The Legacy Behind "Home Depot" - Case Study
Updated: Aug 29, 2022
Was Written on June 07 2020 for MBA 512 Strategic Management Class at Stony Brook University
Discussion Question #1:
Is it necessary for Home Depot to emphasize both the DIY and contractor segments of the market to build and maintain economies of scale? Is one segment tied more closely to the general state of the economy than the other? Explain.
To remain relevant, a company must maintain relevancy. Home Depot gained its success when it was first founded primarily to sell DIY equipment for home and garden buildings. Later on, people were favoring the company’s contractor services which resulted in a large generation of revenue. The question is, what did Home Depot do since its foundation in 1978 to remain relevant?
Home Depot has improved product offerings, advanced the technology used, and modernized its company’s policies. For example, the company developed different services that kept the company updated such as rental gear, extensive delivery services, customized pick/stage ordering, and loading services with employee help.
However, both services are very different and both must be emphasized in the company’s core in a strategic way. The contractor segment represents the B2B segment while DIY represents the B2C segment which generates more revenue. If the company only focuses on contractors, they will lose economies of scale, so a larger capacity of DIY helps in building economies of scale. Although B2C is highly affecting the economies of scale, B2B is highly affecting the framework and infrastructure of the company resulting in domestic gross product. This indicates that the B2B segment is closer to the economy.
Discussion Question #2:
Has competitive pressure from Lowe’s caused Home Depot to modify its business strategy? If so, how?
Yes. “Competitive pressure from Lowe’s has caused Home Depot to aggressively upgrade its old stores,” (Parnell, 2017). While keeping the company’s improvement as well as efforts in growth, Home Depot was competing with Lows for the same target market offering similar services and products. In 2007, Home Depot replaced CEO Robert Nardelli by Frank Blake. The following year, sales peaked thanks to the new “More Savings. More Doing” campaign. Since 2010 the company dominated the home improvement segment to this day. In 2014, Frank was replaced by Craig Menear. The new CEO then introduced the “How Doers Get More Done” campaign which helped the company reach the highest sales in company history (Danzinger, 2020). According to Forbs, (2020) the company changed a few aspects of business strategy to focus on improving store experience. Listed in employee training, new store design, product innovation (for example, expanding the paint department to “color solution center”), speeded home delivery, and improving ecological solutions. (Danzinger, 2020).
Discussion Question #3
Do international opportunities exist for Home Depot beyond North America?
A recent survey conducted by Forbs in 2020, shows that the reputation of China and the credibility of the Chinese reputation is in decline. That is due to the way that the government handled the COVID-19 pandemic. Office Depot, similarly to most companies in the world, are making their products in China. Continuing to produce goods in China might harm the company’s reputation and will prevent it from expanding internationally.
However, with the right marketing plan and with a legitimate adoption of strategy nothing is stopping Office Depot from expanding to new markets beyond North America.
Fernando, J., 2020. Home Depot Vs. Lowe's: What's The Difference?. [online] Investopedia. Available at: <https://www.investopedia.com/articles/personal-finance/070715/home-depot-vs-lowes-home-improvement-battle.asp> [Accessed 29 May 2020].
Flannery, R., 2020. Pew Poll Gives New Fodder To U.S. Politicians Criticizing China Over Pandemic. [online] Forbes. Available at: <https://www.forbes.com/sites/russellflannery/2020/05/28/pew-poll-gives-new-fodder-to-u-s-politicians-criticizing-china-over-pandemic/#63c659025b24> [Accessed 29 May 2020].
Parnell, J., 2017. Strategic Management: Theory And Practice. 5th ed. University of North Carolina at Pembroke: Academic Media Solutions.