Home Depot Case Study

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Home Depot Case Study 1. In what ways can (a) decentralizing and (b) centralizing authority help an organization like Home Depot to improve its performance?

The case of Home Depot brings about the opportunity for one to view both the benefits of centralized and decentralized authority and the benefits that it brings to an organization. As noted by the success of the Home Depot, it is vital that mangers in businesses know which form of authority is appropriate during certain stages of the organizational development. Having the wrong type of structural authority can be detrimental to the growth of a business and can have a potentially fatal effect to the organization as a whole. By closely examining the principles of each type of
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As Home Depot continued to expand and more stores started to surface, it became increasingly important to assure that there was consistency within each unit. By offering the same products in each location, Home Depot was able to continue to retain customers when they moved locations. In addition, as the company purchased larger amounts of each product to be displayed in each store they were able to attract new customers based on their competitive pricing structure.
Hiring Bob Nardelli was a vital move for Home Depot to maintain their place in the competitive market of home improvement. The recentralization that Bob put into place streamlined the company and all purchasing went through the Atlanta headquarters. By streamlining the products that Home Depot offered, Bob was able to decrease the overall cost to the customer and thereby was able to attract new customers into the organization. In addition, increasing the number of new and innovative products allowed the company to be responsive to their current customers.

2. What kinds of factors change the decision to centralize or decentralize over time in a competitive environment such as the home building supply industry?
In the early developmental stages of Home Depot, management within the organization found that a decentralized structure was the most effective way to manage each individual store. By offering a decentralized structure, top executives

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