Home Depot Case[1]
Content
PRESENTED BY: KAREEM AL- AHDAB MOHAMMAD AL SAGGA
Business Background
Founded in Atlanta, Georgia by Bernard Marcus and Arthur Blank in 1978. Home Depot Is the world’s largest home improvement specialty retailer and the second largest retailer in the US with over 900 stores.
Home Depot has had significant growth for over twenty years and held 24% market share in 1999.
Cont.
Home Depot’s primary customer is the individual home-owner or small contractor.
They also offer good customer service to assist those in need.
Home Depot also has a university to educate customers about home improvement projects.
The corporate structure was characterized by being very decentralized. Store managers were DIYers and had a ginificant amount of control.
The Changes
In October 2000, the market share for Home Depot began to drop sharply, this caused the board of directors to seek a new leader.
The board chose Bob Nardelli who held a top level position in GE and was known for his ability to improve operations.
Nardelli started to change the organizational structure into a more centralized and efficient one.
Store managers now have less control over merchandising and offerings.
Cont.
Nardelli is a workaholic and expects employees to share his attitude. He conducts meetings during the weekends.
Buying, once run by 9 regional offices is now controlled by the headquarters in Atlanta.
The customer return policy has been changed due to customers abusing it. It now saves close to 10 million dollars annualy.
Home Depot now uses the Six Sigma quality control method and uses the internet more effectively.
Nardelli wants a coaching environment that promotes long term planning and relationships within the company.
The Competition
Home Depot’s biggest competition comes from Lowe’s. Lowe’s has been placing stores in directly competing areas and has been growing at a faster rate than Home Depot.
Low’s best advantage is that it has less of a warehouse feel and has wider aisles and better lighting.
Case Questions
1-What is the best way for Home Depot to continue to grow?
We believe Home Depot needs to target different groups of customers. They should have professional stores which have a different retail mix to meet the new segment. Home Depot can also expand globally in places such as Europe and take advantage of an unsatisfied or under satisfied market.
Cont.
2- Can Home Depot maintain its current market position with its new policies and increasing competition?
No one likes change, this is true for all people. We believe Home Depot will be able to maintain its position. The store has a well known brand name and some very loyal customers specially in Atlanta. Furthermore, although the stock prices dropped the store is still currently growing at a reasonable rate.
Cont.
3- Will more efficient operations and increased centralization be effective in streamlining Home Depot’s business?
Nardelli was already able to increase the stock price close to what it was during Home Depots peak. We saw how the return policy on its own saved and will continue to save 10 million dollars annually. Furthermore, we don’t believe that a huge corporation such can be very successful globally with a very decentralized structure.
Cont.
4- How might the shifts in corporate culture affect executives, management, and associates?
Previously, managers had a big say in what merchandise a store sold and were able to order them without authorization, now however stores will become more standardized. Employees in general will feel unease in the early stages of the new culture, however we believe after some time the coaching culture will create a stronger culture that reduces employee turnovers.
Thank you for your time!
Feel free to ask any questions.
Business Background
Founded in Atlanta, Georgia by Bernard Marcus and Arthur Blank in 1978. Home Depot Is the world’s largest home improvement specialty retailer and the second largest retailer in the US with over 900 stores.
Home Depot has had significant growth for over twenty years and held 24% market share in 1999.
Cont.
Home Depot’s primary customer is the individual home-owner or small contractor.
They also offer good customer service to assist those in need.
Home Depot also has a university to educate customers about home improvement projects.
The corporate structure was characterized by being very decentralized. Store managers were DIYers and had a ginificant amount of control.
The Changes
In October 2000, the market share for Home Depot began to drop sharply, this caused the board of directors to seek a new leader.
The board chose Bob Nardelli who held a top level position in GE and was known for his ability to improve operations.
Nardelli started to change the organizational structure into a more centralized and efficient one.
Store managers now have less control over merchandising and offerings.
Cont.
Nardelli is a workaholic and expects employees to share his attitude. He conducts meetings during the weekends.
Buying, once run by 9 regional offices is now controlled by the headquarters in Atlanta.
The customer return policy has been changed due to customers abusing it. It now saves close to 10 million dollars annualy.
Home Depot now uses the Six Sigma quality control method and uses the internet more effectively.
Nardelli wants a coaching environment that promotes long term planning and relationships within the company.
The Competition
Home Depot’s biggest competition comes from Lowe’s. Lowe’s has been placing stores in directly competing areas and has been growing at a faster rate than Home Depot.
Low’s best advantage is that it has less of a warehouse feel and has wider aisles and better lighting.
Case Questions
1-What is the best way for Home Depot to continue to grow?
We believe Home Depot needs to target different groups of customers. They should have professional stores which have a different retail mix to meet the new segment. Home Depot can also expand globally in places such as Europe and take advantage of an unsatisfied or under satisfied market.
Cont.
2- Can Home Depot maintain its current market position with its new policies and increasing competition?
No one likes change, this is true for all people. We believe Home Depot will be able to maintain its position. The store has a well known brand name and some very loyal customers specially in Atlanta. Furthermore, although the stock prices dropped the store is still currently growing at a reasonable rate.
Cont.
3- Will more efficient operations and increased centralization be effective in streamlining Home Depot’s business?
Nardelli was already able to increase the stock price close to what it was during Home Depots peak. We saw how the return policy on its own saved and will continue to save 10 million dollars annually. Furthermore, we don’t believe that a huge corporation such can be very successful globally with a very decentralized structure.
Cont.
4- How might the shifts in corporate culture affect executives, management, and associates?
Previously, managers had a big say in what merchandise a store sold and were able to order them without authorization, now however stores will become more standardized. Employees in general will feel unease in the early stages of the new culture, however we believe after some time the coaching culture will create a stronger culture that reduces employee turnovers.
Thank you for your time!
Feel free to ask any questions.
