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Case Study
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GROUP MEMBER]S
GROUP-2, PRASENTATION , MM-1, NDIM
(MM-1, GROUP-2)
SUNIL MISHRA B-59SRIKANT YADAV B-55
DEEPAK JOSHI B-18
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INDUSTRY OVERVIEW
U.S. Home Improvement Retail Industry Focuses on
the sale of equipment and supplies for various forms
of small and individual construction projects,
especially home improvement. Overall market size in2000 was about $200 billion. Customers : Do-It-
Yourself (D-I-Y) Buy-It-Yourself (B-I-Y) Professional
Costumers (Business to Business Sales)
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INDUSTRY OVERVIEW
Worlds largest home improvement retailer Second largest
retailer in the US in 2000 1103 Home Depot Stores 26
EXPO Design Center 4 Villagers Hardware Test Store
Lighting and plumbing subsidiaries Products GroupBuilding Materials, Lumber and Millwork (24.7%)
Plumbing, Electrical and Kitchen (26.6%) Hardware and
Seasonal (28.5%) Paint, Flooring and Wall Coverings
(20.2%)
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INDUSTRY OVERVIEW
Broad assortment of high-quality merchandise and
services at competitive prices using highly service-
oriented personnel and aggressive advertising. Year
2000 Income Statement: Net Sales: 38.4 billion GrossProfit: 11.4 billion Net Earnings: 2.3 billion
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HISTORY OF THE HOME DEPOT
1978 Founded by Bernie Marcus and Arthur Blank; zero locations; 20associates
1979 3 store location; 200 associates; $7 million in sales
1980 4 stores; 300 associates; $22 million in sales
1981 Stock goes public on NASDAQ, raising $4.1 million; 8 stores; 700
associates; $51 Million in sales 1984 Moved to the New York Stock Exchange (NYSE) in
1986 Sales exceed $1 billion; 60 stores
1987 Day-in/Day-out pricing policy; UPC scanning system; health programfor associates introduced; 75 stores; $1.45 billion sales
1988Named retailer of the Year by Building Supply Home centers for
second time; named High Performance Retailer for 7th consecutiveyear by Management Horizons; 96 stores; $2 billion in sales
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HISTORY OF THE HOME DEPOT
1994 The company arrived in Canada with the acquisition ofAikenheads home improvement centers
1997 624 stores; 124,000 associates; $24.2 billion sales
1999 The Legend opened in the Atlanta Store Support Center; chronicles thehistory of The Home Depot and illustrates the values that set us apart
2001 Began flying its flag proudly in Mexico in 2001 through theacquisition of Total HOME
2002 1,532 stores; 300,000 associates; $58.3 billion insales
2003 $64.8 billion in sales
2004 Sales reach 73.1 billion; over 1,818 stores and 54 EXPO centersmaking Home Depot the worlds largest home improvement retailer, 2nd
largest retailer in the United States, 3rd largest retailer in the world
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HISTORY OF THE HOME DEPOT
2005 launches its high-end online home-furnishings store, 10 CrescentLane, shortly followed by the launch of Paces Trading Company, its
high-end online lighting store.
2005 Former employee Michael Davis filed a whistleblower lawsuitagainst the Home Depot, alleging that his discharge was in retaliation
for refusing to make unwarranted charge backs against vendors.
2006 the Home Depot acquired Home Decorators Collection which wasplaced as an additional brand under its Home Depot Direct Division;Sales totaled US$90.8 billion; 10% increase in revenue
2006 Started testing with fuel centers at some of its stores. The first centers areexpected to earn $5-$7 million per year. The fuel centers sell beer, hot food,snacks along with providing diesel at a separate island. This allowscontractors with large trucks to be able to fill their vehicles. The fuel
centers also offer car washes, which are large enough to accommodate fullsize pickups.
2007Nardelli (CEO) was replaced by Frank Blake; sold its wholesaledivision HD Supply to a consortium of 3 private equity firms
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ANEW VISION
To be the first choice for affordable,diverse, innovative, and modern products in
the home improvement industry.
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MISSION
The Home Depot is in the home improvement business and ourgoal is to provide the highest level of service, the broadest
selection of products and the most competitive prices. We are a
values-driven company and our eight core values include the
following:
Excellent customer service Taking care of our people
Giving back
Doing the "right" thing
Creating shareholder value
Respect for all people
Entrepreneurial spirit Building strong relationships
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PRODUCT
The company sells a wide assortment of building materials,
home improvement, lawn and garden products such as patio
sets, kitchen, doors, windows, grills, bath, lighting, fans and
appliances. Home Depot provides an inventory of products specifically
aimed at professional contractors, such as lumber, paint and
painting supplies, plumbing equipment, cleaning and
janitorial equipment
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EXCLUSIVE BRANDS
The Home Depot carries several exclusive brands, including:
BEHR Paint
Chem-Dry (carpet cleaning, upholstery cleaning, tile and grout services)
Distinctions Cabinetry
Eco Options (store brand)
Feather River Doors
G.E. (Water Heaters) Glacier Bay (faucets and bath)
Hampton Bay (lighting, ceiling fans & patio furniture)
Husky (tools)
Millstead
Pegasus (kitchen and bath items)
Ralph Lauren paint Ryobi (power tools)
Thomasville cabinetry
Vigoro (fertilizer)
Workforce
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PRICE
Home Depot offers discounted prices via its online Savings
Center where it cuts p to 20% off products such as play sets,
kitchen faucets, and professional saws.
The company has established special buys prices onappliances offering 25% discounts on products such as
Washer & Dryer sets, and 20% off on Water & Ice
Refrigerators
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PLACE
The Home Depots main office is located in the US, in
northwest Atlanta, Georgia.
Home Depot has 3 stores in Georgia, 5 in Florida, three in
California, as well as locations in Tennessee, New Jersey,and Indiana.
The company has stores in Mexico, Guam, the Virgin
Islands and Canada
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PROMOTION
In 2008 Home Depot marketed its New Low Prices
campaign which featured rebates and discounted prices on
over 1000 products.
The company unveiled its Aprons on the Floor initiativedesigned to improve customer service by providing an
increased presence of available.
The company markets special offers via email newsletters,
do it yourself workshops, and garden clubs.
Sponsored the 1996 Olympic Game.
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PROCESS
Estimates are that the Aprons on the Floor
initiative could allow the assignment of two
additional hours of floor time per week for these
supervisors. This is estimated to mean 4,000 extrahours of customer-service activities for Home
Depot.
Home Depot continues to transforming its
information technology applications by convertingtheir Canadian business to a new enterprise
resource planning platform
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PROCESS
Recent associate training and procedures concentrate on
helping customers with problem solving, rather than
simply securing sales.
In recent years Home Depot is emphasized a moreformalized decision-making process tempering some of
the flexibility regional mangers had operated under.
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PHYSICAL EVIDENCE
The average size of a Home Depot store is about
105,000 square feet of enclosed space. Each store
has about 24,000 additional square feet in the
outside garden area. The company's stores stock approximately 30,000
to 40,000 different kinds of products
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PHYSICAL EVIDENCE
To improve merchandising of its chemical products
area, Home Depot has employed new wayfinding
signage program to brighten aisle and make easier to
navigate between product categories. The garden center area was revised with New table
fixture design with larger and brighter wayfinding
signage.
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PEOPLE
Frank Blake is the Chairman and Chief Executive
Officer of Home Depot.
Tim Crow was hired as Executive Vice President of
Human Resources and assigned to oversee all aspectsof human resource management as well as address
customer service issues.
Home Depot plans to increase the number of full time
employees and expand their training, while de-emphasizing the use of part-time workers.
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PEOPLE
In 2008 the company issued success sharing
checks in excess of $88 million to our hourly
associates a new record
The company places strong on value on itsassociates and provides performance based merit
increases as well as a 401(k) matching program
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STRENGTHS
1 home improvement retailer in the world
2 retailer in the U.S.
Profits climbed 16% and revenues climbed 13% in
for the fiscal year 2004 Innovative methods of differentiating
Dominant in the lumber and building materialsindustry
Distinctive product range Efficient business model
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WEAKNESSES
Rising expenses
Store layout and appearance
New store productivity remains weak
Revenue growth is slower than industry average andLowe's
18% decrease in cash and cash equivalents FY from2002 and 2003 to 2004
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THREATS
Competitors (Lowe's, Sears, Wal-Mart)
Reaching market saturation within North America
Contractor shortage causing backlog in home remodeling
Overlap between Home Depot and Lowe's
A class-action lawsuit alleges that Home Depot and rivalLowe's misled customers with interest-deferred credit cardpromotions in 2003
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POSSIBLE ALTERNATIVE
STRATEGIES
Forward integration: As a retail outlet, Home Depot can
acquire major distributors of plumbing equipment,
construction equipment, and other Home Depot product
related distributors. Backward Integration: As a retail outlet, Home Depot
can acquire its major suppliers of Home Depot supplies
such as installation services, steel mills, and logging
companies of their own thus creating a supply that suitstheir quality, and amount that they need.
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POSSIBLE ALTERNATIVE
STRATEGIES
Market Development: Home Depot mainly targets self
builder construction companies and baby boomers. Home
Depot can develop a market for newly weds, and new home
owners who may want to improve their newly purchasedhome.
Market Penetration: Go after Lowes, Ace Hardware and
True Values market share
Horizontal integration: Home Depot can acquire other homeimprovement companies taking greater control of the
industry, and gaining more control in various regions.
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RECOMMENDATIONS
Domestic Expansion
Open up more full service hardware stores
throughout the united states thus creating a presence in all
areas within a state. Goal would be to haveat least 5 Home Depots per state, averaging 10 new stores
per quarter. This will make Home Depot a one stop shop
for individual customers and
businesses alike.
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RECOMMENDATIONS
Provide fuel services
Aside from being a home improvement store, Home
Depot will have filling stations at select Home Depotstores. This will create a one stop shop for customers,
and businesses providing fuel, food, and other quick stop
necessities.
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STEPS TAKE TO GROW IT]S
MARKET SHERE & PROFIT
Before Mr.Nardelli time All the product to be available to customer in warehouse style at a
very affordable price.
Do-It-Yourself option options available along with Buy-It-Yourself. Installed a computerized inventory system.
1994-started its international expansion.
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STEPS TAKE TO GROW IT]S
MARKET SHERE & PROFIT
During the time of Nardelli
2000- Online store, WWW.thehomedepot.com
was launched.
2002-Started another division called the HomeDepot Landscape supply(HDS)
Centralizing the purchasing and merchandising
processes.
Shift the focus of the company from retail to
constraction business.
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STEPS TAKE TO GROW IT]S
MARKET SHERE & PROFIT
Increase the working hours of employee for
customer service
Reduce employee for cost cutting.
2007-Invest US$350 mn on building customerservice
Replace Do-It-Yourself to Do-It-For-Me attitude
Implement six sigma
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STEPS TAKE TO GROW IT]S MARKET
SHERE & PROFIT
At that time
Increase sales revenues by 20% annually for the next 3 years
Reduce expenses by 20% annually for the next 3 years
by 10% in selling and store operating costs
by 10% in general and administrative costs
New capital expenditure priorities; not over investing in a maturing
business
90% reduction in a new store development in domestic
40% increase in remodeling older stores and upgrading IT systems
50% increase in international expansion
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FINANCIAL HIGHLIGHTS COMPARISION
BETWEEN 2006 TO 2010
US$ mn
ANNUAL
2010 2009 2008 2007 2006
Net sales 17,784 18,961
Total
Revenue
66176 71288 77349 79022 77019
Gross profit 22412 23990 25997 26546 25938
Operating
Income
4803 4359 7242 8866 9047
Income
before Tax
3982 3590 6620 8502 8967
Income afterTax
2620 2312 4210 5266 5641
Net income 2661 2260 4395 5761 5838
EPS 1.58 1.37 2.28 2.56 2.64
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CONCLUSION
Home Depot has a solid foundation. Good Business
Plan Customer Loyalty Good Market Strategy
But its not immune to macro factors Repeat of 94-
95 recession drop Susceptible to interest rates,consumer confidence, real estate Expansion into new
markets could provide insulation
A good company but susceptible to macroeconomic
turbulence
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QUESTIONS
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