Home Depot Inc. Harvard Case Solution & Analysis

Q1: Using the material in Chapter 2, discuss Home Depot's mission and goals (particularly Exhibit 2.1). Indicate where the firm lies among Porter's Competitive Strategies. What business is Home Depot in? What business (es) were them in both before, and after, Bob Nardelli arrived?

An organization is created to achieve some goals and objectives that are decided by the top management of an organization. Thus, it is the basic responsibility of an organization to evaluate the basic requirements of a company that is based on the goals, design and strategy of the company and bring changes according to it. The company is known to be number one home improvement retailer in the world and ranked number two in the United States. In 2004, The Home Depot Inc' revenues rose to 13% along with 16% increase in profits. The company is known for having various different methods in terms of differentiating from the competitors. However, the expenses of the company are continuously rising, and the overall layout and structure of the stores are old fashioned. Productivity of the company is constant along with a decrease in stock prices. Besides that, the competitor of the company Lowe’s stock prices has climbed threefold. Moreover, the revenue growth of the company is way slower than the overall industry average. Also, there is a decline in the company’s cash and cash equivalents from 2002 to 2004.

However, the company has made its focus towards international expansion and there is growth in global sourcing as well. The Home Depot has invested a lot in its IT dept, and they will get a return from it soon. Despite that, the company is facing threats in terms of competition from Sears, Lowe’s and Wal-Mart. Furthermore, the home improvement market is on the saturation phase particularly in North America. By identifying and analyzing the internal and external analysis of HD, the mission of the company is to offer services and products to its customers that are best in terms of price and quality as well. The mission statement of the company is based on building relationships with all the stakeholders that allow HD to deliver their products along with high emphasis on customer service. The objectives of the company are based on its mission statement. The basic objective of Home Depot is to deliver customer service in the best way possible and to maintain its leadership position. Further strategy of the company includes market expansion and profitability. Out of the three Michael’s porter generic strategy, Home Depot Inc is following cost leadership strategy because the company is trying to maintain and increase its market share by emphasizing low cost compared to competitors. Moreover, the company is aggressively seeking for efficient facilities, cost reductions, and tight controls. Before Nardelli’s era, the company was targeting unprofessional individuals with the concept of Do-it-yourself but after Nardelli, the company began providing specialized products and services to smaller professional customers.

Q2: Using the material in Chapter 3, discuss how Home Depot’s strategy (both pre- and post- the arrival of Bob Nardelli) affects its organizational design. Draw Home Depot's organizational structures pre- and post- Nardelli on a separate sheet. Consider using or downloading a free 30-day trial of MS Visio design software.

In Marcus and Blank era, the strategy followed by Home Depot Inc was based on decentralization and giving high freedom and autonomy to the managers. Both the founders of the company have made the foundations of the company on the inverted pyramid that is focused more on customers and customer service than the top management of an organization. The company was based on do-it-yourself concept. The company has given autonomy to its managers that give and encourage them towards innovation and responsiveness. Furthermore, the overall management style in HD was highly decentralized with no formal reporting authority. There is hardly any communication among the managers and thus, limited ability to negotiate national deals. After Nardelli’s era, the management style of the company became more militaristic. The CEO himself preferred to hire personnel from the military background. With the leadership under Nardelli, the overall system in HD became more centralized that in turn made the financial performance of the company better. Under his leadership, the revenues of the company doubled. Because of his relentless focus on cost cutting , the management of the company succeeded in increasing its margins from 30 to 33.8 percent in 2005..........................

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This aggressive retailer adding shop space at the rate of 25% per year. The case is an external financing requirement of a $ 1.4 billion over the next five years. Students have to decide how to meet this requirement is reasonable, recognizing the link between business strategy and financial policy. Analysis of the value of the shares of the company shows a significant overestimation of the market. "Hide
by Robert F. Bruner Source: Darden School of Business 21 pages. Publication Date: June 23, 1998. Prod. #: UV2282-PDF-ENG

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