Home Depot Presentation

8/6/2019 Home Depot Presentation

1/36

1

Case Study

GROUP-2 PRASENTATION MM-1 NDIM


2/36

2

GROUP MEMBER]S

GROUP-2, PRASENTATION , MM-1, NDIM

(MM-1, GROUP-2)

SUNIL MISHRA B-59SRIKANT YADAV B-55

DEEPAK JOSHI B-18


3/36

INDUSTRY OVERVIEW

U.S. Home Improvement Retail Industry Focuses on

the sale of equipment and supplies for various forms

of small and individual construction projects,

especially home improvement. Overall market size in2000 was about $200 billion. Customers : Do-It-

Yourself (D-I-Y) Buy-It-Yourself (B-I-Y) Professional

Costumers (Business to Business Sales)


3


4/36

INDUSTRY OVERVIEW

Worlds largest home improvement retailer Second largest

retailer in the US in 2000 1103 Home Depot Stores 26

EXPO Design Center 4 Villagers Hardware Test Store

Lighting and plumbing subsidiaries Products GroupBuilding Materials, Lumber and Millwork (24.7%)

Plumbing, Electrical and Kitchen (26.6%) Hardware and

Seasonal (28.5%) Paint, Flooring and Wall Coverings

(20.2%)


4


5/36

INDUSTRY OVERVIEW

Broad assortment of high-quality merchandise and

services at competitive prices using highly service-

oriented personnel and aggressive advertising. Year

2000 Income Statement: Net Sales: 38.4 billion GrossProfit: 11.4 billion Net Earnings: 2.3 billion


5


6/36

6

HISTORY OF THE HOME DEPOT

1978 Founded by Bernie Marcus and Arthur Blank; zero locations; 20associates

1979 3 store location; 200 associates; $7 million in sales

1980 4 stores; 300 associates; $22 million in sales

1981 Stock goes public on NASDAQ, raising $4.1 million; 8 stores; 700

associates; $51 Million in sales 1984 Moved to the New York Stock Exchange (NYSE) in

1986 Sales exceed $1 billion; 60 stores

1987 Day-in/Day-out pricing policy; UPC scanning system; health programfor associates introduced; 75 stores; $1.45 billion sales

1988Named retailer of the Year by Building Supply Home centers for

second time; named High Performance Retailer for 7th consecutiveyear by Management Horizons; 96 stores; $2 billion in sales



7/36

7


1994 The company arrived in Canada with the acquisition ofAikenheads home improvement centers

1997 624 stores; 124,000 associates; $24.2 billion sales

1999 The Legend opened in the Atlanta Store Support Center; chronicles thehistory of The Home Depot and illustrates the values that set us apart

2001 Began flying its flag proudly in Mexico in 2001 through theacquisition of Total HOME

2002 1,532 stores; 300,000 associates; $58.3 billion insales

2003 $64.8 billion in sales

2004 Sales reach 73.1 billion; over 1,818 stores and 54 EXPO centersmaking Home Depot the worlds largest home improvement retailer, 2nd

largest retailer in the United States, 3rd largest retailer in the world



8/36

8


2005 launches its high-end online home-furnishings store, 10 CrescentLane, shortly followed by the launch of Paces Trading Company, its

high-end online lighting store.

2005 Former employee Michael Davis filed a whistleblower lawsuitagainst the Home Depot, alleging that his discharge was in retaliation

for refusing to make unwarranted charge backs against vendors.

2006 the Home Depot acquired Home Decorators Collection which wasplaced as an additional brand under its Home Depot Direct Division;Sales totaled US$90.8 billion; 10% increase in revenue

2006 Started testing with fuel centers at some of its stores. The first centers areexpected to earn $5-$7 million per year. The fuel centers sell beer, hot food,snacks along with providing diesel at a separate island. This allowscontractors with large trucks to be able to fill their vehicles. The fuel

centers also offer car washes, which are large enough to accommodate fullsize pickups.

2007Nardelli (CEO) was replaced by Frank Blake; sold its wholesaledivision HD Supply to a consortium of 3 private equity firms



9/36


9

ANEW VISION

To be the first choice for affordable,diverse, innovative, and modern products in

the home improvement industry.


10/36

10

MISSION

The Home Depot is in the home improvement business and ourgoal is to provide the highest level of service, the broadest

selection of products and the most competitive prices. We are a

values-driven company and our eight core values include the

following:

Excellent customer service Taking care of our people

Giving back

Doing the "right" thing

Creating shareholder value

Respect for all people

Entrepreneurial spirit Building strong relationships



11/36

PRODUCT

The company sells a wide assortment of building materials,

home improvement, lawn and garden products such as patio

sets, kitchen, doors, windows, grills, bath, lighting, fans and

appliances. Home Depot provides an inventory of products specifically

aimed at professional contractors, such as lumber, paint and

painting supplies, plumbing equipment, cleaning and

janitorial equipment


11


12/36

12

EXCLUSIVE BRANDS

The Home Depot carries several exclusive brands, including:

BEHR Paint

Chem-Dry (carpet cleaning, upholstery cleaning, tile and grout services)

Distinctions Cabinetry

Eco Options (store brand)

Feather River Doors

G.E. (Water Heaters) Glacier Bay (faucets and bath)

Hampton Bay (lighting, ceiling fans & patio furniture)

Husky (tools)

Millstead

Pegasus (kitchen and bath items)

Ralph Lauren paint Ryobi (power tools)

Thomasville cabinetry

Vigoro (fertilizer)

Workforce



13/36

PRICE

Home Depot offers discounted prices via its online Savings

Center where it cuts p to 20% off products such as play sets,

kitchen faucets, and professional saws.

The company has established special buys prices onappliances offering 25% discounts on products such as

Washer & Dryer sets, and 20% off on Water & Ice

Refrigerators


13


14/36

PLACE

The Home Depots main office is located in the US, in

northwest Atlanta, Georgia.

Home Depot has 3 stores in Georgia, 5 in Florida, three in

California, as well as locations in Tennessee, New Jersey,and Indiana.

The company has stores in Mexico, Guam, the Virgin

Islands and Canada


14


15/36

PROMOTION

In 2008 Home Depot marketed its New Low Prices

campaign which featured rebates and discounted prices on

over 1000 products.

The company unveiled its Aprons on the Floor initiativedesigned to improve customer service by providing an

increased presence of available.

The company markets special offers via email newsletters,

do it yourself workshops, and garden clubs.

Sponsored the 1996 Olympic Game.


15


16/36

PROCESS

Estimates are that the Aprons on the Floor

initiative could allow the assignment of two

additional hours of floor time per week for these

supervisors. This is estimated to mean 4,000 extrahours of customer-service activities for Home

Depot.

Home Depot continues to transforming its

information technology applications by convertingtheir Canadian business to a new enterprise

resource planning platform


16


17/36

PROCESS

Recent associate training and procedures concentrate on

helping customers with problem solving, rather than

simply securing sales.

In recent years Home Depot is emphasized a moreformalized decision-making process tempering some of

the flexibility regional mangers had operated under.


17


18/36

PHYSICAL EVIDENCE

The average size of a Home Depot store is about

105,000 square feet of enclosed space. Each store

has about 24,000 additional square feet in the

outside garden area. The company's stores stock approximately 30,000

to 40,000 different kinds of products


18


19/36

PHYSICAL EVIDENCE

To improve merchandising of its chemical products

area, Home Depot has employed new wayfinding

signage program to brighten aisle and make easier to

navigate between product categories. The garden center area was revised with New table

fixture design with larger and brighter wayfinding

signage.


19


20/36

PEOPLE

Frank Blake is the Chairman and Chief Executive

Officer of Home Depot.

Tim Crow was hired as Executive Vice President of

Human Resources and assigned to oversee all aspectsof human resource management as well as address

customer service issues.

Home Depot plans to increase the number of full time

employees and expand their training, while de-emphasizing the use of part-time workers.


20


21/36

PEOPLE

In 2008 the company issued success sharing

checks in excess of $88 million to our hourly

associates a new record

The company places strong on value on itsassociates and provides performance based merit

increases as well as a 401(k) matching program


21


22/36


22

STRENGTHS

1 home improvement retailer in the world

2 retailer in the U.S.

Profits climbed 16% and revenues climbed 13% in

for the fiscal year 2004 Innovative methods of differentiating

Dominant in the lumber and building materialsindustry

Distinctive product range Efficient business model


23/36


23

WEAKNESSES

Rising expenses

Store layout and appearance

New store productivity remains weak

Revenue growth is slower than industry average andLowe's

18% decrease in cash and cash equivalents FY from2002 and 2003 to 2004


24/36


24

THREATS

Competitors (Lowe's, Sears, Wal-Mart)

Reaching market saturation within North America

Contractor shortage causing backlog in home remodeling

Overlap between Home Depot and Lowe's

A class-action lawsuit alleges that Home Depot and rivalLowe's misled customers with interest-deferred credit cardpromotions in 2003


25/36


25

POSSIBLE ALTERNATIVE

STRATEGIES

Forward integration: As a retail outlet, Home Depot can

acquire major distributors of plumbing equipment,

construction equipment, and other Home Depot product

related distributors. Backward Integration: As a retail outlet, Home Depot

can acquire its major suppliers of Home Depot supplies

such as installation services, steel mills, and logging

companies of their own thus creating a supply that suitstheir quality, and amount that they need.


26/36


26

POSSIBLE ALTERNATIVE

STRATEGIES

Market Development: Home Depot mainly targets self

builder construction companies and baby boomers. Home

Depot can develop a market for newly weds, and new home

owners who may want to improve their newly purchasedhome.

Market Penetration: Go after Lowes, Ace Hardware and

True Values market share

Horizontal integration: Home Depot can acquire other homeimprovement companies taking greater control of the

industry, and gaining more control in various regions.


27/36


27

RECOMMENDATIONS

Domestic Expansion

Open up more full service hardware stores

throughout the united states thus creating a presence in all

areas within a state. Goal would be to haveat least 5 Home Depots per state, averaging 10 new stores

per quarter. This will make Home Depot a one stop shop

for individual customers and

businesses alike.


28/36


29/36


29

RECOMMENDATIONS

Provide fuel services

Aside from being a home improvement store, Home

Depot will have filling stations at select Home Depotstores. This will create a one stop shop for customers,

and businesses providing fuel, food, and other quick stop

necessities.


30/36

STEPS TAKE TO GROW IT]S

MARKET SHERE & PROFIT

Before Mr.Nardelli time All the product to be available to customer in warehouse style at a

very affordable price.

Do-It-Yourself option options available along with Buy-It-Yourself. Installed a computerized inventory system.

1994-started its international expansion.


30


31/36



During the time of Nardelli

2000- Online store, WWW.thehomedepot.com

was launched.

2002-Started another division called the HomeDepot Landscape supply(HDS)

Centralizing the purchasing and merchandising

processes.

Shift the focus of the company from retail to

constraction business.


31


32/36



Increase the working hours of employee for

customer service

Reduce employee for cost cutting.

2007-Invest US$350 mn on building customerservice

Replace Do-It-Yourself to Do-It-For-Me attitude

Implement six sigma


32


33/36


33

STEPS TAKE TO GROW IT]S MARKET

SHERE & PROFIT

At that time

Increase sales revenues by 20% annually for the next 3 years

Reduce expenses by 20% annually for the next 3 years

by 10% in selling and store operating costs

by 10% in general and administrative costs

New capital expenditure priorities; not over investing in a maturing

business

90% reduction in a new store development in domestic

40% increase in remodeling older stores and upgrading IT systems

50% increase in international expansion


34/36

FINANCIAL HIGHLIGHTS COMPARISION

BETWEEN 2006 TO 2010

US$ mn

ANNUAL

2010 2009 2008 2007 2006

Net sales 17,784 18,961

Total

Revenue

66176 71288 77349 79022 77019

Gross profit 22412 23990 25997 26546 25938

Operating

Income

4803 4359 7242 8866 9047

Income

before Tax

3982 3590 6620 8502 8967

Income afterTax

2620 2312 4210 5266 5641

Net income 2661 2260 4395 5761 5838

EPS 1.58 1.37 2.28 2.56 2.64

GROUP-2, PRASENTATION , MM-1, NDIM34


35/36

CONCLUSION

Home Depot has a solid foundation. Good Business

Plan Customer Loyalty Good Market Strategy

But its not immune to macro factors Repeat of 94-

95 recession drop Susceptible to interest rates,consumer confidence, real estate Expansion into new

markets could provide insulation

A good company but susceptible to macroeconomic

turbulence

GROUP-2, PRASENTATION , MM-1, NDIM35


36/36

GROUP-2 PRASENTATION MM-1 NDIM36

QUESTIONS

?

Documents

Home Depot Presentation