MISSION AND VALUES

Competitors

The Home Depot Financial Condition

Highlights: $66.1 billion in revenue for fiscal 2009 Inventory Turnover ratio of 4.20

Inventory cycle repeats a little more than 4 times a year

Over $8.6 billion in LT Debt Looks very large, but HD does a great job of

managing debt $867 million in net free cash flow

Emphasizes both profitability and liquidity of firm

Comparisons: Home Depot vs. Lowe’s

Home Depot Lowe’s

Quick Ratio (Acid Test)

0.23 .09

Debt to Equity 0.50 .27

Net Income $2.661 billion $1.783 billion

2006 2007 2008 2009 20100.000

0.500

1.000

1.500

2.000

2.500

COGS/PP&E

Home DepotLowes

Business Strategies

Internal Programs “Trim the fat”: Close Home Depot Design and

sell HD Supply Boost Employee Moral

Success Sharing program, Homer Badges Program, Aprons on the floor program

Revamp Supply Chain Multi-million dollar distribution centers

Business Strategies External Programs

Focus on better customer service Product Knowledge Recognition Program, Master Trade

Specialist Program New marketing techniques

New tagline “More Saving. More Doing” Holiday season marketing Curb Geographic Marketing

Competing with online “How To” directions Google

Competing with the housing slump Frank Blake “A downturn is a horrible thing to waste.”

Foreign Subsidiaries

Home Depot Canada Early 1990’s partnership with Molson 1st Home Depot Market outside of U.S. Canada’s largest home-improvement retailer

Home Depot South America Greenfield strategy bust Chile and Argentina targeted, but peso crisis

forced HD to exit Only opened 50 stores before withdrawal

Foreign Subsidiaries

Home Depot Mexico Return to acquisition strategy

Bought out Total Home and Del-Norte 70% of homeowners in Mexico build own

homes Stronger relations with U.S. aided successful

growth

Home Depot China

Annual sales to exceed $50 billion Chinese economy growing at 20% annually Home ownership in cities equals 70% Will face already well established international retailer

competition for the first time Tweak product sales to better serve Chinese consumer

•SWOT analysis is a strategic planning tool used to evaluate strengths, weaknesses, opportunities, and threats involved in a business venture or company.

•When analyzing The Home Depot’s SWOT, a great number of strengths were found with a slightly smaller list of weaknesses. There is also a great deal of opportunities for this company while threats are held to a minimum.

SWOT ANALYSIS

Strengths

Established brand

name

Unique business

model

Rapid growth ability

Extensive product

line

Weaknesses

Rapid growth

Corporate Structure

Advertising

Opportunities

Market share

Going global

Threats

High competition

Struggling economy

The list of strengths The Home Depot holds is endless. Some of the top competitive factors that have enabled The Home Depot to make it to the top and remain there are:

•Established brand name•Unique business model•Rapid growth ability•Extensive product line

Other significant strong points of the company that are of value include: a superior corporate structure including bottom-up training, superb use of satellite communications and technology, differentiation based on service, decentralized management, and strategically placed, convenient store locations.

STRENGTHS

Although The Home Depot has an astonishing list of strengths, the list is matched with a similar list of weaknesses. A few of the company’s strengths play dual roles serving as a hardship on the entity as well. A few of the significant weaknesses include:

•Rapid growth •Corporate Structure•Advertising

WEAKNESSES

• MARKET SHARE: The market share for the home improvement industry is of a high magnitude. There is still an immense amount of market share out there to be soaked up with and utilized. Any successful company in this industry has the opportunity to gain this market share.

• GOING GLOBAL: The Home Depot already has its foot in the markets of Canada and Mexico. While it has a foothold in number of markets around the world, there is always room to grow and new countries to open branches in. The company has more than enough manpower and means to expand to its desire.

OPPORTUNITIES

THREATS• COMPETITION: The Home Depot was able to penetrate a blue ocean in home improvement for a small period as it offered a new product of high value at fairly low prices. It didn’t take long, however, for others to realize it was a profitable market. It was soon infiltrated with a number of hardware, carpentry, and construction companies.

• ECONOMY: One of the first areas of a person’s life that will be cut during hard times is luxuries and unnecessary expenses such as home improvements. This could potentially lead to a slow sales season for The Home Depot as unemployment rates are at an all-time high.

2010 Economic Outlook

Recession Affects 4Q 2009 Profit Sales increase 2.5% in 2010 2010=“Transitional Year”

Adaptation

Cutting Costs New Ideas

Industry Analysis

Lowe’s Menards Sutherlands

Porter’s Five Forces

Industry analysis to determine the competitive intensity and overall profitability

Rivalry Among Existing Firms

Industry Sales

Negative Sales growth can suggest increased competition to gain market share

2007 2008 2009 2010

Home Depot 2.60% -2.12% -7.84% -7.17%

Lowe’s 8.52% 2.89% -0.11% -2.09%

Industry Average 5.56% 0.39% -3.97% -4.63%

Rivalry Among Existing Firms

Concentration The higher the concentration level, the fewer

number of firms needed to get job done. Thus, there is less competition.

Home Improvement Industry has high level of concentration.

2006 2007 2008 2009 20100.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Market Share

Home DepotLowes

Rivalry Among Existing Firms

Economies of Scale refer to a company’s ability to mass produce to

drive down costs; the firm increases the scale of its operations

By examining the total assets, we can see a firm’s ability to produce on a larger scale, which increases economies of scale. Total Assets (in millions)

Company 2006 2007 2008 2009 2010

Home Depot 44,405 52,263 44,324 41,164 40,877

Lowe’s 24,639 27,767 30,869 32,625 33,005

Rivalry Among Existing Firms

Switching costs When switching costs are low, a consumer can

easily go through a different company to get the same product. Because of the high competitiveness the home improvement retail industry is characterized by

low switching costs and low differentiation of products.

Exit Barriers: Exit barriers are high when it is hard to exit the industry The large amount of assets along with lease

agreements allows for high exit barriers

Threat of New Entrants Economies of Scale

If large scale economies are present, new firms can be forced to invest heavily to remain competitive

In the retail home improvement industry, new firms must come in with a large amount of capital strength if they plan to sustain and be competitive with the larger corporations.

First Mover Advantage: If the companies within an industry have already

acquired an advantage in product innovation, new entrants may be deterred from entering the market.

In the competitive home improvement industry, each company must keep up with the current market to meet customers’ wants and needs.

Year Established

Home Depot 1978

Lowes 1934

Menards 1972

Sutherlands 1917

Substitute Products

A substitute product is any alternative a potential customer can find outside of the industry to satisfy their same need.

Low: The only major substitute customers have to the home improvement industry is to buy professional builders and contractors.

Bargaining Power of Buyers

With the existence of several firms in the home improvement industry, buyers have a large amount of bargaining power. Conversely, customers of an industry that is dominated by a single firm have little to no bargaining power.

Customers have a significant amount of bargaining power in the home improvement industry. This level of bargaining power drives prices down in the industry.

Bargaining Power of Suppliers

the amount influence the suppliers to companies in the home improvement industry have.

Companies are the customers

the home improvement industry face low levels of bargaining power of suppliers. This is due mainly to the commodity-like products that suppliers sell.

THE HOME DEPOT ORGANIZATIONAL STRUCTURE

•Decentralized, lateral relationships•Allows for flexibility in each store•More costly, but allows for increased growth•Horizontal AND vertical linkages among management

The Home Depot Employees “orange blooded” company culture

Guide behaviors for all employees Camaraderie and success among employees

Full-time, salaried employees work best Core values stressed Entrepreneurial spirit encouraged

The Home Depot Criticism

With any success comes backlash The Home Depot and Wal-Mart faced similar

criticisms for their methods of operation

•Similarities:• Saturation Strategy• Low price policy• Anti-union policies• Forces mom-and pop-shops to close their doors

Core Values

Special Vision

Your Total Value

The Home Depot Foundation

Your Total Value

Keeping Employees Satisfied

Meeting Individual and Family Needs

Core Benefits Package

Financial Benefits

Giving Back to the Community

The Home Depot Foundation

Affordable Housing Built Responsibly

Sustainable Community Development

Team Depot

Corporate Social Responsibility

Environmental Factors

“Going Green”

The SER Program

9 Rules

Conclusion