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Home Depot Case - Research Paper Example

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Home Depot Case Subject: Management I.Executive Summary The Home Depot (HD) leads all competitors in the industry. Although the outgoing CEO had greatly improved the process to arrive at higher sales and profitability, there is one important result required by the Board but not yet achieved…
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Home Depot Case
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Download file to see previous pages Further research reveals there is a top management challenge to develop a good Strategic Plan, one that will retain the accomplishments of the previous CEO in terms of process and at the same time add missing ingredients. HD needs a Strategic Plan that will provide the finest customer services across all branches and that will convince the financial analysts in the stock market to recommend HD shares so as to push up the prices of its shares of stock. To win in that challenge without much experimentation, it is advisable for the new CEO to tap one expert financial adviser who is familiar with the stock market and has contacts with financial analysts, and another expert in the field of Retail Management and Customer Relations for the industry wherein HD belongs. With these two experts, and with good relationship and coordination with the Board, the right performance indicators can be agreed upon. Once people are all directed towards the accomplishment of action plans in the Strategic Plan, Home Depot value of shares will soar to the satisfaction of the Stakeholders. II. Background A.Problem Statement After the resignation of Home Depot’s CEO, Robert Nardelli, who had served the organization from the years 2000-2006, the new CEO, Frank Blake, has to decide what to do in order to satisfy Home Depot Stakeholders who wanted the value of the corporation to increase. Re-stated in a question, what should be the strategies of the company to achieve desired results? B.Symptoms Although the profit margins and sales increased during the term of office of CEO Nardelli, and the number of store outlets grew yearly, the Stakeholders were not impressed and were in fact dissatisfied. The cumulative shareholders’ returns in 5 years was reported in the case to be at negative (-13%). This obliged them to tie up the income of the CEO to the share prices of Home Depot which have been down. In terms of financial performance, more details are in the Appendix Figure 1B. In one article by Simpson, Stephen D. (2006), the author noticed how sales growth of Lowe was much faster than that of Home Depot. He said: “All that said, it is clearly true that Lowe’s is the pluckier and faster growing of the two concepts. Sales in the 4th quarter climbed over 26%...and earnings per share rose nearly 36%. Certainly those numbers outstrip what Home Depot managed to accomplish.” Stephen furthermore added that it was generally known that Lowe’s had “better customer service”. Compared to Lowe in 2006, Home Depot was growing in sales by only 11.14%. C.Critical Factors The experiences of both CEOs Robert Nardelli and Frank Blake were not in the Retailing or Marketing Industry. Both came from GE or General Electric. Nardelli came from the Power Systems Division while Blake was a lawyer. Thus, the former CEO was good at cost cutting and improvements in the process, but weak in customer handling and probably even marketing. The new CEO, on the other hand, was faced by circumstances he did not have expertise on. Shareholders were dissatisfied by the relatively poorer performance of the share prices of Home Depot in the stock market. The graph showed HD shares declining in value. Checking on the financial side, it can be seen that Nardelli actually did a fine job of providing the profitability, growth in sales, and liquidity. Further research revealed the presence of an aggressive competitor, Lowe, which was penetrating the market of HD since it opted to expand by ...Download file to see next pagesRead More
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