What is your assessment of Nardelli’s changes at Home Depot? Which of the changes had the greatest impact?
In my opinion Nardelli, during the years he was The Home Depot’s CEO, did an overall great job. The changes he introduced to the business model were necessary to help The Home Depot to keep growing in the right direction. The Home Depot, at the time Nardelli was appointed CEO, was a company with an old style management and operations that could have compromised the future of the company.
Nardelli focused on and achieved increasing sales and profitability, by 2006 sales had doubled from $45.7 in 2000 to $90.8, and profits had more than doubled from 2000 to 2005 to $5.8 billion. Among all the changes he made, the ones that had the biggest impact were:
Geographic expansion: Nardelli brought the company to Mexico were it went from zero to number one.
Diversification: he expanded the wholesale business with the creation of Home Depot Supply, which provided products and services to professional customers.
Cost cutting measures: he centralized Home Depot’s merchandising and purchasing which lead to an improvement of the buyer power with suppliers and better deals extending payment terms from 30 to 45 or 50 days. He also took the decision to switch full time store employees to part time employees and to reduce the number of employees in the stores. This had actually a negative impact as it certainly contributed to the erosion of the share price during the years and it actually cost Nardelli his job.
How did Nardelli’s changes affect profitability, labor productivity, and customer service? What metrics would you use to assess these impacts?
The main change that Nardelli introduced that affected profitability was the centralization of the merchandising and purchasing. It is true that before 2000 the store managers were able to be closer to customers and to decide what products stock in the stores, but at the same time that was...
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