Home Depot, Inc. in the New Millennium Harvard Case Solution & Analysis

Home Depot, Inc. in the New Millennium Case Solution

Abstract 

The case is about the analysis of the largest retailer of home improvement products, which was founded in the year 1978 in Atlanta. The company, through its significant managerial efforts, became the first to initialize the big-box format and thus, it was soon recognized in the overall world. With the analysis of the case, it can be seen that the competition in the overall market is very tough, which strongly requires that the management should adopt strategies that can satisfy the customers better by strongly focusing on the 4Ps of marketing, which can help the company in gaining the competitive advantage.

It can be seen that the financial performance of the company was very enticing since its beginning, despite of the tough competition in the market. However, due to some economic, financial, as well as managerial issues faced by this entrepreneurial business, the company’s overall performance started to decline in the third and the fourth quarter of 2000. With the detailed qualitative as well as the quantitative analysis, it is recommended for the company to pause its continuous expansion strategy in order to meet the missionary objective of the company in relation to growth. This could help the company in gaining the increase in shareholder’s value after taking some rest and regain its strong historical position of being the largest retailer of home development product in the world.

The detailed economic analysis of the company became the cause of this adoption of strategy ,which reveals the fact that interest rates have been significantly rising, which could significantly decline the sales revenues for the current company. Moreover, there are further chances of increasing inflation, which could hurt the purchasing power of the consumers. After analyzing it from the competitor’s perspective, it is recommended that the company should very cautiously adopt that strategy, which could provide better customer satisfaction with respect to pricing structure as well as quality of products and services. The overall situation strongly reveals the fact that the company should focus on its existing stores and try to increase its sales revenues from these locations rather than focus on further expansion.

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Economic Analysis

In order to analyze the causes behind the negative performance of the company in the last two quarters during the year 2000, its economic issues are analyzed. It can be seen that the macroeconomic factors such as the interest rates, taxation policy, supply of money, spending from the government, rate of unemployment, prevailing growth rate of GDP as well as other economic factors are all negatively affecting the performance of the company. The overall valuation of the company is also affected by the security market, which could provide the different factors and thus, help in the overall valuation e.g. the required rate of return, the beta, risk free rate, as well as the market risk premium.

These economic issues affected the stock price to decline to about $ 35, which is due to the reason that the future expectations related to the earnings from this particular stock declined as well as the dividend per share, and the increasing interest rate. With the announcement from the management regarding the declining share price in the upcoming future, the overall economic activities of the company also would decline. The situation could easily help in predicting the future of the company in which the stock prices are expected to decline further.

It can be seen that with the decrease in the money supply in any economy, the business usually contracts whereas in the period when the supply of money increases, then the economy tries to expand. It is the responsibility of the Federal Reserve, who with the help of certain tools, controls the supply of money in any economy.......................

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