Industry-Strategic Analysis [University] [Instructor Name] Executive Summary This industry comprises of firms and other entities known as ‘Home Centers’ that retail home repair and maintenance products to consumers. The industry is attractive because of its large market share, low bargaining power of buyers and suppliers, moderate level of barriers to entry into the industry and competitiveness in the industry…
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Industry-Strategic Analysis This industry comprises of a number of establishments known as ‘Home Centers’ that are primarily engaged in retailing of products relevant to the repair and maintenance of homes. Such goods include lumbers, plumbing, electrical goods, hardware, tools, and lawn and garden supplies. Home centers also provide building materials and other consumer goods relevant with the repair and maintenance (census.gov). These goods are either purchased from domestic or international manufacturers of suppliers. Operators then retail these goods to the ultimate consumers through their stores (IBISWorld, 2006). Industry’s Dominant Economic Features This industry has a vast market size which is the dominant economic factor of the industry. Other economic factors are significantly affected by the market size in the industry. The annual sales of the industry are estimated at $135.4 billion. As the products offered by home centers are utilized by consumers in all the segments of the market, therefore the market size is extended to all the levels of the market. The business conducted in the industry is comparatively easy to operate therefore the industry is growing at a very fast pace. This scenario has initiated a stiff competition within the industry and major home centers are increasing at an unprecedented rate at the expense of smaller entities in the industry (Sinderman, 1997). The number of rivals within the industry is high. Since the goods produced by the industry are not dependent upon technology therefore the abrupt technological changes do not affect the operations of the industry to a significant extent. This allows the industry sufficient time to acclimatize with the changing trends. The products in the industry are mostly of a generic nature therefore there is not much differentiation between the products. The segments within the industry include specialized home stores that retail specialized goods only such as stores specialized for plumbing, electronic goods etc. Such stores do not retail any other goods other than the specialized goods. Porter’s Five Forces Porter’s Five Forces analysis is conducted to determine whether an industry is attractive for entrepreneurs (Hitt, 2009). In order to analyze the home centers industry, the analysis is being conducted on Home Depot. Home Depot is an American retailer of home improvement products. Home Depot is the largest retailer of home repair and maintenance products in the US therefore it is one of the most important constituents of the industry (Form 10-K, 2010). Following is the Porter’s Five Forces analysis of Home Depot. Threat of Substitute Products Threat of substitute products outside the industry is low because there are no or less substitutes for the home repair and maintenance products. It was determined by the following facts. In case of plumbing, there is not other industry that produces such goods. Similarly, in case of goods like carpets, home decor goods, and other electronic goods for home maintenance, there are no substitute goods produced by any other industry. Therefore home depot has a low threat of substitute products. The main products produced by the company are tools, shelves, indoor and outdoor
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