Home Depot Strategy Analysis
Muhammad Chughtai
Daniel Tesler
Home Depot Case Analysis
Home Depot is a large U.S. based company that competes in the low cost home improvement retail and service industry. Home Depot is a global company because they also have consumers in Canada and Mexico, the potential to expand their market to other areas globally and have a global supply chain. In the U.S. market, the industry is concentrated and in the mature stage with Home Depot and Lowe’s making up a duopoly because they are the only two major players that compete at a similar retail volume nationwide.
With only two large companies in the industry, there are high entry barriers because of the high cost necessary to obtain the key success factors to compete against these established companies. In the home improvement retailer industry, the key success factors (KSF) are the ability to meet competitive pricing, a broad mix of products and distribution capabilities. Because Home Depot and Lowe’s sell an essentially homogeneous selection of goods, any new competitors in the industry would have to be competitive in their pricing to draw customers. Both companies stock a large number of products to create a one stop shopping experience and have extensive distribution channels from suppliers worldwide.
On the macro level and during the time of this case study, the PESTEL analysis from Exhibit 1 indicates a favorable environment for the home improvement retail industry. The U.S. was going through a period of increased housing production and property values were rapidly increasing in price. There was significant opportunity for Home Depot to sell building supplies to contractors creating new properties and home owners that were looking to increase their property values. There was also a large pool of potential customers because the government had been promoting home ownership through subsidizing mortgages and creating tax deductions for mortgage interest payments. There was also a shift in consumer
Daniel Tesler
Home Depot Case Analysis
Home Depot is a large U.S. based company that competes in the low cost home improvement retail and service industry. Home Depot is a global company because they also have consumers in Canada and Mexico, the potential to expand their market to other areas globally and have a global supply chain. In the U.S. market, the industry is concentrated and in the mature stage with Home Depot and Lowe’s making up a duopoly because they are the only two major players that compete at a similar retail volume nationwide.
With only two large companies in the industry, there are high entry barriers because of the high cost necessary to obtain the key success factors to compete against these established companies. In the home improvement retailer industry, the key success factors (KSF) are the ability to meet competitive pricing, a broad mix of products and distribution capabilities. Because Home Depot and Lowe’s sell an essentially homogeneous selection of goods, any new competitors in the industry would have to be competitive in their pricing to draw customers. Both companies stock a large number of products to create a one stop shopping experience and have extensive distribution channels from suppliers worldwide.
On the macro level and during the time of this case study, the PESTEL analysis from Exhibit 1 indicates a favorable environment for the home improvement retail industry. The U.S. was going through a period of increased housing production and property values were rapidly increasing in price. There was significant opportunity for Home Depot to sell building supplies to contractors creating new properties and home owners that were looking to increase their property values. There was also a large pool of potential customers because the government had been promoting home ownership through subsidizing mortgages and creating tax deductions for mortgage interest payments. There was also a shift in consumer