Home Depot Strategy Analysis

2939 Words12 Pages
Muhammad Chughtai Daniel Tesler Home Depot Case Analysis Home Depot is a large U.S. based company that competes in the low cost home improvement retail and service industry. Home Depot is a global company because they also have consumers in Canada and Mexico, the potential to expand their market to other areas globally and have a global supply chain. In the U.S. market, the industry is concentrated and in the mature stage with Home Depot and Lowe’s making up a duopoly because they are the only two major players that compete at a similar retail volume nationwide. With only two large companies in the industry, there are high entry barriers because of the high cost necessary to obtain the key success factors to compete against these…show more content…
Home Depot was more concerned with expanding into new markets than it was about ensuring that they maintained their position as a low cost retailer. With Home Depot’s rapid expansion, they experienced the diseconomies of scale through decentralized purchasing, multiple suppliers for the same goods and difficulty managing the number of stores, all items that Nardelli addressed. When Nardelli took over, he shifted the strategy to integrated. He implemented methods to improve the process efficiency of Home Depot to keep them as a cost leader with investments into IT and logistics and the elimination of the cash return policy. He also moved to differentiate Home Depot by adding services such as tool rentals and professional contractor services, making the stores more appealing through layout changes and an emphasis on helping customers instead of restocking. The major issue that faces Home Depot in 2005 is its lack of a clear strategy. Home Depot put resources towards addressing process efficiency issues which are in line with cost leadership, but they also invested heavily in obtaining a differentiated position. Although Home Depot appears to be trying to obtain an integrated position, they are failing at both cost leadership and differentiation. Home Depot made significant improvements in their processes by centralizing purchasing and switching to automated inventory management to be a cost leader, but they

More about Home Depot Strategy Analysis

Get Access