Chapter 2-4 Home depot
Content
PART II STATEMENT OF THE PROBLEM In today’s global markets, every business is pitted against worldwide competitors with consistently improving productivity, better performance, and shrinking prices ( Pinto, J., 2010). As the same thing, Business sectors like Home Depot experience the inconsistent growth and productivity of their business. The Home Depot is the United States largest home improvement and construction retailer with 35 years’ experience. Established in 1978 by Bernard Marcus, Arthur Blank, Ron Brill and Pat Farrah, Home Depot is headquartered in Atlanta, Georgia. The company has a long history of success largely due to its customer oriented approach, focusing on customer service and providing value added products to their customer base. Moreover, Home Depot faces a hard time in past five to six years after the resignation of former CEO Robert Nardelli on January 3, 2007. He was replaced with vice chairman Francis (Frank) S. Blake at this time. During the time of leadership of Francis Blake he enumerated the problems that Home Depot faces. These are; succession which is the main problem, specifically ; core competencies of Home Depot, weak stock performance, slowing profits, and weak performance of employees. In fact, the net income of fourth quarter 2006 dropped 28% since the previous year, signifying the largest quarterly profit drop in a decade. In line with this, when Francis Blake took over as CEO after Bob Nardelli's abrupt and painful departure. Blake wants to see for himself the way regular folks are treated
when they shop at the big orange box. And he's not sure what to expect. "This is going to be like a Cracker Jack box," he says, a bit nervously. "You don't know what you'll get." However, On the University of Michigan's American Customer Satisfaction Index, Home Depot fell eight points in seven years, to 67 at the end of 2007. It was the largest drop for any retailer in the index, while rival Lowe's remained steady at 75. That kind of deterioration would be a challenge for any newly minted chief executive. But trying to recast the company's image in the middle of the worst housing downturn in decades multiplies the challenge. Furthermore, the following are the symptoms and root causes of the problems experience by Home Depot; 1. Operational Aspect The Replacement of CEO Due to the resignation of former CEO Nardelli, some operations was change and by that problems occurred such as, the policies and rules that govern by the new CEO Francis Blake that may lead to the weak performance of the staff of Home Depot. Poor Customer Service Due to the shrinking consumer demand and lack of new market space, competition between the existing retailers is fierce. The incumbent firms each have a large financial stake to protect and are eager to dominate their existing space and prevent new-comers from entering. They have begun to differentiate based on things such as customer service
where before they only had to provide a larger selection of products. Lowe’s has been taking away market share from Home Depot based on this attention towards customer service.
2. Marketing Aspect Core Competencies The strategic management problem at hand is that Blake's lost sight of Home Depot’s core competencies which consist of their: Retail stores ,Customer service, Low Prices and wide range of products
3. Financial Aspect Weak Stock Performance and Slowing Profits Because of its' transition, weak stock and slowing profits are the causes of problems in financial stability of Home Depot that dropped 28% since the previous year, signifying the largest quarterly profit drop in a decade.
Hence, these are the short term and long term that had been faces with Home Depot; Short Term Problems were: The replacement of CEO
The core competencies
Long Term Problems were: Weak Stocks Slowing Profits
Having these particular problems, the CEO Francis S. Blake should innovate with such strategy that could enhance the performance of the staff towards customers and to their works, the stocks and the profits. These could help him to bring Home Depot on top in lined with this particular industry.
PART III CAUSES OF THE PROBLEM The main problem of this case is the succession of leadership of Home Depot. The following was the cause; The Replacement of CEO Due to its transition, there was a change in the operations of Home Depot specifically the leadership of the new CEO namely Francis S. Blake. With this particular change, the sales of Home Depot were inconsistently growth. The performance of the staff towards it’s' works and customers was affected. That is why the operation was worsening. According to Sharf , (2004), Today that’s certainly not the case. In fact, at least one analyst at the Smear Value Fund gave Home Depot a slightly stronger buy rating than its rival, although both stocks are expected to perform well as the housing market continues to improve. This begs the question: What has changed under the leadership of Frank Blake? What is Home Depot doing right? The answers can be found not today, but in the doldrums of the Great Recession, which Mr. Blake’s team took as an opportunity to right a very shaky ship. Changes were steady, yet sweeping, and included marketing, technologies, stores, and human resource allocation
The Core Competencies The strategic management was also affected due to the unproductive growth of the Home Depot. After the transition, Blake lost sight of Home Depot’s core competencies which consist of their: Retail stores, Customer service, Low Prices and wide range of products. Moreover, the goal of Home Depot that to expand the company worldwide was also affected. It was stated in an article that, Due to the overall market slowing down and HD’s lack in quality customer service, its biggest rival, Lowe’s, has been stealing much of their market share. John Parsons of Shreveport, LA owns a 50year-old house that needs constant repair, and for years he was a regular customer of a nearby HD store. About a year ago, he switched to a Lowe's store, even though it is farther from his house, because he received better service there. "The people at Home Depot don't want to talk to you," he says. "They hide or they say they're busy." Perhaps this slacking quality of customer service is due to big changes in employee policy during Nardelli’s term. One former employee of Home Depot stated that the company began slashing benefits and would only begin to hire part-time—and cheaper, unknowledgeable—labor as well as increasing the employee-to-customer ratio. Customers quickly became frustrated with the lack of adequate service at a store that was once known for its knowledgeable staff.
Weak Stock Performance and Slowing Profits The inconsistent growth and productivity of sales during the five to six years of Home Depot was affects the stock performance and slowing profits of the business. According to the article, the net income of fourth quarter 2006 dropped 28% since the previous year, signifying the largest quarterly profit drop in a decade
BENCHMARK ANALYSIS THE HOME DEPOT vs. LOWES COMPANIES, INC. Lowe's Companies, Inc. is an American company that operates a chain of retail home
improvement and appliance
stores
in
the United
States, Canada,
and Mexico. Founded in 1946 in North Wilkesboro, North Carolina, the chain has 1,840 stores in the United States, Canada, and Mexico. Expansion into Canada began in 2007 with the opening of a store in Hamilton, Ontario in early 2008. Lowe's started the construction of two stores in the Mexican city of Monterrey officially entering the Mexican market. In 2011, Lowe's released plans to build over 150 stores in Australia (as Masters Home Improvement) over the next five years, hoping to compete with the a $46 billion industry. Lowe's Companies, Inc. is ranked #50 on the Fortune 500 list. As of 2010, the chain is based in Mooresville, North Carolina. Lowe's is the second-largest hardware chain in the United States behind The Home Depot and ahead of Menards. Globally, Lowe's is also the second-largest hardware chain, again behind The Home Depot but ahead of the European stores B&Q and OBI.
Category
HOME DEPOT
LOWES COMPANIES, INC.
Type
Public Company
Public Company
Industry
Retailing
Retailing
Location
Marietta,
Focus
States Customer
Georgia,
United North
Wilkesboro,
Carolina by Customer
retention
North
retention
by
improving customer service as improving customer service Fund Sourcing
well as stores Investors,
Business Investors,
Business
Establishments, Income from Establishments, performances, Audience
Members (Target Home Owners,
Board from performances Interior Abandoned Stores
Market)
Designers, Renovators, and
Goal
Contractors 1. To create a stronger connection
with
customers and simplify its business. 2. To
1. To become a more sustainable organization/ operate
improve sustainably.
merchandise assortment and value. 3. To improve shareholder value. 4. To develop competitive
Income
a
platform
to more
across Current Innovations
all
commerce
channels. LED Light Bulb
LOWE’S Innovation Labs: Creating
The
Future
Of
Retail
Home Depot As a conclusion, the benchmark analysis also shows that being attached to a media-giant would be a great help in creating audiences, investors or stakeholders. Home Depot must also learn to get out of its comfort zone and try to innovate some of its furniture that can lead to customer’s satisfaction. Home Depot’s goal must not just focus on providing performances to the audience or customers but also to educate the listeners regarding the performances that they make.
when they shop at the big orange box. And he's not sure what to expect. "This is going to be like a Cracker Jack box," he says, a bit nervously. "You don't know what you'll get." However, On the University of Michigan's American Customer Satisfaction Index, Home Depot fell eight points in seven years, to 67 at the end of 2007. It was the largest drop for any retailer in the index, while rival Lowe's remained steady at 75. That kind of deterioration would be a challenge for any newly minted chief executive. But trying to recast the company's image in the middle of the worst housing downturn in decades multiplies the challenge. Furthermore, the following are the symptoms and root causes of the problems experience by Home Depot; 1. Operational Aspect The Replacement of CEO Due to the resignation of former CEO Nardelli, some operations was change and by that problems occurred such as, the policies and rules that govern by the new CEO Francis Blake that may lead to the weak performance of the staff of Home Depot. Poor Customer Service Due to the shrinking consumer demand and lack of new market space, competition between the existing retailers is fierce. The incumbent firms each have a large financial stake to protect and are eager to dominate their existing space and prevent new-comers from entering. They have begun to differentiate based on things such as customer service
where before they only had to provide a larger selection of products. Lowe’s has been taking away market share from Home Depot based on this attention towards customer service.
2. Marketing Aspect Core Competencies The strategic management problem at hand is that Blake's lost sight of Home Depot’s core competencies which consist of their: Retail stores ,Customer service, Low Prices and wide range of products
3. Financial Aspect Weak Stock Performance and Slowing Profits Because of its' transition, weak stock and slowing profits are the causes of problems in financial stability of Home Depot that dropped 28% since the previous year, signifying the largest quarterly profit drop in a decade.
Hence, these are the short term and long term that had been faces with Home Depot; Short Term Problems were: The replacement of CEO
The core competencies
Long Term Problems were: Weak Stocks Slowing Profits
Having these particular problems, the CEO Francis S. Blake should innovate with such strategy that could enhance the performance of the staff towards customers and to their works, the stocks and the profits. These could help him to bring Home Depot on top in lined with this particular industry.
PART III CAUSES OF THE PROBLEM The main problem of this case is the succession of leadership of Home Depot. The following was the cause; The Replacement of CEO Due to its transition, there was a change in the operations of Home Depot specifically the leadership of the new CEO namely Francis S. Blake. With this particular change, the sales of Home Depot were inconsistently growth. The performance of the staff towards it’s' works and customers was affected. That is why the operation was worsening. According to Sharf , (2004), Today that’s certainly not the case. In fact, at least one analyst at the Smear Value Fund gave Home Depot a slightly stronger buy rating than its rival, although both stocks are expected to perform well as the housing market continues to improve. This begs the question: What has changed under the leadership of Frank Blake? What is Home Depot doing right? The answers can be found not today, but in the doldrums of the Great Recession, which Mr. Blake’s team took as an opportunity to right a very shaky ship. Changes were steady, yet sweeping, and included marketing, technologies, stores, and human resource allocation
The Core Competencies The strategic management was also affected due to the unproductive growth of the Home Depot. After the transition, Blake lost sight of Home Depot’s core competencies which consist of their: Retail stores, Customer service, Low Prices and wide range of products. Moreover, the goal of Home Depot that to expand the company worldwide was also affected. It was stated in an article that, Due to the overall market slowing down and HD’s lack in quality customer service, its biggest rival, Lowe’s, has been stealing much of their market share. John Parsons of Shreveport, LA owns a 50year-old house that needs constant repair, and for years he was a regular customer of a nearby HD store. About a year ago, he switched to a Lowe's store, even though it is farther from his house, because he received better service there. "The people at Home Depot don't want to talk to you," he says. "They hide or they say they're busy." Perhaps this slacking quality of customer service is due to big changes in employee policy during Nardelli’s term. One former employee of Home Depot stated that the company began slashing benefits and would only begin to hire part-time—and cheaper, unknowledgeable—labor as well as increasing the employee-to-customer ratio. Customers quickly became frustrated with the lack of adequate service at a store that was once known for its knowledgeable staff.
Weak Stock Performance and Slowing Profits The inconsistent growth and productivity of sales during the five to six years of Home Depot was affects the stock performance and slowing profits of the business. According to the article, the net income of fourth quarter 2006 dropped 28% since the previous year, signifying the largest quarterly profit drop in a decade
BENCHMARK ANALYSIS THE HOME DEPOT vs. LOWES COMPANIES, INC. Lowe's Companies, Inc. is an American company that operates a chain of retail home
improvement and appliance
stores
in
the United
States, Canada,
and Mexico. Founded in 1946 in North Wilkesboro, North Carolina, the chain has 1,840 stores in the United States, Canada, and Mexico. Expansion into Canada began in 2007 with the opening of a store in Hamilton, Ontario in early 2008. Lowe's started the construction of two stores in the Mexican city of Monterrey officially entering the Mexican market. In 2011, Lowe's released plans to build over 150 stores in Australia (as Masters Home Improvement) over the next five years, hoping to compete with the a $46 billion industry. Lowe's Companies, Inc. is ranked #50 on the Fortune 500 list. As of 2010, the chain is based in Mooresville, North Carolina. Lowe's is the second-largest hardware chain in the United States behind The Home Depot and ahead of Menards. Globally, Lowe's is also the second-largest hardware chain, again behind The Home Depot but ahead of the European stores B&Q and OBI.
Category
HOME DEPOT
LOWES COMPANIES, INC.
Type
Public Company
Public Company
Industry
Retailing
Retailing
Location
Marietta,
Focus
States Customer
Georgia,
United North
Wilkesboro,
Carolina by Customer
retention
North
retention
by
improving customer service as improving customer service Fund Sourcing
well as stores Investors,
Business Investors,
Business
Establishments, Income from Establishments, performances, Audience
Members (Target Home Owners,
Board from performances Interior Abandoned Stores
Market)
Designers, Renovators, and
Goal
Contractors 1. To create a stronger connection
with
customers and simplify its business. 2. To
1. To become a more sustainable organization/ operate
improve sustainably.
merchandise assortment and value. 3. To improve shareholder value. 4. To develop competitive
Income
a
platform
to more
across Current Innovations
all
commerce
channels. LED Light Bulb
LOWE’S Innovation Labs: Creating
The
Future
Of
Retail
Home Depot As a conclusion, the benchmark analysis also shows that being attached to a media-giant would be a great help in creating audiences, investors or stakeholders. Home Depot must also learn to get out of its comfort zone and try to innovate some of its furniture that can lead to customer’s satisfaction. Home Depot’s goal must not just focus on providing performances to the audience or customers but also to educate the listeners regarding the performances that they make.
