Home Depot Is the Second Largest Retailer Case Study

Excerpt from Case Study :

Home Depot is the second largest retailer in the world, but like every other company there are issues that can make even this business more productive. The home products market is very competitive around the world and The Home Depot has taken advantage of much of the American market while leaving the international market largely untouched. This analysis will diagnose the company's situation, determine what issues need to be addressed with a SWOT analysis, use the five factor model to probe the identified issues, and then give recommendations for changes that can be made.

Diagnosis

The Home Depot has experienced soft sales since 2006 (Wagner, 2010). One of the reasons for this is that the entire market was seeing a decline in sales especially after the market downturn in 2008, but The Home Depot had more serious problems. In 2008 the company reported fourth quarter losses of $54 million (Wagner, 2010), and they have not completely recovered those numbers in the meantime. The company has tried several different strategies to recover such as cutting over 7,000 employees in 2009, but the soft growth continues. It is easy to blame the problems that have occurred because of the market downturn, but there seem to be more serious problems with the company than just a loss of sales over the past four years.

In researching the company, it is easy to see that they have had a substantial uptick in complaints over the past five years (Consumer Affairs, 2011). The breadth of the charges of poor customer service have been growing because people are dissatisfied with the service that they are receiving, and the fact that customers seem to think that the associates are impersonal. The major issue seems to be that the company is using contractors that have not been properly vetted for the jobs that they are supposed to be performing. Complaints to Consumer Affairs range from simply forgetting tools at the site and not cleaning up, to major installation problems that cause the customer further expense since they have to get another professional to repair the damage done by Home Depot installers. The financial situation of many retailers have gotten much better (including The Home Depot's major U.S. competitor, Lowe's), but The Home Depot has continued to face financial issues and a loss of business because they have consistently poor customer service numbers.

Problems and Issues

One of the best ways for an analyst to look at the problems a company has is to first conduct a SWOT (strengths, weaknesses, opportunities and threats) analysis of the company. Many sources, including The Home Depot itself have conducted SWOT analyses to determine where the company is going right and where the need to increase resources. The issues facing the company are detailed in the weaknesses and threats sections, but a rapid decline could occur in the company's strengths and opportunities if problems are not addressed. The following is from The Home Depot's own SWOT analysis (2011).

Strengths

The Home Depot has many strengths based on the fact that it is a large company with a great amount of resources.

1. rapid expansion

1. Establishing a brand name

1. corporate structure:

1. training

1. Personal involvement of CEO - store managers

1. Bottom-up training - train the carry-out people first - C225

1. Use of technology

1. Satellite communications

1. UPC scanning - 1989

1. Customer service

1. Differentiation based on service

1. Human resource

1. Stock options

1. Reduced cost in shares (15% discount)

1. Authority Vs. responsibility

1. If a store manager wants to change the display or order more/less of a product they do not need to get authorization from headquarters - C227

1. Cannibalization of sales of new stores to existing - C228

1. Home Depot will open up new stores close to existing stores to:

1. Improve customer satisfaction

1. Reduce delays in shopping

1. Increase utilization by existing customers

1. Attract new customers to more convenient locations

1. organizational structure:

1. Decentralized management:

1. Casual working environment in the corporate offices, according to an Human Resource spokesperson

1. Regional managers

1. There are 20 regional managers

1. Each one is only responsible for six to eight stores

Weaknesses

1. rapid expansion…

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