The Home Depot Employees
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Transcript The Home Depot Employees
Highlights:
$66.1 billion in revenue for fiscal 2009
Inventory Turnover ratio of 4.20
Over $8.6 billion in LT Debt
Inventory cycle repeats a little more than 4 times a
year
Looks very large, but HD does a great job of
managing debt
$867 million in net free cash flow
Emphasizes both profitability and liquidity of firm
Home Depot
Lowe’s
Quick Ratio (Acid Test)
0.23
.09
Debt to Equity
0.50
.27
Net Income
$2.661 billion
$1.783 billion
COGS/PP&E
2.500
2.000
1.500
Home Depot
Lowes
1.000
0.500
0.000
2006
2007
2008
2009
2010
Internal Programs
“Trim the fat”: Close Home Depot Design and sell
HD Supply
Boost Employee Moral
Success Sharing program, Homer Badges Program,
Aprons on the floor program
Revamp Supply Chain
Multi-million dollar distribution centers
External Programs
Focus on better customer service
Product Knowledge Recognition Program, Master Trade Specialist
Program
New marketing techniques
New tagline “More Saving. More Doing”
Holiday season marketing
Curb Geographic Marketing
Competing with online “How To” directions
Google
Competing with the housing slump
Frank Blake “A downturn is a horrible thing to waste.”
Home Depot Canada
Early 1990’s partnership with Molson
1st Home Depot Market outside of U.S.
Canada’s largest home-improvement retailer
Home Depot South America
Greenfield strategy bust
Chile and Argentina targeted, but peso crisis forced
HD to exit
Only opened 50 stores before withdrawal
Home Depot Mexico
Return to acquisition strategy
Bought out Total Home and Del-Norte
70% of homeowners in Mexico build own homes
Stronger relations with U.S. aided successful growth
Annual sales to exceed $50 billion
Chinese economy growing at 20% annually
Home ownership in cities equals 70%
Will face already well established international retailer
competition for the first time
Tweak product sales to better serve Chinese consumer
• SWOT analysis is a strategic planning tool
used to evaluate strengths, weaknesses,
opportunities, and threats involved in a
business venture or company.
• When analyzing The Home Depot’s
SWOT, a great number of strengths were
found with a slightly smaller list of
weaknesses. There is also a great deal of
opportunities for this company while
threats are held to a minimum.
Strengths
Weaknesses
Established brand
Rapid growth
name
Corporate Structure
Unique business
Advertising
model
Rapid growth ability
Extensive product line
Opportunities
Threats
Market share
High competition
Going global
Struggling economy
The list of strengths The Home Depot holds is
endless. Some of the top competitive factors that have
enabled The Home Depot to make it to the top and
remain there are:
•
•
•
•
Established brand name
Unique business model
Rapid growth ability
Extensive product line
Other significant strong points of the company that
are of value include: a superior corporate structure
including bottom-up training, superb use of satellite
communications and technology, differentiation based
on service, decentralized management, and
strategically placed, convenient store locations.
Although The Home Depot has an astonishing list
of strengths, the list is matched with a similar list of
weaknesses. A few of the company’s strengths play
dual roles serving as a hardship on the entity as well. A
few of the significant weaknesses include:
• Rapid growth
• Corporate Structure
• Advertising
• MARKET SHARE: The market share for the home
improvement industry is of a high magnitude. There is
still an immense amount of market share out there to
be soaked up with and utilized. Any successful
company in this industry has the opportunity to gain
this market share.
• GOING GLOBAL: The Home Depot already has its
foot in the markets of Canada and Mexico. While it has
a foothold in number of markets around the world,
there is always room to grow and new countries to
open branches in. The company has more than enough
manpower and means to expand to its desire.
• COMPETITION: The Home Depot was able to
penetrate a blue ocean in home improvement for a small
period as it offered a new product of high value at fairly
low prices. It didn’t take long, however, for others to
realize it was a profitable market. It was soon infiltrated
with a number of hardware, carpentry, and construction
companies.
• ECONOMY: One of the first areas of a person’s life
that will be cut during hard times is luxuries and
unnecessary expenses such as home improvements.
This could potentially lead to a slow sales season for
The Home Depot as unemployment rates are at an alltime high.
Recession Affects
4Q 2009 Profit
Sales increase 2.5% in 2010
2010=“Transitional Year”
Cutting Costs
New Ideas
Lowe’s
Menards
Sutherlands
Industry analysis to determine the competitive
intensity and overall profitability
Industry Sales
2007
2008
2009
2010
Home Depot
2.60%
-2.12%
-7.84%
-7.17%
Lowe’s
8.52%
2.89%
-0.11%
-2.09%
Industry Average
5.56%
0.39%
-3.97%
-4.63%
Negative Sales growth can suggest increased
competition to gain market share
Concentration
The higher the concentration level, the fewer
number of firms needed to get job done. Thus,
there is less competition.
Home Improvement Industry has high level of
concentration.
Market Share
70.00%
60.00%
50.00%
40.00%
Home Depot
30.00%
Lowes
20.00%
10.00%
0.00%
2006
2007
2008
2009
2010
Economies of Scale
refer to a company’s ability to mass produce to drive
down costs; the firm increases the scale of its operations
By examining the total assets, we can see a firm’s ability
to produce on a larger scale, which increases economies
of scale.
Total Assets (in millions)
Company
2006
2007
2008
2009
2010
Home Depot
44,405
52,263
44,324
41,164
40,877
Lowe’s
24,639
27,767
30,869
32,625
33,005
Switching costs
When switching costs are low, a consumer can easily
go through a different company to get the same
product. Because of the high competitiveness
the home improvement retail industry is characterized by low
switching costs and low differentiation of products.
Exit Barriers: Exit barriers are high when it is hard
to exit the industry
The large amount of assets along with lease
agreements allows for high exit barriers
Economies of Scale
If large scale economies are present, new firms can be
forced to invest heavily to remain competitive
In the retail home improvement industry, new firms
must come in with a large amount of capital strength
if they plan to sustain and be competitive with the
Year Established
larger corporations.
Home Depot
1978
First Mover Advantage:
Lowes
1934
Menards
1972
If the companies within an industry have already Sutherlands
acquired an advantage in product innovation, new
entrants may be deterred from entering the market.
In the competitive home improvement industry, each
company must keep up with the current market to
meet customers’ wants and needs.
1917
A substitute product is any alternative a potential
customer can find outside of the industry to satisfy
their same need.
Low: The only major substitute customers have to
the home improvement industry is to buy
professional builders and contractors.
With the existence of several firms in the home
improvement industry, buyers have a large amount
of bargaining power. Conversely, customers of an
industry that is dominated by a single firm have
little to no bargaining power.
Customers have a significant amount of bargaining
power in the home improvement industry. This
level of bargaining power drives prices down in the
industry.
the amount influence the suppliers to companies
in the home improvement industry have.
Companies are the customers
the home improvement industry face low levels of
bargaining power of suppliers. This is due mainly
to the commodity-like products that suppliers sell.
•Decentralized,
•Allows
lateral relationships
for flexibility in each store
•More costly, but allows for increased growth
•Horizontal AND vertical linkages among
management
“orange blooded” company culture
Guide behaviors for all employees
Camaraderie and success among employees
Full-time, salaried employees work best
Core values stressed
Entrepreneurial spirit encouraged
With any success comes backlash
The Home Depot and Wal-Mart faced similar
criticisms for their methods of operation
•Similarities:
•Saturation Strategy
•Low price policy
•Anti-union policies
•Forces mom-and pop-shops to close their
doors
Special Vision
Your Total Value
The Home Depot Foundation
Keeping Employees Satisfied
Meeting Individual and Family Needs
Core Benefits Package
Financial Benefits
Affordable Housing Built Responsibly
Sustainable Community Development
Team Depot
Corporate Social Responsibility
“Going Green”
The SER Program
9 Rules