Competitive and Strategic Analysis of Home Depot - Case Study Example

?Competitive & Strategic Analysis of Home Depot of the of the of the Competitive & Strategic Analysis ofHome Depot Answer 1(a) Strategic management is considered as one of the essential subjects encompassing the managerial responses, competitive and entrepreneurial strategies developed at each and every business stage. It is also considered as one of the managerial devices which have the potentiality to develop long and short term planning for the removal of constraints and complexities. It helps in the evolution of long and short term planning process. This is one of the major reasons which are known as destination marketing as it helps in the attainment of the goals and objectives. Answer 1(b) Home Depot is known for developing strategies based on the strategic management techniques and principles. Some of the important polices of Home Depot based on strategic management techniques are as follows: The product policies of the company are facilitated by merchandising transformation and development of portfolio strategy. These are triggered by innovation, value and assortment. The company has laid emphasis on interconnected retail strategy which provided seamless shopping opportunity to the customers. The sustainability integration system of Home Depot is a forum which reports measuring of the output produced and also highlights the wide range of sustainability options available for Home Depot (“Employee Self-Service (ESS) Welcome”). Answer 1(c) The mission of Home Depot is to provide excellent customer service by offering a diversified range of environment friendly innovative products and also advices customers on how to use the product to derive maximum advantages. Some of the important short and long term goals and objectives of Home Depot would be as follows: To bring an increase in the sales of the CFL light bulbs and the recharge batteries as they are easily recyclable. The company plans to increase the sales of the CFL bulbs from 1.6 to 3.0 million. The management of Home Depot plans to increase the sales growth by 2.0 to 2.5 percent in each store of each region. The major objective of this plan would be to increase the gross and operating margin expansion in each and every store. To increase the number of store layout by 2 percent in regions of Canada, America, Mexico and China and generate earnings more than 2.6 billion in each region during the tenure 2013 to 2014. Answer 2(a) The traditional roles of board of directors would be as follows: Active involvement and participation of the directors in decision making To check whether the accounting practices are being adhered according to the standards lay down by the accounting boards like International Financial Reporting Standard (IFRS) and International Accounting Standard Board (IASB). To ensure that the financial activities do comply with the Sarbanes Oxley act and other legal requirements. To be consulted in decision making related to matters like appointment of personnel, developing compensation system and also checking the work of the internal and external auditors (Fielding 110). Selecting the new personnel for board of directors (Fielding 200). Answer 2(b) Dealing with corporate governance issue requires the cooperation from the stakeholders, shareholders and the management. Corporate governance in Home Depot often deals with the frequent conflicts that arise in the meetings among the boards of directors and the management. The annual meetings often witness frequent conflicts that arise out of differences in opinion concerning managerial decision making. Presently, the management of Home Depot is trying to incorporate theories like stakeholder theory and Agency theory which focuses on the improvement in the relationship between boards of directors and the management. Home Depot is engaged in several community development activities which benefit the community, society and also increase the goodwill of the company. One of the most recent activities meant for the betterment for the entire society development was the military commitment society initiative. This military society initiative undertaken by Home Depot lays emphasis on recruitment of former and existing military personnel. The initiative focuses on helping the military veteran who has partial disability and providing job opportunities to National Guard members. Presently, more than 60000 military veterans work at Home Depot and are offered a work environment which helps the military personnel in enhancing their skills and values. They are also offered the opportunity to transfer the cases of reassignment of several duty stations depending upon the job store availability. Job opportunities are also provided to the spouse of the military personnel giving the equitable chances in gaining recognition in their career. They have also become an additional member of the Army Spouse Employment Partnership Program (ASEP). Answer 3(a) Competitive advantage Competitive advantage revolves around communicating a greater amount of perceived value to particular target market and attain favorable position which seeks to become profitable than its competitors. The company operates on a mini-network system which is also influenced by the Big Box model. The mini network system enhances both the online and the offline distribution network and focuses on the efficiency system of the delivery system within a particular range. The network model focuses on the delivery of light, heavy and bulk order through online mode not only to clients but also to any retail store that is in urgent need of the product. Home Depot has not only successfully adopted this model but has reaped great benefits out of it unlike Wal-Mart who could not manage to successfully implement the model. Core Competency Home Depot offers a diversified range of home improvement products and services ranging from tools, paints and furniture ranges. It is one of the few home improvement stores which offer customized home improvement services like moving services, truck and car rental, installation services etc. The moving services provide customers with the opportunity to avail these services while shifting and relocating homes. The truck and car rental system allows the customers to hire the car and shift the items by themselves during relocation. The truck and car rentals service rates are not only affordable but also support the payment in installments. Apart from the moving and truck, car rental services, the company believes in developing several sustainable initiatives which aid both the betterment of the society and helps the customer to rebuild and sell their homes effortlessly. Home Depot is the only home improvement store in America which provides the professional contracting services which allows the customers to paint their house and avail the services from Home Depot. This system also allows the customers to avail the tools, paints, brushes on a hire on a contractual or one stop payment basis. The paints used are not only environment friendly products but also comes with certain environment protection messages and instruction manual on painting and brushing. The company also encourages the sale of LED CFL bulbs which are easily rechargeable and recyclable. Home Depot happens to be one of the few home improvement measures with one of the main sustainability measures which is to increase the sale of these bulbs to promote energy savings within the society. Answer 3(b) The Porters Five Forces Model is very instrumental in identifying the external threats faced by the retail industry which have the potentiality of affecting the profits of the industry. Bargaining Power of Buyers: The American retail industry consists of leading companies that specialize in selling goods of high quality at affordable prices. The brand loyalty of the retail companies is also decided by the customer preferences and their different categories. The product ranges are almost synonymous but there is a difference in the quality and price range. The availability of the products is easy. Therefore, it can be said that the bargaining power of customers is high in the retail industry. Bargaining Power of Suppliers: Suppliers form an integral part of the retail industry and help in the smooth supply and delivery of goods. The American retail industry is highly dependent on the timely supply of goods which also affect the profitably of the industry to a large extent. Some of the certain companies like, Lowe and Home Depot plan to centralize the purchasing operations and decrease the inventories of merchandise which reduce the effect of the suppliers. Given the present scenario in the retail industry, the bargaining power of suppliers is very high in the industry. Intensity of Rivalry among Competitors: Presently, the home improvement retail market in USA is very saturated and there is a high intensity of competition among the existing companies Lowe and Home Depot. Both the companies specialize in different products, Home Depot earns majority of its revenue from the online store compared to the offline and online stores of Lowe. Threat of Substitutes: In the case of home improvement retail sectors, the threat of substitutes is minimal. This is because the home improvement companies are the only sector concentrating on technological innovations and innovative offerings in the home furnishing sector. There are no substitutes for the home improvements sector. Threat of New Entrants: The magnitude of threat of new entrants is determined by the large proportion of the market share held by the existing retail companies. It has been observed that the Lowe and Home Depot are some of the important retail companies that yield high amount of profitability in the market and prohibit the entry of the novice retail companies. The strong influence of the existing retail companies on the suppliers and distributors also debar the entry of novice retail companies to enter into the markets. During the tenure 2010 to 2103, there was emergence of fewer retail companies into the US markets. Wheelen and Hunger call: This element deals with the relative power of stakeholders in the companies which include government, trade associations, local communities, unions, shareholders etc. The stakeholders and shareholders in the US home improvement retail sector have sufficient power. It is the opinion and the input of the stakeholders that contribute significantly to the managerial decision making regarding product and service development. Therefore, it is observed that the relative power of stakeholders is very high in this industry. Answer 4(a) To distinguish itself from its competitors the company adopted the business differentiation model. The business differentiation model helps in distinguishing its products and services from others by allowing the management to position the company in a way to help the customers to distinguish between the customers and competitors products and services. This strategy helps in the differentiation of the products and services based on range, quality, price, service and convenience. The management of Home Depot adopted the cost leadership strategy which would lower the cost structure and also improve the cost of operation. Home Depot concentrated on the improvement in supply chain, merchandise transformation and customer service. The three-level strategy creates great value for the company and caters to the needs of the customers. The business model also focuses on incorporating different types of sustainability model which is meant for the betterment of the entire society and community. The concept of selling environment-friendly products is a result of incorporating profit oriented initiatives in the business model adopted by Home Depot. Answer 4(b) Value Chain Analysis The value chain of Home Depot is segregated into primary and supporting activities. Primary Activity The value chain analysis is important to lay down the business level strategies. The primary activities include the selling of home improvement goods and services. Products sold by Home Depot include paints, cleaning product like upholstery, carpet, tile and grout cleaning products, gas roofing, water heaters and such. Inbound and Outbound Logistics They are largely dependent on the suppliers for the timely delivery of goods and services. The home improvement products and services need to be delivered within a particular time frame to avoid expiry. Home Depot has always managed to maintain stable relations with suppliers and a supplier diversity program was introduced to maintain stable relations and also to develop innovative services in the supply chain and logistics systems (“Message from Supplier Diversity Leadership”). The supplier base in Home Depot is divided into two parts - online and physical store suppliers. The suppliers in Home Depot are responsible for delivering customers who order online and also to several store outlets of Home Depot. Operations This includes the purchase of the home improvement goods and services from leading brands and then distributing it to Home Depot stores across different locations (“Organization Chart”) Marketing and Sales Home Depot promotes its products aggressively through print and social media. Discounts and offers of the company are promoted through radio and social media because of their cost effectiveness and utility (“Our Company”). Services Apart from selling home improvement goods and services, the company also provides moving, packing and truck rental services for shifting purposes. Supporting Activity Support activities involve support assistance which is required for the primary activities. Procurement As mentioned before, the company procures home improvement goods from leading brands on a contractual basis and then sells it through their online and physical stores. Technology development Technology is very important for supply purposes within Home Depot. Technologies like radio frequency help in applying and removing tags (Dye 263). Other advanced technologies help the company to track and monitor goods from the supplier base to the physical stores or individuals. Human Resource Management The company recruits from a diversified workforce and believe in imparting training and induction to the employees for the achievement of goals and objectives in unification. Infrastructure Presently, the company owns more than 22,200 convenient locations throughout USA, Canada, China and Mexico (“Global Presence”). Answer 5(a) In terms of business level strategy, Home Depot has adopted the cost leadership strategy. They have revised the cost structure of the company. By lowering the prices of the products, they could attract potential customers and also retain the existing customers. Along with the cost leadership strategy, the management also proposed the cost leadership model which is based on improving business performance within three years (“Organization Design”). In terms of corporate level strategies, the company focuses on the value creating strategy. As per this strategy, the company will turn to seek out its competitors by gaining a huge market share (Stock, “Home Depot Found a Way to Plug a Huge Hole in Its Business Model”). Answer 5(b) Strength Cost leadership strategy helps in promoting mass consumerism and attracts large number of potential customers. Value creation strategies help in offering diversified range of products to customers and also to create value (“Organization Transformation for an Oil and Gas Super Major”). Weakness Cost leadership strategy fails to attract the niche clients or clients belonging to the higher income group as they associate the price of the products with the quality. High priced product is often associated with good quality (Bradley, “Types of Corporate Level Strategy”). Value creation strategies fail to capture the niche markets. Answer 5 (c) Although, Home Depot has taken several sustainable development initiatives, it has failed to cover aspects like plantation of trees and rebuilding homes for the underprivileged (“Stores, Products, and Services”). Home Depot needs to address these environmental concerns and undertake initiatives such as, plantation of trees and rebuilding several homes for the underprivileged. This would help in enhancing the image of the company along with gaining attention from potential customers. Works Cited Bradley, Jeremy. “Types of Corporate Level Strategy.” Chron. Chron, 2013. Web. 24 October. 2013 Dye, Lowell. Managing Multiple Projects: Planning, Scheduling, and Allocating Resources for Competitive Advantage. Florida: CRC Press, 2002. Print. “?Employee Self-Service (ESS) Welcome.” Home Depot. Home Depot, 2013. Web. 24 October. 2013 Fielding, Michael. Effective Communication in Organisations. Claremont: Juta and Company Ltd, 2005. Print. “Global Presence.” Home Depot. Home Depot, 2013. Web. 24 October. 2013 “Message from Supplier Diversity Leadership.” Home Depot. Home Depot, 2013. Web. 24 October. 2013 “Organization Chart.” Cosmo. Cosmo, 2013. Web. 08 October. 2013 “?Our Company.” Home Depot. Home Depot, 2013. Web. 24 October. 2013 “Organization Design.” Schlumberger Business Consulting. Schlumberger Business Consulting, 2013. Web. 08 October. 2013 “Organization Transformation for an Oil and Gas Super Major.” Bain & Company. Bain & Company, 2013. Web. 08 October. 2013 “Stores, Products, and Services.” Home Depot. Home Depot, 2013. Web. 24 October. 2013 Stock, Kyle. “Home Depot Found a Way to Plug a Huge Hole in Its Business Model.” Bloomberg Business Week. Bloomberg Business Week, 2013. Web. 24 October. 2013 Read More