Home Depot

Topics: Customer service, Home improvement, Home Pages: 7 (1230 words) Published: June 14, 2013
Home Depot, Inc.

Home Depot, Inc. is the world’s largest home improvement retailer with sales last fiscal year topping $74

billion (Figure 1). Home depot sells a wide inventory of products ranging from building materials and home

improvement products to lawn and garden products. In addition it provides various home improvement

services including bathroom and kitchen installation. Its main consumer base consists of do-it-yourself

consumers- those homeowners who do their own home improvement projects, do-it-for-me consumers-

those homeowners who hire others to do their home repairs, and professional contractors.

Home Depot operates on a large economic scale in a highly competitive home improvement industry and

competes in areas of customer service, price, store location and appearance, quality, and availability and

assortment of merchandise. Its major competitor Lowe’s operates on a similarly large economic scale and

provides a highly similar range of products and services. Lowe’s had revenues of more than $50 billion the

past fiscal year (Figure 2). Like Home Depot, Lowes is a highly recognizable brand. Other competitors include

home improvement stores such as Ace and smaller regional and local hardware stores which operate on

smaller economies of scale and provide a similar but smaller range of products and services. Additional

competitors including electrical, plumbing, and building supply houses, lumber yards, specialty design stores,

showrooms, discount stores, mail order firms, warehouse clubs, independent building supply stores, and

installers of home improvement products compete with Home Depot in specific product or service areas.

Supply houses can sell directly to consumers due to low capital requirements for entry into the industry and

directly compete with Home Depot. Additionally there is growing competition from online and multichannel

retailers as consumers increasingly shop online for home improvement goods. Consumers have many

choices in the competitive home improvement industry which drives down prices as firms try to compete

for business. In turn, businesses have differentiated to set themselves apart. Figure 3 illustrates the various

forces at play in the competitive home improvement industry.

The home improvement industry, as gauged by revenues of its two biggest firms, has experienced recent

growth the past 2 fiscal years after more than 2 years of decreasing revenues (Figures 1, 2). These years of

decreasing revenues are tied to the economic recession and corresponding slump in the housing market.

The home improvement industry is intimately tied to the housing and construction market as consumers and

businesses who cannot buy or build houses generally do not buy home improvement goods. However, the

upswing in the housing market in recent years, as the economy recovers, has seen a corresponding increase

in the home improvement industry. As overall economic conditions recover, the unemployment rate drops,

financing become more readily available, and people have more disposable income, the home improvement

industry should continue to recover and see growth. However businesses must still adapt to an increasing

consumer focus on environmentally responsible products as well the trend toward online shopping as new

online merchants enter the industry if they hope to remain profitable in the future. Figure 4 illustrates the

various environmental forces shaping the home improvement industry.

Home Depot’s core capabilities include its focus on customer service, product authority for home

improvement, disciplined capital allocation, productivity, and efficiency, and interconnected retail (Figure 5).

To develop...
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