Home Depot Analysis

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Company Profile of The Home Depot

ANALYSIS #1

1. COMPANY BACKGROUND

Home Depot Inc. was founded in 1978 and is the world's prevalent home improvement retailer and the second largest retailer in the United States. The sales for the fiscal year 2000 were $45.7 billion, compared to $38.4 billion in fiscal 1999. As of January 2001, the company was operating 1,134 retail stores in forty-seven states, six Canadian provinces, Puerto Rico, Chile and Argentina.

Home Depot stores sell a wide variety of building materials, home improvement and garden products. Additionally, the company operates four Villager's Hardware test stores, which offer products for home enhancement and small projects. In mid-year, Home Depot also launched a Home Depot Floor Store, located in Plano, Texas.

Home Depot stores serve three primary customer groups: do-it-yourself (D-I-Y) customers, who are characteristically homeowners that purchase products and complete their own projects and installations; buy-it-yourself (B-I-Y) customers, who are typically homeowners that pay for materials themselves, and hire third parties to complete the project and/or installation; and professional patrons, who are professional repair re-modelers, general contractors and trades people.

Home Depot stores average approximately 108,000 square feet of enclosed space, with an additional approximately 24,000 square feet in the outside garden area. The co-founder of Home Depot Inc. retired as co-chairman on May 30, 2001. Arthur Blank, 58 years old, ran Home Depot since its inception in 1978 and was chief executive from May 1997 to December 2000. He will not seek re-election to the board. Co-founder Bernie Marcus, 71, the company's other co-chairman, is expected to continue as chairman. Blank decided to retire sooner than he had planned, primarily because of what he called the successful transition of leadership to CEO Robert Nardelli, a former General Electric Co. executive and the first outsider at Home Depot's helm. Nardelli, 52, replaced Blank as CEO on December 5, 2000.

When Blank was CEO, sales more than doubled to $45.7 billion last year from fiscal 1996, and the stock price almost quadrupled, helping to make Home Depot sixth on the Fortune magazine's list of most Admired Companies in America. The magazine also ranked Home Depot as America's Most Admired Specialty Retailer for eight consecutive years. Home Depot's stock is traded on the New York Stock Exchange and is included in the Dow Jones Industrial Average and Standard & Poor's 500 Index.

The executive officers direct the departmental, operational, merchandising, finance etc. functions, and they provide the support to all the members of staff to ensure that they follow the goals of the company and this will lead to profitability. The executive officers and directors are there to ensure that the company does not lose customers.

2. MAIN STRENGTHS

Home Depot has done many things since 1978 to lead to the success it is experiencing today. Some of these strengths will be highlighted in the following paragraphs.

1) A major strength of Home Depot is its ability to embrace change and be creative. Home Depot grew from one store in 1978, to 1,134 at the end of fiscal 2000. This was made possible by their diversified operations. Home depot has a very wide customer base in both the US and abroad. Basically, Home Depot has customers in both North and South America. Home Depot is able to be successful because they listen to their customers. Home Depot continuously analyses their operations, and based on customers' requests and suggestions, they improve on them. Due to these strong qualities, Home Depot will be able to continue to increase the number of stores they operate, both locally and abroad. This store growth will be possible due to the extensive market research done by Home Depot's management and staff. In addition, by having a large amount of stores, a specialty retailer can enjoy increased buying power that gives them clout in making demands on manufacturers, such as for volume discounts, co-operative advertising, and merchandise pricing and ticketing prior to shipment. These lower product costs can be passed on to the consumer in the form of lower prices. Home Depot is a case in point. With nearly $50 billion in home improvement sales, it is able to garner significant concessions from its vendors. Another way retailers seek to gain market share is by developing different store concepts that appeal to various demographic groups or income brackets, example, Home Depot has it's upscale EXPO design centers.

2) Another strength of Home Depot is the optimism of both management and staff. Even though Home Depot is constantly changing their methods of operations and their products, they still maintain a high level of customer service. Home Depot also does not have a problem in changing its top management as they see fit, in order to keep up their success in the home improvement market. Home Depot therefore employs both management and staff from any industry, who they perceive, will add to the happiness of the customers and investors.

3) Yet another strength of Home Depot is their ability to realize that customers are on a day-to-day lease, always with increasing needs and expectations. This means that Home Depot realizes that it is easy to gain customers, but it is just as easy (if not easier) to lose them. With this in mind, Home Depot recognizes the need to continue to listen to their customers, and constantly try to improve the level of service and products available in order to please them. Due to the increase in competition from other firms in the industry, Home Depot has implemented a program called Service Performance Improvement Program (SPI), which allows most of inventory handling to be done after the stores are closed. This makes it easier for customer service agents to make the customers' shopping experience easier and more delightful. The SPI will be put in place in all Home Depot stores by the end of fiscal 2001.

4) Home Depot allows customers to buy products for their home at a deeper discount than from traditional