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Case 14: Home Depot

Case 14: Home Depot

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Case 14: Home Depot

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  1. Case 14: Home Depot Team Five Wei-Chun Chen (Casey) Yeonghan Choi Susanna Mark Martin Williams Byungseok Kim Team Five: Chen, Choi, Kim, Mark, Williams

  2. Agenda • Introduction - Byungseok Kim • SWOT analysis - Martin Williams • Recommendations & Current Situation - Wei-Chun Chen Team Five: Chen, Choi, Kim, Mark, Williams

  3. Introduction • Company: • Founded in 1979, Atlanta, Georgia • Largest home center retailer • One of thirty largest retailers • 28,000 employees • Sales volume increase from 22 million in 1980 to 5.1 billion in 1991 • In 1991, 174 full service warehouse stores in 15 states • 1982, 1988 retailer of the year • Annual sales growth rate of 38% • Excellent working capital for expansion Team Five: Chen, Choi, Kim, Mark, Williams

  4. Introduction • Current target market • Do-it-yourselfer (DIY) • Married male homeowner • 25-54 years old • High school or college educated • Mean income of $20,000- $40,000 • Home remodeling contractors • Building maintenance professionals • Other professional customers Team Five: Chen, Choi, Kim, Mark, Williams

  5. Introduction • Merchandising strategy: • Excellent customer service • Everyday low pricing • Broad product selection Team Five: Chen, Choi, Kim, Mark, Williams

  6. Introduction • Average store profile • Company owned, not franchised • Store size: 67,000 - 140,000 square feet • “Make the store fit the land” philosophy • Regional purchasing and distribution centers Team Five: Chen, Choi, Kim, Mark, Williams

  7. Introduction • Corporate culture and organization structure • Importance of the individual • Informal corporate culture • Nonconformity • Autonomy of store manager • Approximately 17 mangers per store • 1 store manager • 6 assistant managers • 10 department managers Team Five: Chen, Choi, Kim, Mark, Williams

  8. SWOT AnalysisStrengths (1 of 2) • Suppliers • Authority Vs. responsibility • Corporate structure: • Promotion from within • Regionalization • Training • Organizational structure Team Five: Chen, Choi, Kim, Mark, Williams

  9. Strengths (2 of 2) • Use of technology • Customer service • Human resource • Cannibalization of sales of new stores to existing stores • Rapid expansion • DIY market is recession proof Team Five: Chen, Choi, Kim, Mark, Williams

  10. Weaknesses (1 of 5) • Only targeting the DIY market • Suppliers • Purchasing from 1900 - seems too high • Employee turnover • Corporate structure: • Promoting from within - only will get an insider prospective Team Five: Chen, Choi, Kim, Mark, Williams

  11. Weaknesses (2 of 5) • Rapid expansion • May be expanding too quickly and growing faster than corporate culture can handle • May be distracting to existing stores Team Five: Chen, Choi, Kim, Mark, Williams

  12. Weaknesses (3 of 5) • Advertising • Their strategy calls for aggressive adverting, yet their sales are growing exponentially, yet advertising is stagnate • Refer to the next two charts • Based on exhibit 1 Team Five: Chen, Choi, Kim, Mark, Williams

  13. Weaknesses (4 of 5) Team Five: Chen, Choi, Kim, Mark, Williams

  14. Weaknesses (5 of 5) Team Five: Chen, Choi, Kim, Mark, Williams

  15. Opportunities (1 of 2) • Small market share in the home improvement market • Approximately 5% • Overseas • Form partnerships with larger contractors • Domestic housing market • Affordable • Growth potential Team Five: Chen, Choi, Kim, Mark, Williams

  16. Opportunities (2 of 2) • Form partnerships with suppliers • Use of newer technologies - such as the Internet • Attract potential employees • On-line resume • A new medium for advertising • Pop up windows or links Team Five: Chen, Choi, Kim, Mark, Williams

  17. Threats (1 of 3) • Mergers • If Home Depot mergers with other companies, for example Bowater Warehouse, this may cause incompatibility with the two companies Team Five: Chen, Choi, Kim, Mark, Williams

  18. Threats (2 of 3) • Expansion growth: • This may lead itself to monopolistic inquires - especially if they continue with mergers or rapid growth • Asian countries • Housing market is not as readily available as domestic Team Five: Chen, Choi, Kim, Mark, Williams

  19. Threats (3 of 3) • Competition • Lumber yards • Home improvement stores • Major competitor - Lowe’s • Regional home improvement stores • Chase-Pitkin • J-Kay Lumber Team Five: Chen, Choi, Kim, Mark, Williams

  20. Recommendations (1 of 3) • Expansion strategy • Hire more outsiders in corporate offices • International • Asian countries • Form partnership with subcontractors instead of targeting DIY • The American countries Team Five: Chen, Choi, Kim, Mark, Williams

  21. Recommendations (2 of 3) • Expansion strategy (continued): • Domestic • Continue expansion to improve customer satisfaction • Target markets other than DIY • Upscale interior design products • Contractors Team Five: Chen, Choi, Kim, Mark, Williams

  22. Recommendations(3 of 3) • Suppliers • Use Just-in-time inventory • Reduce the number of suppliers • Form partnership relations with existing suppliers Team Five: Chen, Choi, Kim, Mark, Williams

  23. Current Situation (1 of 6) • New theme stores: • EXPOs (5 in the US) • “Where Home Depot stops, we start” • Focused more on project orientated items • Follows similar regionalization strategy Team Five: Chen, Choi, Kim, Mark, Williams

  24. Current Situation (2 of 6) • New theme stores (continued): • Little Store: • The concept has not yet been implemented, as of November 1998 • Will compete with smaller chains • Target the customers who do not like to shop in larger stores • Product line is 40,000 to 50,000 items Team Five: Chen, Choi, Kim, Mark, Williams

  25. Current Situation (3 of 6) • Information Technology • EDI • Increase efficiency • Cost reduction • Internet • http://www.homedepot.com/ • Offer on-line shopping (TBA) • Education - books on home repair Team Five: Chen, Choi, Kim, Mark, Williams

  26. Current Situation (4 of 6) • Never experienced a work stoppage or strike • Suppliers • 7200 worldwide • IDC - Import Distribution Center • Allows the company to directly import products that are not currently available domestically Team Five: Chen, Choi, Kim, Mark, Williams

  27. Current Situation (5 of 6) • New market • BIY - Buy-it-yourselfer • Home depot will install the products for you • Stores in 1997: • 624 stores • 592 in US • 32 in Canada Team Five: Chen, Choi, Kim, Mark, Williams

  28. Current Situation (6 of 6) • Financial: • Net sales as of fiscal year 1997 was over $24 Billion • Sales are expected to reach $30 billion for fiscal year 1998, which is 2.5 times more than Lowe’s revenue in 1997 • Own about 17% of the $165 billion home improvement market Team Five: Chen, Choi, Kim, Mark, Williams

  29. Questions ?? ?? Team Five: Chen, Choi, Kim, Mark, Williams