Upload
ronald-carpenter
View
214
Download
0
Tags:
Embed Size (px)
Citation preview
HomeBase, Inc (HBI)
ACase Study
Peter F. Drucker Graduate School of Management02 ·17 · 01
Group Members:Anindya Chatterjee , Atul MundadaChona Bunaguen, Stephen Meade
HBI: A failure HBI: A failure
Demise of an inefficient organization High cost of sales Abysmally low net profit margin Poor inventory management Sub-normal productivity Below-average shareholder return- no
trust Poor corporate image
Targeted customer: Women, age 35-54 Higher-margin business Less seasonal Offer consumers unique shopping
experience…emphasis on a wide range of price points, special conveniences and added services, as well as customer service
The Idea: House2HomeThe Idea: House2Home
(HomeBase Press Release, January 2001)
Threats, Opportunities Strengths, Weaknesses
Creation of Strategy
Evaluation and Choice of Strategy
Implementation ofStrategy
Strengths, WeaknessesThreats, Opportunities
Creation of Strategy
Evaluation and Choice of Strategy
Implementation ofStrategy
H2H SWOT AnalysisH2H SWOT Analysis
•Existing Infrastructure•Business Know How•Financial Capacity
•Inefficiency•Mgmt Lack of Vision•Size•Lack of Aggressiveness
•Differentiation•First Mover Advantage – New Niche
•Timing (Economic Recession)•Competition•Buy Out
H2H SWOT AnalysisH2H SWOT Analysis
•Existing Infrastructure•Business Know How•Brand Recognition (?)•Financial Capacity
•Inefficiency•Mgmt Lack of Vision•Size•Lack of Aggressiveness
•Differentiation•First Mover Advantage – New Niche
•Timing (Economic Recession)•Competition•Buy Out
Barriers to Entry is High for New Entrants
Bargaining Power of Buyers is lower in this Industry
Bargaining Power of Suppliers is low for this industry
Threat of Substitutes – Neutral Threat from Existing Competitors
1. No Direct Competition2. Disaggregated Competition
Porter’s Five Forces for H2HPorter’s Five Forces for H2H
Intra Industrial AnalysisIntra Industrial Analysis
Home Depot Expo
Stroud's
Linens N Things/Bed,
Bath & Beyond
House2Home Target
High Cost
Low Cost
Limited Offerings
Broad Mix
Good Idea (targeted marketing)Need to address other core
deficiencies
Conclusion: H2H will not Conclusion: H2H will not succeedsucceed
H2H SWOT AnalysisH2H SWOT Analysis
•Existing Infrastructure•Business Know How•Financial Capacity
•Inefficiency•Mgmt Lack of Vision•Size•Lack of Aggressiveness
•Differentiation•First Mover Advantage – New Niche
•Timing (Economic Recession)•Competition•Buy Out
Why diversification alone Why diversification alone will not workwill not work
Com
peti
tive S
cop
e
Cost Focus
Differentiation
Differentiation Focus
Cost Leadership
H2H
McKenney & McFarlan Quadrant Analysis
Bro
ad
Targ
et
Narr
ow
Targ
et
H2H will not
manage to move
up
We recommend: Change in We recommend: Change in business practice business practice
Customer Focus
Efficiency Drive with right Alliances and Partnerships
Threats, Opportunities Strengths, Weaknesses
Creation of Strategy
Evaluation and Choice of Strategy
Implementation ofStrategy
Attacking H2H’s Core Attacking H2H’s Core Problems Problems
Inefficiency Effective IT investment will improve
efficiency Shift in management focus and
strategy- the willingness to do it (IT)!
Trust of Shareholders / Low Corporate Image
Transparency and effective communication
Customer focus
H2H: Business StrategyH2H: Business Strategy
McKenney & McFarlan Quadrant Analysis
S
trate
gic
im
pact
of
exis
tin
g I
T
syste
ms
Strategic impact of IT applications under development
Support
Strategic
Turnaround
Integration of Business Chain
H2H
H2H: Learning from Past H2H: Learning from Past MistakesMistakes
Home Depot installed Mobile ordering platform and strengthened direct SCM link with manufacturers
HBI lacked in efficiency drive – IT focus. 1998/99 were years where competitors could cash on it like never before.
More Efficient P.O.S. More Efficient P.O.S. Architecture Architecture
We recommend a Linux-based system
Front / Back-office integration - ‘one face to the customer’
Effective implementation of a CRM strategy
Systems Integration- ERP Systems Integration- ERP focus focus
Identify, and design a streamlined e-Procurement chain
Configure a supply integration matrix- value chain
Select the right package/vendorIntegration
H2H: Web Interface H2H: Web Interface StrategyStrategy
Reasons why customers go to website Compare costs Company Information Browse product mix Gain product knowledge
Difficult to sell online
H2H: Web Interface H2H: Web Interface StrategyStrategy
Suggestions for a good websiteDynamic section for Q & A and
Customization conceptData mining and Customer
profilingPush and Pull Marketing Strategy
Threats, Opportunities Strengths, Weaknesses
Creation of Strategy
Evaluation and Choice of Strategy
Implementation ofStrategy
H2H Business Strategy: Cost H2H Business Strategy: Cost and Benefits and Benefits
With the right efficiency drive: Reduce SG&A by 10% & 20% in 1st & 2nd yr
increase sales by 2% in 2nd yr (2004)+
Tighten Inventory cycle by 7-10 days-
Raise IT budget by $50m over 2yrs=>
3yrPV of DEPS improves from –0.82c to –0.08c
H2H: The AlternativesH2H: The Alternatives
H2H- assumptions announced by management
In total, the company currently expects a net loss for next fiscal year of approximately $80 million, or $2.13 per diluted share
$0.50 per diluted share in the fiscal year ending January 2003
$1.00 per diluted share by January 2004
H2H: The Results H2H: The Results H2H EPS will jump to $2.55 by 2004 H2H can reap advantage of being
the first mover Collecting and processing
information will play a key role An effective CRM will be easy to
implement once the systems integration is in place
The whole process may easily take 18 months
Threats, Opportunities Strengths, Weaknesses
Creation of Strategy
Evaluation and Choice of Strategy
Implementation ofStrategy
H2H: Focus on People H2H: Focus on People
Proper Implementation needs:Management Adaptability
and WillingnessProper training of workforceFlow of information from
bottom to topOwnership
Conclusion Conclusion
The success of the H2H concept lies on effective marketing
H2H can reap advantage of being the first mover
Collecting and processing information will play a key role
An effective CRM will be easy to implement once the systems integration is is place
The whole process may easily take 18 months
HBI: Cost InefficiencyHBI: Cost Inefficiency
78.15
72.01 71.65
69
71
73
75
77
79
HomeBase Industry Home Depot
Comparison
Cost of Sales (5yr MA)% of Total Revenue
market.forbes.com, Financials
HBI: Less ProfitableHBI: Less Profitable
1.01
4.87 5.14
0123456789
10
HomeBase Industry Home Depot
Comparison
Net Profit Margin (5yr MA)
market.forbes.com, Financials
HBI: Poor Inventory HBI: Poor Inventory ManagementManagement
Comparison Home Base Industry Home Depot
Quick Ratio 0.2 0.22 0.24
Current Ratio 2.21 1.53 1.55
Receivable Turnover 53 60.4 60.59
Inventory Turnover 2.97 5.02 5.19
market.forbes.com, Financials
HBI: Low ProductivityHBI: Low Productivity
152,589
228,538221,139
150,000
170,000
190,000
210,000
230,000
250,000
HomeBase Industry Home Depot
Comparison
Gross Revenue/Employee
market.forbes.com, Financials
HBI: Poor Returns to HBI: Poor Returns to ShareholdersShareholders
-16.01 -31.1 3.23
24.46 26.27
18.31
25.23 27.6
18.93
-20
-15
-10
-5
0
5
10
15
20
25
30
HomeBase Industry Home Depot
Comparison
Sales - 5 Yr. Grow th Rate EPS - 5 Yr. Grow th Rate Return On Equity - 5 Yr. Avg.% chg YoY
market.forbes.com, Financials
HBI: Lack of AggressivenessHBI: Lack of Aggressiveness
-23.9
20.14 18.58
-20-15-10-505
1015202530
HomeBase Industry Home Depot
Comparison
Capital Spending - 5 Yr. Grow th Rate
% chg YoY
market.forbes.com, Financials
Shareholder’s nightmareShareholder’s nightmare
Point of divergence
as IT started having greater
impact on the bottom
line
www.finance.yahoo.com
HBI: Current Movements in HBI: Current Movements in SharesShares
HBI Closing Price
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.501-
Sep
-200
0
8-S
ep-2
000
15-S
ep-2
000
22-S
ep-2
000
29-S
ep-2
000
6-O
ct-2
000
13-O
ct-2
000
20-O
ct-2
000
27-O
ct-2
000
3-N
ov-2
000
10-N
ov-2
000
17-N
ov-2
000
24-N
ov-2
000
1-D
ec-2
000
8-D
ec-2
000
15-D
ec-2
000
22-D
ec-2
000
29-D
ec-2
000
5-Ja
n-20
01
12-J
an-2
001
19-J
an-2
001
26-J
an-2
001
2-Fe
b-20
01
9-Fe
b-20
01
Sep 09, HBI announces new strategy (H2H)
Dec 8, HBI announces Qtly Results
$/Sh
Management and employees bought HBI shares, shareholders giving benefit-of-doubt
www.finance.yahoo.com
The Porter Value ChainThe Porter Value ChainSupport Activities
Primary Activities
Firm InfrastructureHuman Resource ManagementTechnology DevelopmentProcurement
InboundLogistics
OperationsOutboundLogistics
MarketingSales
Service
H2H: The Alternatives H2H: The Alternatives
96
16
-0.683
22
11
-60
-82
-102
1925
38
-150
-100
-50
0
50
100
150
25-Jan-1997 30-Jan-1999 30-Jan-2001 31-Jan-2002 1-Feb-2003 2-Feb-2004
-3
-2
-1
0
1
2
3 Income After Taxes Diluted EPS
Projected
HBI
HBIHBI
Alternative
Alternative
Alternative
$mn Diluted EPS
www.forbes.com, HomeBase press releases, Our research
H2H: The Alternatives H2H: The Alternatives
96
16
-0.683
22
11
-60
-82
-102
1925
38
-150
-100
-50
0
50
100
150
25-Jan-1997 30-Jan-1999 30-Jan-2001 31-Jan-2002 1-Feb-2003 2-Feb-2004
-3
-2
-1
0
1
2
3 Income After Taxes Diluted EPS
Projected
HBI
HBIHBI
Alternative
Alternative
Alternative
$mn Diluted EPS
www.forbes.com, HomeBase press releases, Our research