Home Depot Caso Estudio

TABLE OF CONTENTS

THE HOME DEPOT, INC. 1
EXTERNAL ENVIRONMENT - INDUSTRY ANALYSIS 1
COMPANY ANALYSIS – STRATEGY 2
Corporate history 2
Strategy 3
FINANCIAL RESULTS 5
ASSESSMENT AND RECOMMENDATIONS 6
References 7
Exhibit 1: Home improvement retail industry leaders 8
Exhibit 2: Five forces of competition analysis 9
Exhibit 3: Financial results – The Home Depot 10
Exhibit 4: Lowe’sfinancial results 14
Exhibit 5: Home improvement retail industry statistics 16
Exhibit 6: The Home Depot SWOT analysis 17




THE HOME DEPOT, INC.
The Home Depot is an Atlanta based company that ranks first in the home improvement retail market. It is also the second largest retail company in the world following Walmart. This paper will study the industry which the company belongs to and thecompany strategy to assess the company’s performance over the last five years, which coincides with the period of time the current CEO has been in charge of the company. After the thorough analysis, there will be a set of recommendations for the company.
External Environment - Industry Analysis
The Home Depot belongs to the retail industry. Because it is a huge industry and it would becomplicated to obtain conclusions by studying the whole industry, we will narrow our focus and will analyze the home improvement retail industry which the company belongs to.
Retailers from this industry typically sell different kinds of building materials, home improvement supplies and lawn and garden products. The target customers usually are do-it-yourselfers (DIY) as well as home improvement,construction and building maintenance professionals. The industry has a fairly concentrated market structure; it is dominated by a few strong competitors (Home Depot and Lowe’s) with a reduced number of other small players. See Exhibit 1 for industry leaders’ basic data.
Home improvement appears to be less a retail sector and more a movement. There are sociologic facts that boosted the growth of theindustry. E.g. when the ABC program Home Improvement debuted in 1991 , The Home Depot's annual sales were about $3.8 billion and the company employed 21,500. When the show ended in 1999, the chain (the #1 DIY store operator in the US) had annual sales of about $38.4 billion with 201,000 on the payroll. Home improvement retail sales were around $230 billion in 2004. Home improvement is the weekendhobby of millions of enthusiasts around the world. Weekend DIY-ing is so popular that there are even cable networks dedicated to home improvement along with prime time shows in broadcast channels.
Fueled by the low interest rates, home ownership in the United States has been continuously growing over the last years. As home owners invest much more on home improvement than home renters, our industryof study has shown an important growth rate over the last years: an annual compound rate of 7.2 % from 1998 to 2003.
Furthermore, 85 % of the nation's homes were built prior to 1980 and will need frequent maintenance, meaning the industry can expect to expand even more. Some experts estimate a 5.3 % rate in the 2003-2008 period so that US home improvement sales will reach $265 billion by 2008 .Currently, big-box chains continue to open stores in the US and abroad. What is clear is the important influence that the general economy has over this particular industry. An increase in interest rates would lead to a halt in home sales that could provoke a stop in the industry growth.
Sales in this industry are seasonal having its peak during the spring and summer, when most customers start homeimprovement projects. Bad weather can affect sales as it has happened during spring 2005.
Technology does not affect this industry in a strong way although it is possible to take advantage of technical advances by offering better products and being more efficient in operations.
Although in the future it can be expected for this industry to reach maturity and stop growth, home improvement is...