Home Depot

Introduction

History

The Home Depot was founded in 1978 by Bernard Marcus, Arthur Blank, and Ronald Brill. These men founded The Home Depot because they were laid-off of their management jobs at the Handy Dan home center chain. They used the knowledge that they acquired from the Handy Dan along with funds provided by a New York venture capitalists firm to form The Home Depot. The Home Depot understood there was an unserved market of do-it-yourselfers who couldn't do-it-themselves. Though we also serve professional contractors, we have made the do-it yourselfer our primary focus. In order to properly serve this market of unskilled craftsmen, we made it a requirement that our employees be competent in their department. We are credited with revolutionizing the home improvement industry by offering an unparalleled selection of products and services.

The Home Depot is currently the world's largest home improvement retailer.

Some of our competitors (Lowe's) have tried to replicate "The Home Depot" way of doing business, but they lack the human resources to provide the type of value and service that we offer. Although we have enjoyed our success over the years, the lumber and hardware industries are highly competitive. The Home Depot is not only the world's largest home improvement retailer; we are the second largest retailer in the world (Behind Wal-Mart). Because of this fierce competition, we are always looking for ways to improve our company.

The Home Depot also strives to take care of its investors by trying to earn them the greatest return on their investment possible. We would like to keep our reputation for being a very safe yet profitable investment. People should see our stock symbol, HD, and feel comfortable that we are working for them. Our 21% increase in sales is evidence that this is being accomplished.

Summary of Organizational Challenges

The Home Depot's is being faced with its biggest problem to date. We are expanding and opening new stores all the time, so the workforce that we have to choose from is becoming diluted. On average, we are opening a new store every 48 hours. As previously mentioned, the company was founded on the professional competence of our employees and we are finding it more and more difficult to find good associates. This shortage causes us to spend more time and financial resources training employees. This has become so big a problem that we have turned to "headhunters" to find good associates for us. It is vital that we figure out a way to rectify this problem without using so many resources. This rapid growth is also making it more difficult for the stores, suppliers, and headquarters to effectively communicate among each other. There are more than 1,800 stores just in the United States all having to ensure that their supply needs are filled every Monday through Friday night. We must search for a better way to coordinate these routine transactions.

Strategy Formulation

Mission Statement

"The Home Depot's mission is to be the leading home improvement center in the world. We will do this by offering our customers all over the world unparalleled value and quality on their home improvement purchases. We plan too accomplish this through day-in day-out low prices and continuing technological advancement. The Home Depot is an environmentally sound company and encourages goodwill throughout its communities. We will treat our employees with respect while encouraging them to use there entrepreneurial spirit to help increase stockholder wealth."

Vision Statement

"The Vision of The Home Depot is to become the number one retailer in the world. We would like to achieve superior shareholder value, demonstrate excellent corporate citizenship, and generate an environment that induces creativity from our employees."

External Analysis

Competition

The home improvement industry is one of the most rapidly growing industries in the world. We would like to maintain our current status as number one while gaining more of the market share. We are trying to accomplish this through the successfully combining the economics of a warehouse store with high-level customer service usually reserved for smaller companies. Our annual sales totaled 64.8 billion. Our biggest competitors are: Lowe's, Menard, and TruServe.

Lowe's, Inc. is the company's biggest competitor and they are steadily gaining more of the market share. Lowe's experienced rapid growth throughout the 1990's and the early 2000's. They are currently opening most of their stores in small towns where they can easily offer better prices and a larger selection than the smaller outlets already located there. Lowe's strategy for the new millennium is focused on expanding operations into the Midwest and the West. They recently purchased the Eagle Hardware and Garden chain of retail outlets, which helped them add about 40 new stores in the West. Its annual sales totaled 36.5 billion.

Menard, Inc. ranks as the third largest home improvement retailer. They have, approximately, 170 outlets located primarily in the northern region of the Midwest. Menard may be smaller than both Lowe's and The Home Depot, but they feature a full compliment of products similar to both. Menard, however, operated a manufacturing facility to maintain competitive retail pricing and increase net profits. The company is owned by John Menard, founder, president, and CEO. Its annual sales totaled 5.3 billion.

The True Value Company, formerly known as TruServe, operates 6,800 retail outlets, including its flagship True Value Hardware stores. True Value Company is a cooperative comprised of members who are entrepreneur-retailers. They are committed to empowering the independent retailer by setting industry and market standards with their unique brand of creative marketing, wide product assortment, technology, and training. Their annual sales totaled 32.7 million.

Economic Impact

The Home Depot, as well as the entire home improvement industry, was affected by poor state of the economy. The Home Depot experienced fluctuations in its stock price in 2002 because investors shied away from our company. Lowe's was able to capitalize and gain more of our market share. After these initial fluctuations we started to, once again, see steady growth. This was due to the psyche of the American public after the September 11 attacks. People