Strategic Analysis of Home Depot Inc - Case Study Example

? Strategic Analysis Strategic Analysis Strategic analysis in business refers to the unique plan a business is using to advantageously position itself in the industry and its operating environment. It is an invaluable tool in planning for a business as it researches the factors that affect the business from within and also externally (Floor, 2006). This paper explores the business strategic plan used by Home Depot Inc, a private listed American company that deals with construction and home improvement equipments. The company has over two thousand stores in the US alone, and others operating in other countries such as Canada. It was founded in 1978 and has grown to become the fastest growing retail store in America. This analysis evaluates this plan using the SWOT analysis tool, to identify the company’s strengths (S), weaknesses (W), its opportunities (O), and what threatens its sustainable growth (T). Home Depot was founded on the intention of being the largest home improvement facility in America. The company’s mission statement comprises of its core values which are: taking care of people, giving back to the community, doing the right thing, excellent customer service, building strong relationships, creating value to the shareholders, respect for all, and encouraging the entrepreneurial spirit (Floor, 2006). This reveals the high value the company has placed in people and clearly shows the purpose of the business. It is very elaborate and is a plus for the company. Home Depot is now the largest chain of retail store in the county, and is a brand name. This is an achievement of its vision. The company has been actively involved in various corporate social responsibility initiatives, spending over $200 million in a number of causes. The key strength is their customer service and affordable costs. The three top priorities in Home Depot’s strategic plan are to offer goods and services that are targeted at the low cost market, to open more outlets, and to increase their range of products. Besides this, Home Depot also aims at being the exclusive supplier of building materials to licensed contractors. These three capture the core objectives of the company, established on the company’s values and in line with its vision. For example, the company seeks to focus its operations on improving customer satisfaction, by offering a variety of products and providing innovative products at competitive prices. This goal supports the company’s mission to deliver excellent customer service and to take care of people. According to Floor (2006), Home Depot has a unique strength in the market, as it has built a reputation by offering high quality goods. By expanding its range of products, the company will be tackling one of its weaknesses. The company has for a long time been criticized for providing products of the same type and design. This company faces this challenge because it purchases its supplies from other manufacturers, a factor that limits its control on the features in a product. Product monotony has given the other competitors in the market an edge over Home Depot. The company’s image has also suffered considerably due to various products being recalled by the management after complaints from consumers. To its shareholders, the company strives to give them value for their investment. In order to remain profitable and be able to pay dividends, the company seeks to continually open new outlets and reach new markets. Home Depot now has thousands of outlets in the US and has opened 180 stores in Canada, about a hundred in Mexico, and a few in China and Britain. The company is also aggressively promoting its products to customers by establishing extra supply channels. To increase its earnings, Home Depot is reducing its cost of doing business significantly and investing heavily in its R & D. Home Depot has partnered with contractors in the growing home improvement industry and housing market. These collaborations although few, are among the many core competencies of this company, which fast-track its objective to reward their investors (Bohm, 2009). Technology is a major external factor that has revolutionized Home Depot’s operations. While many companies struggle with implementing technology into their activities, Home Depot has integrated it in almost all aspects of its business. The company has introduced Electronic Data Interchange (EDI) to prompt them when a store is low on inventory. Stock taking has been made easier for them through the use of UPC codes to keep records of all their items. The company has also aggressively furthered its online presence. The internet presents an opportunity for the company to expand its market reach, by offering online shopping services (Bohm, 2009). Competition is another external factor affecting the company. In the home improvement industry, Home Depot faces rivalry from companies such as Lowes and Builder’s square. Home Depot has managed to stay ahead of them by stocking brand names, having helpful employees who offer exceptional service, and having an extensive network of stores. It also offers low cost products which appeal to majority of consumers as opposed to Lowes, which targets the high end market (Pride & Ferrell, 2011). The external environment also bears one of the biggest threats to the company. The US economy is not doing well. A lot of people are struggling with the economy and high unemployment rates in the country. The purchasing power of consumers has been highly affected by the economy, and spending on home improvement projects is expected to decline by up to twelve percent per year as a result (Bohm, 2009). Home Depot’s management is one of its internal assets. Key managers in the firm have been in the retail market for years. They are experienced in sales and understand what customers want. Besides this, many of them have worked at Home Depot and have been prompted to their current positions. This internal promotion of long serving employees ensures that workers are motivated to work for them and are attached to the company. Among the notable board members of the company are its co-founders, Bernard Marcus and Arthur Blank. They have a wealth of experience in management and have the company’s vision at heart (Bohm, 2009). Another opportunity that has been identified by the company is revision of its marketing strategy. As highlighted earlier, this involves expanding its product range from the conventional products, to attract both new and existingcustomers. Staffing is also an internal factor that influences Home Depot’s performance. So far, the company has had a reputation of offering excellent customer service. This has been particularly through its workshops and seminars on home improvement, targeting the do-it yourself segment of the market. However, a lot of complains have been lodged against the untrained staff and associates that are often deployed in the stores. This is a serious threat to the company (Bohm, 2009). Home Depot’slow price strategy is what sets it apart from other companies in the market. The company has equipped its employees with technology to enable them spend more time with customers. By focusing more on the customer, offering exciting products and controlling professional contracts, the company is seeking a competitive advantage in the market. Home Depot’s approach to the international market is by the direct investment strategy. The company opts to acquire already existing firms in other countries as its plan on expansion. This way, it fully understands the market, suppliers and business practices of the new environment. It is also advantageous as it builds on the success of the existing business rather than start from scratch. This approach is working for them as it is easy to transfer the company’s expertise through his model (Bohm, 2009). From the above discussion, the strategic analysis of Home Depot Inc using the SWOT analysis can be concluded as follows. Home Depot’s strength is its competitive prices, excellent management and outstanding customer service. Besides this, its sizeable distribution channel is also an asset. However, the company has weakness in its staff training and lack of innovativeness in its product line and product recall. The internet is one of opportunities the company should capitalize on to further its growth. Another opportunity is in the new markets the firm is growing towards and the new products being introduced. The poor economy and unsatisfied customers are the company’s biggest threats in attainment of its objectives (Bohm, 2009). The company should intensify its international expansion plans to increase its economies of scale. However, it should consider producing environmentally friendly products that are energy efficient and develop customized products in these new markets in line with the customer needs. The culture of exceptional customer service should continue at the company, and its associates extensively trained on all products to effectively assist customers. The company should give more focus on innovation and creativity, as this is the strategy which most successful companies are employing nowadays. Creativity and innovation basically promotes uniqueness, where a company or a firm is able to come up with unique products, hence making the products to stand out from the other related or similar products in the market. Therefore, Home Depot Inc should also give much focus on innovation and creativity, so as to remain relevant in the industry or in the market. References Bohm, A. (2009). The SWOT Analysis. Munich: GRIN Verlag. Floor, K. (2006). Branding a Store:How to Build Successful Retail Brands in a Changing Marketplace. London: Kogan Page Publishers. Pride, W. M., & Ferrell, O. C. (2011). Foundations of Marketing. Connecticut: Cengage Learning. Read More