardware stores targeted at remodels
ā¢ In 2009 7,000 jobs / additional
positions will be shed as well as
close more stores and
ā¢ In 2010, growth will continued
to be curtailed
7. Internal Analysis
Positioning:
ā¢ As the country slowly climbs out of
recession, Home Depot plans to
reposition itself as a bargain-priced DIY
store.
ā reduced prices on its best-selling items
ā cleaned up stores to attract a larger female
demographic
ā increased customer service training
8. Internal Analysis
Sales 2009:
ā¢ Home Depot- $71,288 million
ā¢ Loweās- $48,230 million in
company can boast of
ā¢ Home Depot- 322,000 employees
ā¢ Loweās- 229,000 employees.
ā¢ Gross Profit Margin for 2009-
33.77%
9. Internal Analysis
Current Plans:
ā¢ āFree cash flow rose to near $2 billion, a level not seen
since 2007. This enhanced liquidity allowed the
Company to finish the year with more cash-on-hand
(about $1.4 billion) and lower total debt.ā
ā¢ Saturated markets creates pressure to mine growth with
new merchandise offers, services, formats and markets:
ā Store ModernizationāImproving the Experience
ā MerchandisingāNew Products, New Appeals
ā ServicesāA Do-It-For-Me Focus
ā FormatsāTapping New Markets
ā Non-storeāExtending Multichannel Reach
ā Pro MarketāMoving Beyond Retail Core
ā CapabilitiesāEnhancing Efficiencies
ā InternationalāGetting Serious Overseas
10. Internal Analysis
Assortment, Price and Service= Strategic Guide:
ā¢ āTo say that Home Depot (grew) fast is an
understatement. Second only to Wal-Mart in
the retail category, the company brought in
more than $73 billion in sales in 2004 and
added 20,000 employees ā bringing the total
number of associates to 325,000.ā
ā¢ Frank Blake: āWe're committed to being the
company that helped set the standard for
customer service excellence in home
improvement. Please continue to hold us
accountable.ā
11. External Analysis:
PESTEL
ā¢ Political:
ā Government policy that affects the housing
market
ā¢ Economic:
ā The current recession
ā¢ Social:
ā Changes in income have resulted in
consumers shying away from discretionary
items
ā Lower availability of credit to consumers
has adversely affected sales
ā The baby boomers
12. External Analysis:
PESTEL
ā¢ Technological:
ā Home Depot has transformed its supply chain
ā 24 Rapid Deployment Centers
ā¢ Environmental:
ā The āgreenā movement
ā Home Depot is committed to conducting business in
an environmentally responsible way
ā¢ Legal:
ā Employer/employee disputes, product liability
disputes, workersā compensation claims
ā Foreign trade issues
13. External Analysis:
Five Forces
ā¢ Rivalry of Existing Competitors:
ā Lowes, Sears, and Ace Hardware
ā Home Depotās competition runs a range of lumber
yards, specialty interior stores that concentrate on
one aspect of the home, i.e. kitchens, lighting,
flooring, etc
ā¢ Threat of New Entrants:
ā The barriers to entry are high: large product
selection, highly trained employees, large startup
capital, prime real estate, strong regional
recognition, and customer loyalty
ā¢ Bargaining Power of Suppliers:
ā Price concessions
14. External Analysis:
Five Forces
ā¢ Bargaining Power of Buyers:
ā Since inception, primarily focused with the do-it-
yourself customers
ā Redefined the market by opening up the buy-it-
yourself and professional customers
ā¢ Threat of Substitute Products:
ā People will always have/need houses and the
desire to improve oneās home
ā It is hard to create a substitute that can
compete with Home Depotās low costs
ā A substitute to Home Depotās in store
home improvement classes is the
Internet
15. Recommendations
ā¢ Key is to transform HD into an
aggressive first-mover in the
market
ā Already making some moves in the
right direction
ā Be more aggressive by focusing on
commercial sales and taking
advantage of potential acquisitions
17. Recommendation:
Focus on Execution
Targeting Women:
ā¢ Capitalize on visit to store
ā Transition from Martha Stewart line to
typical HD assortment
ā¢ Women are growing force in household
decision making
ā Make sure women realize their capabilities
ā¢ In-store signage
ā¢ Project seminars
ā¢ TV specials
18. Recommendation:
Focus on Execution
International Expansion:
ā¢ China poses greatest challenge
ā Dramatically different culture and
logistics
ā¢ āThe Home Wayā HD store with
Chinese corporate culture- easier
and safer way to break into the
market
19. Recommendation:
Focus on Execution
Supply Chain:
ā¢ HD is mocing distribution into RDCās (Rapid
Distribution Centers)
ā Serves about 100 stores each (By end of 2010, 20
RDCās for US)
ā¢ HD struggles with management of inventory
levels
ā Inventory manager should have power to make
changes to stocking levels
ā Communication between department manager,
inventory manager and vendor reps to account for
seasonality and special events
ā Audit program to track reasons for stock outs
20. Recommendation:
Scripps Networks
Scripps Networks:
ā¢ Expand business by moving into
advertising industry
ā Competitive advantage no competitor can
easily imitate
ā Corner important target audiences:
ā¢ Do It Yourself Network
ā¢ Home and Garden TV
ā¢ Food Network
ā¢ The Travel Channel
ā¢ Fine Living
21. Recommendation:
Scripps Networks
Food Network:
ā¢ Cooking shows targeted towards those
most interested in cooking
ā Ties into kitchen remodeling (one of HDās
most common projects sought out by the
āDo-It-For-Meā consumer
ā Travel Channel and Fine Living cater to
more affluent customers with the financial
means to pursue most home improvement
projects
22. Recommendations:
Commercial Sales
ā¢ Market Home Depot has entered
and exited
ā¢ Customers
ā Very Demanding
ā¢ Deliveries
ā¢ Stock Outs
ā Long Term / Relationship selling
ā Cost Conscious
23. Recommendations:
Commercial Sales
ā¢ HD Strengths
ā Buying Power
ā RDCās / Supply Chain
ā Credit Department
ā Existing Resources
ā¢ HD Weaknesses
ā Customer Service
ā Sales Tactics
24. Recommendations:
Commercial Sales
ā¢ HD Supply
ā Conquered the commercial sales
āmountainā
ā¢ Service
ā¢ Lower price
ā Separate locations lead to loss of
efficiency
ā Overhead costs
ā¢ Lower margins
25. Recommendations:
Commercial Sales
ā¢ Create new āsales forceā within HD
ā Mobile, commission based salesman
ā Manager equal with store manager
ā Separation from retail culture
ā Low / No overhead
ā¢ Sales contribute to the individual store
revenues
ā¢ Utilize existing resources /
facilities / equipment
26. Recommendations:
Sherwin Williams
ā¢ Facts:
ā Painting and associated products:
20% of revenue
ā Painting #1 rated project
homeowners are willing to tackle
themselves
ā Sherwin Williams has the lowest
consumer market penetration
ā Sherwin Williams is the #23 rated
retail brand in the US (HD is 3)
27. Recommendations:
Sherwin Williams
Reasons for acquisition:
ā¢ Marketing Aspect
ā Drive consumers to the store
ā Create a destination within a product
segment
ā¢ Sears Craftsman
ā¢ Target / Wal-Mart in home furnishings
ā¢ Profit Aspect
ā Eliminate the āmiddle manā within the paint
industry
ā SHW revenues
ā Potential higher return
28. Recommendations:
Sherwin Williams
Implementation:
ā¢ Move SHW representatives into HD
stores
ā¢ Maintain existing SHW business model
ā Commercial / Industrial focus
ā Drives image
ā¢ Maintain separation
ā Efficiency and Service are key drivers
ā Possible service of existing clients on
limited basis through new locations