Strategic Initiatives Taken by the Home Depot Relative to Organizational and Operational Adaptation to Changing Markets Robert A. Pontau Jr., PE
December 10, 2012
Strategic Initiatives Taken by the Home Depot Relative to Organizational and Operational Adaptation to Changing Markets
The Home Depot is the world’s largest home improvement retailer (The Home Depot, Inc., 2012). At the end of January 2012, the company employed approximately 331,000 people (The Home Depot, Inc., 2012). With a workforce larger than many small cities, it is imperative that the Home Depot adapts to changing markets to satisfy the needs of all company stakeholders. The business of home improvement retail is heavily dependent on housing market conditions. The Home Depot posted its largest profits in 2007, $6.62 Billion (The Home Depot, Inc., 2012), just as the housing bubble was about to burst. “In March 2007, the United States' subprime mortgage industry collapsed due to higher-than-expected home foreclosure rates, with more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale” (Wikipedia, 2012, Subprime Mortgage Industry Collapse, p. 1). The mortgage industry collapse marked the start of a global economic decline that would create ongoing hardship right through to 2012 (Wikipedia, 2012). In 2007, the leadership team at The Home Depot predicted the harder times to come. The team made organizational and operational changes that allowed the company to adapt to the changing markets. The changes included modifications in distribution, expansion into new markets, modifications in growth strategy, and changes to human resources management. Because of the new strategies and tactics, the Home Depot remained profitable throughout the economic decline that began in late 2007. Effects of Recent Economic Trends
The economic downturn that began in 2007 had a negative effect on the Home Depot. Sales at the Home Depot peaked in 2007 at $77.349 Billion. Sales fell to a five-year low in 2009 at $66.176 Billion (The Home Depot, Inc., 2012). A decline of more than 12% from 2007. In 2011, sales rebounded slightly to $70.395 Billion (The Home Depot, Inc., 2012). Sales figure are not yet in for 2012, but they are expected to be near $73.6 Billion, a 4.6% increase more than 2011 and nearing 2007 levels (Brown, 2012). It has been five years and sales figures have not yet recovered from the peak that was achieved before the bubble burst on the housing market. The economic downturn forced the Home Depot to make difficult decisions regarding the size of its workforce. There were 331,000 employees of the Home Depot at year end 2007. The number of employees dropped to 317,000 at year end 2009 (The Home Depot, Inc., 2012). The economic downturn forced layoffs and restructuring at the company, resulting in 14,000 lost jobs. As sales began to increase in 2010, the labor force was also increased. In 2011, the company once again reached 331,000 total employees (The Home Depot, Inc., 2012). The downturn in the economy and housing market could have been detrimental for home improvement retailers like Lowe’s and Home Depot, but the news was not all bad. “Homeowners chose to redo or spruce up their homes instead of selling, and headed to places like Home Depot and Lowe’s for the supplies” (Brown, 2012, p. 2). The Home Depot shifted its focus from new construction to capitalize on revenues from renovation projects and remain profitable. Strategies for Adapting to Changing Markets
A common strategy for adapting to changing markets is to cut costs. The Home Depot underwent organizational changes that eliminated 14,000 jobs between 2007 and 2009. The job cuts were at the management level and not at the associate level, which emphasized the focus on customers and associates. In addition to cutting jobs, the Home Depot halted construction of new stores to free up capital for its...
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