Living Case Study: Strategy EditionG U I D E D S T U D Y O F H O M E D E P O T I N C .

EXECUTIVE SUMMARY

FindingsThe Home Depot is in a unique place right now, the company has tremendous amounts of resources and capital, but no definitive direction going forward that would give them a strategic and competitive advantage over their main competitors Lowe’s and Menards. The current state of the home improvement industry has pushed Home Depot to its cross-roads, they can go in a direction that will help the company grow and gain a bigger piece of the market, or the company can just stay where it’s at and hope its competitors falter along the way.

The following report was put together to show how Home Depot can take advantage of their current situation in the home improvement industry. Home Depot’s market share will allow them to react to new forces and competitors in the environment, but also gives them the resources and time to work on integrating a new strategy that will take advantage of the company’s core competencies while addressing and minimizing the company’s weaknesses. Going over the current structure, the internal and external environments and the company’s vision, mission and long-term objectives has led me to conclude that a new strategy will be best for the company going forward. In assessing which strategy Home Depot should use going forward, I have studied all facets of the industry and background of the company and have included them in the report. The strategy that Home Depot should pursue going forward is the “Product Development” strategy. The HDX brand has a bad reputation for its shortcomings and has led to a decrease in both customer confidence and associate confidence in selling HDX products. The “Product Development” strategy should be put in place to increase the quality of all HDX products. If some HDX products cannot effectively and efficiently be increased in quality, then those products should be taken off the shelves and their resources should be reallocated to other HDX products where quality can be significantly increased. By taking the time and reallocating resources properly, Home Depot can develop action plans and unit goals to help meet the “Product Development” strategy. Home Depot has the right leaders in place to lead the implementation of this strategy and the foundation to build upon the values the company lives. The “Product Development” will increase both customer satisfaction and employee morale surrounding the HDX brand. It will also give

customers a quality and cost effective alternative compared to the expensive brands.

The “Product Development” strategy will allow Home Depot to capitalize on founders Bernie Marcus and Arthur Blanks’ innovative philosophy involving the “Customer Bill of Rights” (Our Company, n.d.). Home Depot is change ready, the company’s customer service is bounds ahead of the competition and this strategy will help the company reach new heights. Companies like Home Depot always hit a point in time where they need to make a decision about their future; companies who do not take the time to study the environment, or look at the trends and develop new processes and strategies, lose their footprint in their industry. Home Depot is at that point and the best way to go moving forward to execute on their industry is implementing the “Product Development” strategy.

Recommendations1. The “Product Development” strategy should be implemented going

forward. This strategy will help Home Depot build on its strengths, address the company’s weaknesses, take advantage of the company’s opportunities and minimize the company’s threats. This strategy will also help the company get back to its roots and will help the company live its vision by executing on the eight core values the company stands for.

2. The “Product Development” strategy should be implemented immediately to catch the company’s competitors Lowe’s and Menards off guard. It should be implemented by studying the processes in place for making HDX products and gathering data to figure out which products can be increased in quality. If a products quality cannot be significantly increased, than Home Depot should get rid of it and take the resources and put them towards new products and new processes.

3. In order to achieve alignment with this strategy, Home Depot needs to change the culture surrounding the brand and train associates on the improvements made for the brand. To achieve alignment across all facets of Home Depot, the company will need to create an effective means of communication. Communication is key in any strategy implementation. Home Depot needs to make sure every unit level, store level and corporate level manager is communicating with one another.

4. Home Depot will need to exercise management controls during the entire process to help with the implementation. If the “Product Development” strategy is executed and implemented effectively and successfully, the company can expect an increase in customer service and an increase in sales for the store brand. The company can also look forward to customer retention and customer loyalty that will build by giving customers a quality alternative to choose from in comparison with competitors.

5. Successful implementation and execution of the “Product Development” strategy will increase intangible assets like employee morale and customer service. This strategy will also increase tangible assets like inventory turnover, which will allow the company to gain bigger capital at a faster rate by turning the inventory of the HDX brand into a quick liquidity turnaround. It will also increase the return on investment because more customers will be buying HDX product, which in turn helps Home Depot recoup on the investment for increased quality.

6. The “Product Development” strategy should be reviewed on a weekly basis with both progress reviews and also periodic reviews. It should be evaluated by managers at every level by asking the right questions and gathering the correct data that will help them find root causes for any issues and help them obtain information that could be effecting the implementation. Lastly, communication on all levels, through every phase of the implementation process; starting with manufacturers and going all the way to store level associates, keeping everyone in the loop and communicating effectively will help with the evaluation and reviews of the implementation process.

STRATEGIC STUDY

Historical Background and Present ContextHistory

The home improvement industry has been running strong for many years now and at the top of that mountain is the Home Depot. According to the company’s corporate website, The Home Depot was first established in 1978 by both Bernie Marcus and his colleague Arthur Blank. But Marcus and Blank could not do it on their own, and this caused them to seek help with further guidance and the financial aspect of the company, for which they hired Ken Langone an investment banker and Pat Farrah who knew the ins and outs of merchandising. Together the four of them would open the first two stores in June of 1979 in Atlanta, Georgia. The main idea behind the stores was to provide customers with an overwhelming shopping experience that had a “Warehouse Feel” and an abundance of products (Our Company, n.d.). Home Depot’s history has been documented on their corporate website, in which they talk about the first stores, saying “The first stores, at around 60,000 square feet each, were cavernous warehouses that dwarfed the competition and stocked 25,000 SKUs, much more than the average hardware store at that time” (Our Company, n.d.).

Early on, both Marcus and Blank began to realize the importance of customer service, which led them to the idea of the “Customer Bill of Rights” (Our Company, n.d.). This idea in Marcus and Blank’s eyes was that the customer was deserving of and entitled to certain things when shopping at Home Depot. Those included things like great prices, a large selection with consistent quantities and employees that worked on the sales floor who knew

what they were selling and provided customers with the best possible customer service (Our Company, n.d.). Both Marcus and Blank came up with their own unique philosophy in regards to customer service and that was “whatever it takes” (Our Company, n.d.). What that meant, was that customer service was more than getting people in and out of the store, it meant more than just bringing in a customer selling them a product and waving goodbye. The philosophy’s framework was building a relationship with the customer, they knew this philosophy would bring back repeat customers and cement their company as a retail giant (Our Company, n.d.).

After a few years, the Home Depot was gaining so much recognition and praise from both customers and financial advisors, that in 1981 the company finally went public. After going public, the company saw extreme growth and by the end of 1989 the company opened its 100th store. This tremendous growth caused other nations to push Home Depot into expansion. Their first move came in the early 90’s when they opened their first store outside of the United States borders and into Canada and in 2001 they opened their first store in Mexico. As the expansion continued to grow and the company gained a larger footprint in North America, they decided to take the business overseas in 2006 and opened their first store in China (Our Company, n.d.).

The Industry

Building off the early years, Home Depot has continued to make leaps and bounds in market share and growth. Of course, there has been hiccups along the way, but as the home improvement giant has shown in the past; they can overcome anything. Home Depot has always been a company striving to provide its customers with top end products at competitive prices. Home Depot’s corporate website says “The Home Depot began changing consumers’ perspectives about how they could care for and improve their homes. The Company created the “do-it-yourself” concept, spawning an entire industry that now spans the globe” (Our Company, n.d.). But with all great things in both life and business, there is going to be competition and Home Depot was not the first one into the industry, that title goes to their biggest competitor and that is Lowe’s. Lowe’s opened its first store in the 1920’s and has since maintained a level that has built strong competition between the two. The two home improvement retailers have made it through difficult times and have both flourished and faltered. The home improvement industry is largely weighed on by the economy and there is nothing more unstable than the economy. For Lowe’s, they had to deal with World War II that had the entire economy focusing on bonds and building materials for war, but they pushed through. By the time Home Depot opened its doors the economy was in a flux, moving upward and then falling. Global issues had caused the industry to slip, but they stuck with their design and vision because they knew what it could become. As the years have progressed on, competitors have fallen off the map and have filed for bankruptcy, we can see this with a company like Builders Square who was owned by Kmart. They couldn’t withstand a reorganization with Home Quarters who was a big retailer at the time and eventually shut their doors. But one thing stayed true, Home Depot and Lowe’s were here to stay.

As the millennium approached, Home Depot saw a low market share home improvement retail center gain ground and become a threat in the industry and that is Menards. Menards has a similar store image and layout design like Home Depot and caused Home Depot and Lowe’s to realize that it was no longer a one-on-one competition. Where Home Depot sets itself apart from companies like Menards and Lowes, is the fact that Home Depot offers trusted and durable brands that others just simply do not. Take Menards for instance, they only offer their home brand when it comes to power tools and other home equipment. At Home Depot, they offer brands like Rigid, Porter Cable, Ryobi, Echo and the store brand HDX.

Present Context

This brings us to today, and as we all have witnessed no matter how powerful you are and how much market share you may have, one slip up can prove detrimental. Home Depot showed they are not invincible and with technology seemingly improving with new gadgets and software every day, the industry has changed and Home Depot didn’t change with it. They had a massive data breach. Home Depot lost the trust of its customers and let rivals including Lowe’s gain ground on Home Depot’s personal relationships with contractors and the average Joe with its recent data breach. It showed that Home Depot had a lapse of judgement and decided to put its customers at risk by not keeping up-to-date with its encryption data software. Home Depot’s stock did decline but didn’t drop as far as most would have thought and that is because corporate officers kept those at risk informed and updated on the investigation into the breach and how they were going to prevent something like that from happening again in the future.

Regarding the Data Breach, Robert Hackett of Fortune.com talked about how the hacking barely made a dent for Home Depot. Hackett said that the Home Depot spent $28 million dollars in reimbursements and insurance coverages. According to Hackett, that $28 million dollars only represented about .01% of the company’s sales for the year (Hackett, 2015).

As you can see, a company like Home Depot, which has established itself as one of the biggest, most reliable companies in the world can push through. Home Depot’s history and the foundation they have built and continue to build on, has allowed them to flourish even in downtimes. They have made it through the housing crises, recent depression and now they have so far been successfully moving their way through a data breach that would have bankrupt most companies. It all starts with people, and Marcus and Blank knew that. The customer service philosophy and foundation those two built is still guiding Home Depot today and with housing market rising again, we can only imagine that Home Depot will continue to grow.

Company Mission, Vision, and Other Guiding Stars

Mission and Vision

Home Depot has many guiding stars that effectively and systematically work together to provide the organization and customer the best shopping experience and customer service. The company’s values statement as stated on their corporate website is “The Home Depot’s values guide the beliefs and actions of all associates on a daily basis. Our values are the fabric of the Company’s unique culture and are central to our success. In fact, they are our competitive advantage in the marketplace. Associate pride and our “orange blooded” entrepreneurial spirit are distinctive hallmarks of our culture” (Investor FAQ, n.d.). The organization also follows a mission statement that is built on eight core values that include excellent customer service, watching out and looking after the care of their people, giving back, doing the right thing, creating value for the shareholder, respecting all people and creating entrepreneurial spirit. The mission statement for the company as provided on their corporate website is “The Home Depot is in the home improvement business and our goal is to provide the highest level of service, the broadest selection of products and the most competitive prices” (Our Company, n.d.). These statements show that Home Depots approach, along with their vision and mission statements do in fact, as stated above, work systematically within one another. This is can be noticed, as their values statement speaks about their associates living and believing in the values that Home Depot provides. Reading the company’s values statement above, we can see that Home Depot believes their competitive advantage is based on their associates striving to provide those values and bringing those values to life, as they work day-to-day providing excellence in customer service. The values statement directly leads into the company’s mission statement, based on the involvement of extraordinary services.

Home Depots values are extensive and by reading the values of Home Depot it is easy to see why the company has thrived while others in the industry, excluding Lowe’s, have faltered. The value that stands out the most is “Doing the Right Thing”, in which Home Depot believes instead of taking the easy route and just "Doing the Right Thing" the company takes it a step further and focuses on "doing things right” (Investor FAQ, n.d.) Too many home improvement and do it yourself companies or stores focus on just doing things right, by which I mean getting the customer in and out of the store with the product they need, without forming a personal relationship and helping the customer feel trust in them as informative and wise to their individual situational needs. At Home Depot, they focus on building those relationships so customers will continue to come back and ask for a certain associate because they helped them personally with their at home project and built a foundation for a long-lasting relationship.

Guiding Stars

The guiding stars that drive Home Depot include associate empowerment and from first-hand experience working for the company, I feel the concept of empowerment has pushed Home Depot to greater heights. Associate empowerment is putting customers first and this to some employees is a motivation within itself. As employees of Home Depot we are

empowered to offer up to $50 off in any transaction as a discount; anything above $50 requires a manager’s log in and signature for approval. In my personal experience, it is very motivating and rewarding to know that I can personally help a customer make a purchase if they don’t think they can afford it or they think the price is too steep. There are a lot of items in Home Depot that are way overpriced and a lot customers see this; which can make them hesitant about their purchase. But from personal experience there is nothing better than telling a customer that you will take certain amount of money off to help the customer out and then seeing how grateful they are, which in turn makes customers a little more proactive about filling out surveys and mentioning your name. It also gets those customers back into the store because they know the store associates take care of them and will continue to look out for their best interest. On the other side, there are some employees who simply just do not care and do the bare minimum just to get their paycheck and go home. I feel it is like that with most, if not all companies, regarding employees who are excited about making a customer’s day and those who don’t care what happens as long as they’re getting their paycheck. That aside, all the guiding stars that Home Depot has in place, have given associates like myself and customers the confidence and trust to make effective decisions about the shopping experience at Home Depot.

Areas for Improvement

Having a strong mission, vision and other guiding stars can only provide a foundation for a company and like all facets of business, Home Depot does have areas in which the company can improve. The one to me that stands out the most is the second core value in the company’s mission statement, which states “Taking care of our people” (Our Company, n.d.). I cannot speak for the company as a whole or any other store for that matter, but the first and second core values within the mission statement should be switched. I feel I speak for a lot of associates at Home Depot when I say that the “Taking care of our people” value should be the number one priority of Home Depot. In author Stephen Covey’s book “The 7 Habits of Highly Effective People”, Covey talks about successful companies working inside-out and not outside-in, meaning that successful companies take care of their people first and then consumers or customers (Covey, 2004). At the store level, associates are treated as replaceable or disposable. In fact, the Home Depot store where I work, it is known that the stores turnover rate is one in three and the most common issue new associates and associates that have worked there for a while have, is that management is too concerned about the customer and puts no effort into their relationships with employees. For example, there are sometimes issues that arise with customers, whether it be pricing or something else. Too many times employees will call managers over to help them and by looking at the values the Home Depot believes in, one would think store managers would back up their employees. This simply just does not happen, managers almost always side with customers and make the employee look foolish in front of other customers and associates because they put too much focus on outside-in rather than inside-out.

The biggest improvement Home Depot can make to live the values, mission and guiding stars the company has set forth, is to hire managers who believe in what the company stands for. It is clearly outlined that the company believes in taking care of their own, but if managers do not follow or believe in this value, than the core values are just words on a sheet of paper. Home Depot has long believed in promotion from within, but those promotions for associates to become managers, are on seniority and not on merit. If Home Depot starts focusing on their hiring of managers and department supervisors that live those values, Home Depot could significantly improve their turnover rate at the store level. It is easy to understand why putting customers first is a part of Home Depot’s values because it is a retail company and you need to have customer retention in order to succeed, but in order to provide great customer service and achieve customer retention, you need to work from inside-out and not outside-in as Stephen Covey puts it.

External Environment Assessment

External Environment

Home Depot has the market share and foundation that every CEO and entrepreneur of company strives to obtain. But the external environment has a lot to do with where Home Depot is, how they got there and where the company will go from here. Looking at the external environment in which Home Depot operates, from a dynamic systems perspective we can see that many things affect and can affect the home improvement industry. The main trends and forces that heavily weigh on the industry are economics and technologies. The economy is foremost the biggest trend and force effecting the industry. Sales for home improvement retailers like Lowe’s and Home Depot, weigh heavily on the economy and housing market. In 2007, the housing market crashed and the industry’s sales fell with it. When the economy is unstable and houses are not selling, customers will not be going into stores like Lowe’s and Home Depot to make major purchases and the sales from 2007 to 2009 reflected that. Since then, the market has started to stabilize which has led to more and more individuals purchasing homes and renovating current homes, which in turn has increased sales for the industry. Technology trends also have a deep impact on the home improvement industry. Technology, impacts every industry and can deeply effect a company if they do not keep up with current trends, this can be seen with the data breach Home Depot had. Besides security reasons, technology has changed the way consumers shop, make purchases and create ideas for projects. Technology is also changing the way products are manufactured and with that comes price decreases. These trends are effecting the way home improvement retailers do business and are shaping how business will be done in the coming years.

From a market competitive perspective, the home improvement industry has seen more than its fair share of changes and shifts. There are new products and marketing campaigns that are pulling the consumer every which way, with that comes pure competition. The main industry leaders are Home Depot, Lowe’s and Menards, each coming up with new ideas and sales promotions to

drag customers from one store to the other. Each company has tried to set itself apart from the others, but they keep bumping heads in order to grab the customer’s attention. The big three have been doing this with credit cards, price matching and incentives to customers to keep them coming back. After years and years of pushing back and forth, the industry has come to realize the importance of intangible things like customer service and customer relationships and now the industry is spending more and more on resources, trying to provide the customer with the best shopping experience possible.

Porter Five Forces Model

Looking at Home Depot through the lens of Porter’s five forces, it shows me that Home Depot is almost placed perfectly within the industry. If you look at Menards, they basically only offer the store brand products and do not carry a lot of different, trusted suppliers or manufacturers. Lowes on the other hand does, but they do not hold enough market share or bargaining power to negatively impact Home Depot. Porter’s Five Force Model in relation to Home Depot is as follows:

1. The threat of new entrants, i.e., new competitors.

The threat of new entrants in regards to Home Depot and the home improvement industry is very low. The market share between Home Depot, Lowes and Menards doesn’t leave barely any room for a new entrant. The time to effectively market a new entrant and price to enter the industry would be abnormally large given the fact that only three companies have successfully done so, those are named above.

2. The threat of substitute products or services.

The threat of substitute products or services remains high, considering the amount of services Home Depot provides at flat rates. It would be easy for a company to do those same services like fixing tools or delivering products at a sufficiently lower rate. The products Home Depot offers are in a lot of stores and depending on the price for each of those individual stores depends on how big the threat would be. The lower the price, the more likely the customer would shop somewhere else.

3. The bargaining power of customers (buyers).

It is not easy for customers to drive prices down at Home Depot. Home Depot is given a price list for all the products they carry from each manufacturer that provides that particular product. If it simply does not sell, the company will buy it back from the store and work on new prices at the manufacturing level. However, it is easy for customers to find or bring in coupons for specific products and get them at discounted prices. And there is always putting up a huge fuss and whining until management lowers the price of an item just to get the customer out of the store.

4. The bargaining power of suppliers.

The bargaining power for suppliers is minimal for Home Depot. Home Depot offers almost every single brand you can think of that would help someone with their project. Suppliers like Rigid, EZ GO, Porter Cable, Echo and Ryobi are each vying for shelf space. There is way too many alternatives for suppliers to have any sort of bargaining power.

5. The intensity of competitive rivalry, i.e., the jockeying for position among current competitors.

There is a tremendous jockeying situation for position among current competitors. With companies like Lowes and Menards, Home Depot has to honor all coupons offered by those competitors just to stay ahead of the curve. Although that is a small number of major competitors, it is still a driving force for good position in the industry and impacts the market share for each company.

Using Differentness

After looking at Home Depot through the lens of the five forces model, it is now time to look at Home Depot and how they use their differentness to set themselves apart from their competitors. Home Depot, an industry leader in the area of home improvement may seem cookie cutter, in regards to Lowes, but taking a deeper look into the organization will help us understand how Home Depot sets itself apart from others. In my eyes, it is easy to see why Home Depot is different from others and that is mostly based on the fact that I work there. From a store perspective, Home Depot relegates different aspects of customer service for every type of customer. Contractors do not even head to the opposite end of the store relevant to the Pro Desk area. The Pro Desk works directly with vendors, calling them to get specific products for contractors at the exact dimensions the contractors need. The Pro Desk also deals with a service called the bid room. In the bid room, pro desk associates are able to submit large quantities of lumber, for example, and tons of manufacturers will compete to fulfill that order and bid against each other to gain the lowest price. This allows contractors and other customers, to receive the lowest possible price for the best quality of products.

The customer service desk deals with every day customers helping place online orders and fixing issues with deliveries and refunds. Then there are the specialists who work in one department customizing products and orders for customers to get their project done. These departments include bathrooms, kitchens and flooring, for example. I strongly believe its Home Depots customer service that sets them apart from companies like Lowes. Whatever the problem is, there is a person(s) in the store that will help fix the issue and get customers out of the door at the smallest price possible. Home Depot also sets itself apart from others with the Home Depot credit card. Unlike that of Lowes, Home Depot’s credit card offers great financing at 6, 12, 18 and 24 months depending on the purchase price. If you pay off that project within the allotted financing time you pay zero interest and at Home Depot most customers will pay off their projects within that allotted time. Lowes offers 5% of your purchase but charges ridiculous interest and provides horrible financing. It is the little things like that

that sets Home Depot apart from others and with the new updated software for security protection with peoples identities on the Home Depot credit card, it is now safer than ever to get and use one.

Potential Threats

Even with great customer service and unique credit card financing, Home Depot does face threats. The three biggest threats facing Home Depot are:

1. Fraud/Return Policies:

Home Depot has long been known for its relaxed return policy, often returning items that are not even from the store. To many customers are finding out how easy it is to get store credit and are just turning around and selling the store credit. Home Depot loses thousands of dollars each day in every store from fraudulent returns and their relaxed return policy.

2. Competitors Copying Strategy:

With Home Depot taking a majority of the market share, which can only mean one thing for its competitors, and that is to copy Home Depot’s strategy and try to get consumers out of Home Depot and into their stores. Whether it be by sales or service, companies will continue to copy or emulate Home Depot so they can make a profit and take a little bit of that market share back.

3. The Economy:

If the economy keeps trending upwards than Home Depot has nothing to worry about, but if the economy slips or crashes it will drive down sales for Home Depot and also drive the stock down. This will lead to more firings and stores closing up shop. We can only predict what the economy will do, but that does not mean that is what is going to happen.

Looking at the threats and thinking about how they could be effectively reduced (because nothing can ever be eliminated) we can see that Home Depot needs to tighten itself up. If they can gain operational effectiveness they will gain a strategic and competitive advantage over companies like Lowes and Menards. If they focus on denying returns without receipts they will be able to almost eliminate the fraudulent return policy. Customer service will hold the threat of theft at bay if it is done correctly. If Home Depot continues to provide excellence in customer service and tweaks a few areas they will be able to make the best of what they’ve got and that is customer loyalty. The economy is out of their hands and it can only be foreshadowed, but if they prepare for the worst and have a contingency plan just in case the economy dips again, they will be well positioned and trained to combat what the economy might hold in store.

Opportunities

Home Depot may have some pretty serious threats that could affect the company, but it also has a lot of opportunities the company can capitalize on. Those opportunities include:

1. Housing Recovery:

The housing market has made a significant improvement in both new houses being built and houses being sold. This will bring the demand back to the home improvement industry as consumers will be looking for products to build and renovate houses.

2. Expansion:

With the housing market increasing and unemployment on the decline, new economies will be emerging in new geographic areas. This will allow businesses to expand and open new store fronts to meet the demand of these new rising economies.

3. Environmental Friendly Building Materials:

According to Green Building Materials website, a turnaround in construction activity which will occur through 2017, is going to push growth in eco-friendly building materials demand 11 percent annually to reach around $86.6 billion. Green Building Materials website also believes that an increase in growth for eco-friendly building materials, will cause an increase in customer interest surround the eco-friendly materials and that increase will cause a market share growth for eco-friendly companies (Green Building Materials, 2013).

Home Depot can capitalize on these opportunities by continuing their eco-friendly initiative and by continuing to support green alternatives and recycling in their stores. If Home Depot continues to move toward a greener future, they will continue to gain profit and make the earth a better place and that will cause more customer support and spending. To take advantage of the housing recovery, Home Depot needs to start rolling out new products and lower costs. They can also address this issue by giving customers even better financing options with their store credit card, which will get new home owners in the door. Expansion, is an opportunity that Home Depot needs to really take a step back and look at. They have had problems in the past with expansion by going into unstable markets. But the economies that are growing in the United States, means Home Depot will be able to keep a close eye on progress in new geographic areas.

Internal Environment AssessmentInternal Environment

Assessing Home Depots internal environment brings forth a lot of tangible and intangible data, as the company has been in the market since the first doors opened in 1979. Home Depot’s tangible data includes a large inventory of products that stack every shelf. It would be hard to walk into a Home Depot and

go down an aisle with no product. The company’s inventory span’s throughout North America, with warehouses full of product ready to ship out at a moment’s notice. Other tangible assets include the amount of stores Home Depot currently has open. According to Home Depot’s corporate website, “The Home Depot has more than 2,200 convenient locations throughout the United States (including the territories of Puerto Rico and the Virgin Islands), Canada, China and Mexico. Stores average 105,000 square feet with approximately 23,000 additional square feet of outside garden area” (Stores, Products, and Services, n.d.). Home Depot’s capital internal environment is a little different, as some of their current ratios are not as strong as they used to be. Home Depot’s most crucial financial and capital data can be seen in the following ratios:

1. Growth Rate Annual Revenue = 5.71876

This is very important to Home Depot because it shows how the annual growth rate of the company and where the company is trending.

2. Current Ratio = 1.35788

This ratio shows how strong Home Depot is and shows the company efficiency in turning products into cash.

3. Return on Investment = 21.71235

Return on investment is crucial because it shows that Home Depot is using its resources in the most efficient way possible.

4. Net Income per Employee = 17241.85000

This ratio shows the efficiency of how Home Depot uses its employees. The higher the number the more efficient Home Depot is with their employees.

5. Inventory Turnover = 4.89899 (Home Depot Financials, 2015)

This calculates the number of times Home Depot’s investments in inventory are regained in an accounting period.

These ratios and the numbers that follow, show that some of Home Depot’s financials and efficiencies are not only strengths, but are also weaknesses. This can especially be seen in the inventory turnover, which shows that Home Depot is not recouping its investment in a good manner and there could be many causes for that. Growth Rate Annual Revenue is also a good starting point to figure out how Home Depot is growing as a company and in this day and age, this should be done all the time, not just on an annual basis.

Change Ready Structure

The structure of Home Depot is changing from what it was in the past. Before the housing crash in early 2007 Home Depot had a sound structure that kept them way ahead of the curve in terms of market share. Judging on how they have overcame that crash and adapted for the future, it shows that Home

Depot’s structure is not fixed and they’re more than capable of making structural changes easily. The new strategies Home Depot has implemented have worked so far, it is still way too early to tell if their new strategies and ideas will fully become what the company envisioned, but their handling of new strategies has gone extremely well, especially at the store level. All-in-all, Home Depot is in a good position to both adapt to new structures and environments, and the company has shown they are capable of change.

Using Strengths

As an organization Home Depot’s major strengths include excellent customer service, special services, adaptability and competitive pricing. Home Depot’s customer service has and always will be one of their strongest competencies. The only way they can further exploit the strength of their customer service is by continuing training and be selective in the hiring process. They have built such a strong reputation in regards to their customer service, that they need to keep bettering it, or they will lose customers who absolutely live and die for Home Depot and their service. In regards to the company’s competitive pricing strength, the best way they can further take advantage of their competitive pricing is to be their first. And by first I mean not just offering great prices and matching other companies, but by being the company who has such good prices that others are trying to meet and beat Home Depot’s prices. They need to strengthen their relationship with both suppliers and vendors and continue to build off of those relationships to get better bulk deals. In regards to adaptability, Home Depot has shown great skill in adapting to the new environment. They have been doing this by offering great financial services and financing on certain price brackets. They can better their ability in adapting by continuing to follow market trends and observing the future market trends. They can do this by performing a plethora of assessments to better gain knowledge of the upcoming trends and where the market is heading. Lastly, in regards to special services; the special services and Home Depot both go hand-in-hand with all the services they provide, including, the pro desk, bid room, installation, credit financing and all custom specializations that the department specialists can create. They can build off of that by offering an easier way for customers to look at their designs and make suggestions on changes and colors from the comfort of their home. Installation services can be better in aspects of timing and making arrangements, as of right now, it is a confusing process that customers should probably come into the store to set up measures and things of that nature to make sure it is done correctly.

Addressing Weaknesses

Having listed the strengths Home Depot can build on and improve, it is just as important to look at the company’s weaknesses which include the outside-in approach, loss prevention presence, target audience and caps on compensation. Home Depot’s outside-in approach has been detrimental in terms of turnover rate. The outside-in approach can be diminished by having managers put more trust into employees and backing them on situations when the customer(s) are truly wrong. I know the home improvement industry is a

customer first based industry, but you have to work inside-out and not outside-in. Home Depot needs to take care of their own people before they take care of everyone else. In regards to Home Depot’s loss prevention presence, it is difficult for big store like Home Depot to watch for theft. A loss prevention associate can only work in one store for so long before they change because potential thieves will sooner or later recognize who they are and what they do. This leaves the door wide open for potential thieves to take product out of the store and either sell it or return it without a receipt for store credit which they sell on sites like Ebay. To minimize this, Home Depot can take the initiative and hire an outside company who employs more than one LP associate to rotate through different Home Depot’s. It can also be maintained by putting someone at the door checking receipts they too will deter thieves, just as Costco does.

Home Depot’s target audience has been that of contractors and men working on homes and projects, which leaves the women demographic lacking in terms of shopping experience. In recent months, Home Depot has been showing gardening commercials depicting women and I know personally in the stores they have been putting out more women friendly tools and trying to make it easier for women to grab large items off of tall shelves by keeping small ladders in aisles that women frequently visit. To improve and build on the women demographic Home Depot needs to continue to make improvements and adjustments to make stores friendly to both men and women. Lastly, comes Home Depot’s compensation weakness. With the minimum wage looking to increase here soon, Home Depot can remove the cap on wages for associates who have been there for a long time, instead of losing them when the associate realizes they can no longer get a raise because they reached their cap. All of these weaknesses can be overcome at minimal cost and Home Depot will be better for it in the end. Home Depot has the resources to take these weaknesses and turn them into strengths.

Strategies in Action at Home DepotLong-term Objectives

Home Depot’s long-term objectives have been well documented throughout the company’s transformation from former CEO Frank Blake to current CEO Craig Menear. Home Depot has expressed three long-term objectives. It begins with making the Home Depot a great environment for associates to work in and expresses the objective for career advancement within the store. The next long-term objective is having Home Depot be in a place where the company’s business partners can grow and be able to increase the sales and profitability of their own businesses. The last long-term objective of Home Depot, is to create the best business environment for current and potential investors to put their money (Investor FAQ, n.d.). Evaluating these objectives leads me to believe that Home Depot has the right idea in mind and these objectives, if met, will increase profits and decrease the employee turnover rate. Home Depot should elaborate more on these objectives and produce specific criteria and data for when and how they are going to reach these objectives. Assessing these long-term objectives creates confusion as

Home Depot does not provide a lot of room for adequate personal and professional growth within the store ranks. Being that there is a cap on wages, much like there is a cap on sports teams, associates and potential associates need to be informed that unless they plan on working for Home Depot for an extensive period of time to become a manager, they will be in a way stuck or bottlenecked.

The company’s long-term objectives do work well with the company’s strengths in customer service, as making the Home Depot a great place for advancement will give associates motivation to provide great customer service to better than chances of advancement. However, the long-term objectives do not address the loss prevention or female demographic weaknesses. And assessing these objectives against Home Depot’s mission statement, it makes things a little more clustered and confusing. Home Depot’s mission statement says putting customers first, yet the long-term objectives make it sound like they are putting employees first. It is extremely confusing to understand. On one side it seems Home Depot is ruffling the feathers of investors, but on the other side I am hoping that the company’s long-term objectives are true regarding associates. But unless the company makes some big changes at the store level, they will not be able to obtain some of those objectives.

Current Strategy

The current strategy Home Depot uses is called the “Three-legged stool”, which focuses on customer service, disciplined capital allocation and product authority (Moskowitz, 2014). I feel that Home Depot is continuing to use its “Three-legged stool” approach because it allows them to put priorities in place on which items or topics need to be tackled first. Although I am not too easily persuaded by this strategy, I do feel it gives Home Depot a certain type of uniqueness. Home Depot has done a wonderful job using this strategy to obtain its long-term objectives in most aspects. Home Depot has been able to continually increase its shareholder price and stock price to become more profitable. This strategy however is not increasing internal capacities and internal strengths. Home Depot’s “Three-legged stool” strategy in some ways provides clarity in the utilization of its core competencies and its differentness in the market. By using the “Three-legged stool” it utilizes competitor awareness which provides quality and develops personal relationships with customers. It does this by putting customer service first. The product authority segment of that same strategy also helps utilize Home Depot’s strength in buying power, high inventory and quality products.

Although this strategy does work well with the company’s core competencies, Home Depot’s strategy as far as I have been able to see is a one-off type strategy, meaning it is just the one strategy to develop and promote the business to make it more profitable. The strategy just seems to be solely focused on increasing profit. There are still, in my opinion, too many weaknesses that have not been addressed using this strategy and there is a ton of room for improvement. The “Three-legged stool” strategy does not take into

consideration any of the company’s weaknesses. It does not address the theft or loss prevention aspect or the compensation weakness and lastly, it does not address the female demographic. However, Home Depot’s “Three-legged stool” strategy is helping the organization in achieving its end goal of competitive sustainability. A few areas need to be touched up and tweaked a bit, like the confusion within its statements and its treatment of employees. But all in all, by focusing on price allocation and the opening of multiple channels and mediums to help better the customer experience, Home Depot is improving its competitive position within the industry.

Strategy Trade-offs

The “Three-legged stool” strategy does explain the trade-offs that Home Depot is making. By focusing on price allocation and productivity, they are focusing on putting more money into safe technology that will combat hackers from stealing the identities of cardholders. By doing this, they are allowing their customer service to further increase and profits to continue to rise because more people will sign up for credit cards, which puts more money in the pockets of Home Depot shareholders and associates through profit sharing. The trade-off, while putting more focus into price allocation and correct disbursement, they are spending less on training classes for associates and money for wage increases, which for associates can make it a bad trade-off. It is a good trade-off in some aspects because this will increase profit sharing, which means a store that exceeds sales plans will disperse the extra money into the pockets of associates; and by getting more customers signing up for credit cards, that means they will be spending more money in the store.

Strategy Analysis and ChoiceStrategy Going Forward

The strategy that Home depot should seek to implement going forward is “Product Development”. The “Product Development” strategy is pursuing an increase in sales by improving current products or creating new ones. I have strongly urged the development of HDX, which is Home Depot’s store brand. Why? I know personally from working at Home Depot and more importantly working at the customer service desk which deals with returns, that HDX is not a trusted brand or product. Customers will buy the HDX brand because it is a cheap alternative to products or brands like Ryobi, Echo or Rigid and makes the customer feel like there are getting a deal. But more times than not, we will have customers come back within the thirty day time frame with HDX products because they’re busted and do not work. By continuing to focus on the HDX brand and marketing it more as still a cheap alternative, but more importantly a quality cheap alternative than the expensive counterpart, Home Depot will be able to take a bigger slice of the pie when it comes to sales. Customers want quality at a good price, and further product development of the HDX brand and its products will help strengthen the trust and reliability of Home Depot’s products. On Consumer Reports website, they give a look inside just one of the shortcomings that HDX provides, that being paper towels for which they say

“Home Depot’s exclusive HDX paper towels struggled with both, for an overall score of just 36. That’s a full 60 points below the top-rated Bounty DuraTowel, though to be fair the DuraTowel is head and shoulders above the competition, and the only paper towel judged excellent in every way” (DiClerico, 2014).  

Utilizing Leverage

The “Product Development” strategy will utilize leverage in helping Home Depot gain and sustain competitive advantage. Too often, companies and businesses like Walmart, Target and even Home Depot, focus on stocking their shelves with as much product as possible, not taking into account the quality of the product they are selling. Is it nice to walk into a store and see a plethora of different brands to choose from? Yes, but at what cost. I can walk into a store and see thousands of brands and find the one that’s right for me, but that doesn’t mean I am going to go home and find out I hate it. Menards had a similar approach with their store brand, but Menards is too focused on how many products they can make under their store brand that they too have forgotten about quality. Just because you make a sale with your store brand doesn’t mean it won’t be returned and begin a negative word-of-mouth following. If Home Depot begins focusing more on the HDX brand and fixing its shortcomings, they will be able to gain a competitive advantage over Menard’s and Lowe’s because they too are behind the eight ball, as far as their store brand goes. Focusing on quality and resources will allow Home Depot to get rid of HDX products that do not sell well and the HDX products that they cannot make with superior quality. By eliminating the products that they cannot make any better, they will be able to take those resources and focus those resources on products that they can make better and will save them money in doing so by refocusing those resources.

Building on Core Competencies

Home Depot’s core competencies will only increase if they pursue the “Product Development” strategy. It will help build off of the customer service aspect because it will allow associates to be able to speak with confidence about the HDX product with customers, which in turn will build better long lasting relationships. It will allow Home Depot to adapt should Lowe’s and Menard’s broaden their store brands, because Home Depot was there first. It will help with pricing because it is Home Depot’s store brand and they will be able to reallocate their resources appropriately to make sure they can keep the prices down and competitive. It will help with execution because it will allow more sales and create a better reputation with customers and contractors who are hesitant about buying certain products. This will not happen overnight, but Home Depot will be able to do it and it will make the company better as a whole, while increasing the money in shareholders pockets and increase profit sharing within the store among associates. The “Product Development” strategy will above all else, help the reputation and customer service aspect of Home Depot, for which Home Depot is known for. Customer Service is the most important aspect of any business selling products, you don’t want to shop where you get awful service and Home Depot recognized that early on and spent a lot of time

and money on focusing how to do it right. Product Development in an industry that has seen its ups and downs in recent years will only help strengthen the brand and image of the said organization. By being able to confidently sell a store product and build a long-lasting relationship with your customers, will help your customer service build upon itself. I know this first hand, working with different contractors or builders, I have seen sales lost because associates aren’t confident about the products they are selling. People are always looking for a deal, with HDX products improving in quality with this strategy, customers will get great deals for great products.

Embracing Trade-offs

Lastly, the “Product Development” strategy embraces trade-offs effectively because it focus on putting resources including money, time and knowledge into products that can be better made and getting rid of products that cannot be made efficiently or effectively. There has to be tradeoffs in this strategy in order for it to work. I have seen at my store HDX products that have been sitting on the shelves for months, with maybe two or three units sold in that time. If you think of that shelf space that could be given to another supplier which in turn would increase your profit margin, and give you more time to focus on products that do sell and that can be sold at greater rates if the quality was better, than why wouldn’t you do that? It is a necessity. That is why this strategy requires trade-offs. It also will increase the insecurity of certain suppliers who are worried about the HDX products taking more sales away from them, which will cause them to lower their pricing, which in turn will create more foot traffic through your store because of the low prices. Will some vendor’s be upset? Yes, but in the long run it will be beneficial for everyone, including store associates. As said in Senge’s “The Fifth Discipline”, “In reinforcing processes such as the Pygmalion effect, a small change builds on itself. Whatever movement occurs is amplified, producing more movement in the same direction” (Senge, 1990). The “Product Development” strategy will create a snowball effect as more and more products provided by Home Depot under the HDX brand name will become sincere quality products. This will slingshot Home Depot into a direction they might not have been expecting, but will further implement them as the number one home improvement store in the industry. Resources will be used in a more efficient manner and money and time spent will be used to further create a brand that Home Depot can be proud of. The snowball effect will continue to roll forward and shelf space will be used more effectively to create maximum profits and will help build long lasting relationships with customers.

Home Depot’s vision has always been about providing customers with the widest selection of products to choose from and providing the best service possible. Achieving this strategy will help Home Depot move towards its vision because this strategy requires high levels of great service in every facet of the company. It will also give every customer who walks in the door another option or product to choose from and they will know that the HDX brand is a great viable alternative at a competitive price.

Strategy Implementation: AlignmentAdjustments

In order to accomplish the “Product Development” strategy, a lot of adjustments will need to be put forth in order for this strategy and Home Depot’s structure to become aligned. The major structural adjustments that might need to be made include the culture surrounding the HDX brand and the ways employees sell it. It will require new processes to be made in order to build up the HDX brand and it will also require processes at the manufacturing level in order to start making higher quality, more reliable products under the HDX name. The impact of a change in the strategy at Home Depot should not affect the “Three-legged Stool” approach they have been following, in fact those two strategies would work in great harmony with each other. The “Three-legged Stool” strategy again is defined by CEO Craig Menear, for which he states “Our strategy continues to be rooted in our three-legged stool, which stands for customer service, product authority for home improvement and disciplined capital allocation” (Menear, 2015). By pursuing a “Product Development” strategy Home Depot will be able to create a better customer service environment by giving employees the confidence to sell more Home Depot products and with the quality becoming better, which will bring back happier customers. It will also build a better image for Home Depot’s product authority, in that it will create a good product and foundation to build upon. Lastly, it will help immensely with capital allocation, in that it will put money, resources and effort into building a better store brand which will keep money flowing in the right places.

Alignment with Structure

The current organizational structure at Home Depot is multidivisional. I would describe Home Depot’s structure as the same in being multidivisional because it has individual stores that act as profit centers or separate businesses but work together as a whole for the organization. The strengths of having a multidivisional structure align with the “Product Development” strategy in that they allow an organization like Home Depot to expand their operations, which would allow Home Depot to expand the HDX brand. Another advantage to a multidivisional structure is synergy and this is going to be crucial for Home Depot in the pursuit of the product development strategy because corporate managers and manufacturers are going to have to work together in order to complete all necessary changes for quality improvement. If Home Depot is able to take advantages of the strengths that accompany their multidivisional structure towards the “Product Development” strategy they can eliminate the weaknesses that come with that structure. By creating synergy they can make sure they coordinate accordingly to eliminate the duplication of resources. By expanding operations within their already existing HDX brand they will not have to fight or compete for scarce resources. The multidivisional structure does serve the product development strategy. It could be improved by creating better channels of communication between high level management and manufacturers. Communication is essential in all facets of business and even

though Home Depot has a good communication structure in place, it can be better improved to help align the new strategy of product development and the multidivisional organizational structure. If the CEO stays actively involved with the manufacturers during every process of creating new processes for making HDX products, than there will be no surprises along the way and the company and manufacturers can work together as a whole.

Alignment with Culture

The culture at Home Depot needs to be changed in regards to the new strategy of product development. Associates will often tell customers that the HDX brand is garbage or no good and there are better alternatives. I actually have over heard associates at work tell customers in regards to buying an HDX drill that “You are getting what you pay for in regards to quality”. This needs to be adjusted for this new strategy to work. If associates are constantly referring customers to other products because of the stigma that lies with the HDX brand, than this strategy will fail. This can be adjusted by training and incentives for selling HDX product. It can also be changed by allowing customers to demo HDX products in the store and compare them with other brands.

The high level leaders or corporate leaders such as the CEO and COO are capable to lead a change in culture for Home Depot in seeking alignment with the “Product Development” strategy. Since Craig Menear took over for former CEO Frank Blake, morale within store management has changed. Managers were and are excited about Craig’s ideas from what I understand and have heard. His “Three-legged Stool” approach has been working and he has the capabilities and mentality to lead the organization in change and alignment. There is a gap between the current state of the company’s culture and the culture needed for this strategy, but that gap is manageable and can certainly be aligned for execution and implementation. It can be easily managed by giving associates enough information about the new HDX quality and letting them demo them out. Personally, I have never trusted the HDX brand, but if I were able to try out a new and improved product by HDX, I would change my opinion on the matter. I am not saying that will happen with everyone because some people do get stuck in their ways, but that is why it is so important to focus on getting the right people first, the people that believe in the new direction. Also, I am not saying Home Depot employees should quit trying to sell different brands because that would prove catastrophic, but giving them the knowledge about the quality improvements will help them let the customer know the benefits of any product compared to that of the HDX brand.

It is difficult to change an organization’s culture, it’s difficult for any type of change in both life and business. No one likes change, when something is new, people tend to stick with what they know and changing those habits is difficult. But it seems more than possible to align Home Depot’s culture with the “Product Development” strategy. Besides what I listed above in changing the culture at Home Depot, I just firmly believe that giving associates the time to learn more about the HDX products and focusing on bringing in the right people

that are open to trying new brands and products like HDX, Home Depot’s culture will change and will continue to develop for perfect alignment.

Alignment with Operations, Functional and Supportive Activities

In order to create alignment between the current operations, functional activities and supportive activities, the company must reallocate the correct resources into the right spots. Functional activities need to market the new HDX products and how they have changed, money needs to be put in the right hands for product development and the pursuit of great quality. The dot com facet of Home Depot needs to focus on putting more HDX products on the front page and come up with great ideas for selling the products.

The “Product Development” strategy will affect the functional areas of Home Depot in different ways. For marketing, it will require a new marketing plan to sell the HDX brand because of the bad stigma that is held or was held in conjunction with the brand. For finance and accounting, it is going to require money in order to develop new processes that will help assure the quality of the new product line. For research and development, it is going to be a process that will take time and research, they will need to figure out which products the HDX brand should continue to make and which products they need to cut ties with. They also need to figure out how they can best make these products with great quality but still be able to sell at a cheaper level then competitors like Ryobi or Porter Cable. Human Resources needs to make sure they get the right people hired for the company and figure out which current employees are not willing to change and see if it is time to move on or continue to train them. Customer service will be affected in areas like customer questions and inquiries about product, creating orders with HDX products which is rare right now and gaining customer confidence about the new refined HDX brand. The current supportive and operational activities are going to complement and reinforce one another when this strategy is implemented, as they are already working together in marketing the Home Depot as the go-to-store for home improvement products and product development. By adding a refined HDX product and brand it will only strengthen the synergy that the current operational and supportive activities have. I have full confidence that Home Depot has the resources and capabilities to make the changes in order to maintain alignment between this strategy and structure. Remember, Home Depot is huge company and leads the market share to that of its competitors, which means they can spend a little extra time and effort in order to make changes to their structure. They already have the strong foundation built and now they can build upon that structure to become a better all-around company.

Strategy Implementation: Action PlanStrategic Goals

In order to successfully execute on the “Product Development” strategy, Home Depot will need to set strategic goals in relation to this strategy. Those strategic goals will be to (1) create a quality alternative choice in comparison to other brands and maintain a low price by getting rid of HDX products that Home

Depot cannot strategically improve quality and reallocating those resources to other facets of the brand. (2) Improve customer satisfaction significantly with the HDX brand. (3) Increase sales of the HDX brand and grow customer service. (4) Create more repeat customers. These strategic goals will be broken down to unit goals that are measured and time-bound to make sure they are met. These goals are all measurable through a system of metrics and data that will provide the basis of the measurability. For example, looking at the first goal we see it can be measured by testing the quality of the HDX product to that of its counterpart and seeing how well they both perform. To maintain the low price, Home Depot can measure this by keeping track of manufacturing processes and comparing the price of their brand to its competitors. The second goal, improving customer satisfaction significantly with HDX brand, you can see that this goal can be measured by customer surveys and the rate of returns for the HDX brand that come back to the store The third goal can be measured by watching how many units are sold each quarter, which will help determine whether any of the HDX products should cease production, with those resources being put towards other HDX products. The last goal can be measured by sales and tracking purchases within customers. Where customers make orders or use their cards for sales, even when they fill out surveys, that information can be analyzed to see how customers return to make purchases of HDX products.

The strategic goals will be accomplished by Home Depot’s manufacturing department and marketing department. The manufacturing department will need to create new processes that both improve quality and keep pricing low. The manufacturing department will also need to study the processes already in place for HDX products and determine whether or not those products can be improved upon or the company should quit manufacturing those products and reallocate those resources to other products. The marketing department will need to market the refined HDX brand to reach the target audience and provide customers with information in regards to how HDX products were improved in quality. The marketing department will need to study and look for new mediums to reach that target audience and come up with a marketing campaign that will grab customer’s attention.

Action Plan

For Home Depot to capitalize on the on the company’s strategic goals, the manufacturing department and marketing department will need action plans. The action plans for each are as follows:

1. Manufacturing Department

Goals: Develop new manufacturing processes that will:

Increase the quality of HDX products. Lower the cost of manufacturing HDX products. Improve customer service in relation to HDX sales.

Performance Metrics:

Year 1: Complete the design of new processes for manufacturing by end of year.

Year 2: Gather all proper resources required for new processes and begin manufacturing by end of year.

Year 3: Begin process design for additional HDX products for quality improvement.

Action Steps:

Year 1:

Establish process designs for manufacturing

Manufacturing personnel; engineers

June 2016

Get approval for specifications on processes

Top level management

November 2016

Year 2:

Figure out what resources will be required for new processes

Manufacturing personnel; engineers

June 2017

Gather all resources and begin manufacturing

Manufacturing personnel

December 2017

Year 3:

Begin design phase on additional products for manufacturing

Manufacturing personnel;Engineers

June 2018

Get approval for new process designs

Top level management

November 2018

Interlocks:

Manufacturing department works with:

To: When:

Information technology department

Help with process design

Start June 2016

Construction department

Manage construction of processes

Start December 2017

2. Marketing Department

Goals: Market HDX brand that will:

Gain customer confidence with purchases of HDX products. Increase sales of HDX products. Reach target audience.

Performance Metrics:

Year 1: Study new possible mediums for the marketing of new HDX products by end of year.

Year 2: Develop marketing plan for reaching target audience through new mediums and gather proper resources for implementation by end of year.

Year 3: Start implementing new marketing plan by end of year.

Action Steps:

Year 1:

Begin study of new mediums

Marketing team June 2016

Establish which mediums will be used in marketing campaign

Marketing team September 2016

Get approval for marketing campaign

Marketing team;Top level management

December 2016

Year 2:

Gather proper funding for development of marketing campaign

Marketing team;Finance department

March 2017

Develop marketing plan

Marketing team June 2017

Year 3:

Implement new marketing campaign

Marketing team December 2018

Interlocks:

Strategy Review, Evaluation, and ControlStrategy Review

As Home Depot is implementing its strategy of “Product Development”, it is crucial that this new strategy is evaluated on a regular basis and continuously. Home Depot will need to review the progress being made against the plan by asking the right questions and making sure everyone at every level, is communicating effectively. In order for this strategy to work for Home Depot, weekly progress reviews will be necessary to make sure everything is running smoothly. I feel unit managers and top management as well as individual employees should be involved in the weekly progress reviews. Having those three groups of individuals will let management know from bottom to top what is going on and will also make them aware of problems that could be evolving. Having weekly progress reviews will allow Home Depot’s upper management team enough time and notice to act on issues that could be arising within the implementation stage and will give them adequate time to adjust things that will make implementation be successful.

The review process is in place to give everyone a chance to voice their concerns and opinions that are going on within the strategy implementation stage. There is no single way to prevent any mishaps or misfortunes that will arise with implementing a new strategy, but if everyone is involved and performing weekly reviews at every level, Home Depot can make sure they’re in the best position to make the “Product Development” strategy work and be successful. The philosophy and objectives of the weekly reviews are to:

1. Allow time to adjust from deviations of the plan.2. Keep everyone involved at all levels of the implementation stage.3. Have every unit manager complete weekly reviews to indicate how

they are adjusting and if additional resources will be needed to make sure everything is going smoothly.

Marketing Department works with:

To: When:

Manufacturing Department

Learn of process improvements to include in campaign

June 2016

Finance Department Gather funding for campaign

March 2017

Strategy Evaluation

As Home Depot implements the “Product Development” strategy it will evaluate what is occurring by keeping everyone involved and having management asking the right questions. Home Depot will start by, as Fred David states in his book “Strategic Management: Concepts” about strategy evaluation, “Strategy evaluation should initiate managerial questioning of expectations and assumptions, should trigger a review of objectives and values, and should stimulate creativity in generating alternatives and formulating criteria of evaluation” (David, F. R. 2010). Home Depot will evaluate the strategy by reviewing the bases of strategy, measuring organizational performance and if necessary taking corrective actions. By reviewing the bases of strategy, Home Depot will be able to look at the strategy as whole and will allow management and other members of Home Depot, to ask the right questions about strengths, weaknesses, opportunities and threats, which is theoretically performing a SWOT analysis of the strategy and how it will impact the organization and implementation. Measuring organizational performance is important for Home Depot and the implementation of the strategy because as Fred David states about the activity “This activity includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance, and examining progress being made toward stated objectives” (David, F.R. 2010). Lastly, in regards to formulating criteria of evaluation, Home Depot will be able to changes processes and techniques they are using that have proven to be ineffective. This will help Home Depot better align all of its implementation strategy units to help the organization perform better in coming years.

Locating Implementation Problems

If things aren’t going well with the “Product Development” strategy, it will be crucial in figuring out where the root cause lies and doing that in a swift manner. The best way for Home Depot to do this, is to keep following the weekly progress reviews and continuing to have excellent communication at all levels throughout the process. If everyone is communicating and performing weekly progress reviews, it will be helpful in determining where the root problem lies. For instance, if the strategy isn’t going smoothly and everyone is communicating strongly, the weekly progress reviews will show where things might be going wrong. That starts from store level management reports on sales of the HDX brand and all the way to the manufacturing of the HDX products. I also believe it would make things run smoothly if Home Depot were to hire or create, from within the organization, a team who can examine every process at every level. Looking for issues and problems by this group and effectively communicating the data with management from the CEO to store managers will help everyone act on data they have received. The criteria that Home Depot will use to guide the organization in this evaluation will be examining the progress and seeing if goals are being met or if units are falling behind. By having objectives and timelines, the group Home Depot has created for the examining of processes, will be able to look at the goals, objectives and timelines to see where improvements are needed and where additional resources or change needs to be implemented.

Management Controls

As Home Depot is implementing its strategy, it will need appropriate management controls so that adjustments are made and Home Depot’s actions and results move closer to the “Product Development” strategy. This can best be done by having management clearly state the company’s objectives, short-term and long-term goals. By keeping everyone in the loop about the progress, objectives and goals, Home Depot will be able to identify where there are adjustments to be made. Having clear and concise communication at all levels about the company’s vision for the future, it will allow appropriate management controls like providing incentives to individuals and units who meet their goals on time and stressing those incentives a head of time to give people the motivation to meet these goals. Having good communication about all objectives will also allow Home Depot to tell individuals what will happen if they fail to meet goals in timely manner, that can include additional training or being moved to a different part of the company and if all else fails, finding someone else who can get the job done.

Synthesize, Integrate, Summarize: ConclusionHome Depot associates and customers probably have never heard of

Bernie Marcus or Arthur Blank, but those two were pioneers and they set the standards for Home Depot when they first came up with the idea. Home Depot has seen its fair share of shortcomings, but the foundation that those two men built pushed the company through even the worst of times. Their idea of the “Customer Bill of Rights”, shaped Home Depot’s attention to customer service (Our Company, n.d.). Home Depot is known for their customer service and associates as well as customers have both Bernie Marcus and Arthur Blank to thank for that. It has been a long time since Home depot opened its doors and the company has continued to make innovate ideas and processes into reality. The company tries to live the eight core values they have put in their mission statement and those eight core values have shaped the way Home Depot conducts its business. The company is guided by its attempts to create a great shopping experience for customers and has recently made attempts to better the environment.

As years progress and time moves forward, things change and environments are dramatically moved around as the economy shifts. The home improvement industry hasn’t been the easiest industry to navigate for Home Depot, as we have seen with the recent housing crisis. The housing crisis tested Home Depot and tested their ability to adapt and execute on a down economic depression, but the company pushed through and showed shareholders and competitors that the company is here to stay. Home Depot’s internal environment is similar in some aspects, as through years and years of hard work, they have been able to gain extensive capital and store fronts. For years, the company has been following their “Three-legged stool” strategy and that has helped them capitalize on some of the company’s strengths and weaknesses, but has also fallen short on others. The “Three-legged stool” strategy didn’t help the company with the data breach it recently experienced

and the data breach has taken away a lot of customers from Home Depot (Moskowitz, 2014).

As Home Depot approaches its 37th anniversary, the company has hit its plateau and it is time for Home Depot to make changes in its strategy in order to keep up with the changing environment and industry. With competitors like Lowe’s and Menards opening new stores every day and fighting to grab a larger piece of market share, Home Depot can capitalize on all the hard work they have been doing since the company’s creation. Home Depot can solidify themselves as the number one home improvement retailer but implementing the “Product Development” strategy. This strategy will allow Home Depot to focus and improve on one of their biggest shortcomings and that is the company brand HDX. The company brand is a cheap alternative compared to competitors, the products are not only cheap in price but are cheap in quality. The “Product Development” strategy will help the company focus on reallocating resources to improve the quality of the HDX brand and give both customers and associates confidence in purchases and sales of the brand. This strategy will not be easy and like everything else in the world, it is not going to happen overnight. Home Depot will need to set guidelines and goals for each unit at every level to meet in order to successfully implement this strategy. These goals need to be time-bound and specific, and every unit level goal needs to have someone who is constantly monitoring the goals and making sure they are met. Above all else, Home Depot needs to get the right people on board and train associates who do not believe in the strategy. The culture surrounding the HDX brand needs to be shifted and the best way to do this is training and incentives. The company needs incentives for associates at all levels of the company in order to create motivation for the associates to follow this strategy and its implementation. Communication is going to be key for this strategy to work, every single individual from CEO Craig Menear down to store associates need to communicate effectively and consistently to make sure everything regarding this implementation is going smoothly.

If Home Depot can implement this strategy, the company will break through the plateau they are currently at and reach heights that competitors like Lowe’s and Menards will not be able to reach. Every strategy including the “Product Development” strategy will need constant progress reviews to keep everyone in the company informed about shortcomings and areas of improvement. If this strategy is successfully executed Home Depot’s market share will grow and continue to grow as processes for manufacturing the HDX products improve. I feel the “Product Development” strategy and all of the unit goals and changes in culture will strengthen customer retention and create the positive environment that Bernie Marcus and Arthur Blank established in the beginning years. The strategy will reinforce what both Marcus and Blank believed in and innovated, and that is the “Customer Bill of Rights”. The retail industry is based on customers and the service they receive, and the “Product Development” strategy will capitalize on the excellent customer service already in place and strengthen Home Depot’s core competencies while diminishing the company’s weaknesses.

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