Introduction: Key Facts
The Home Depot Inc. is a privately held company with a significant market share in the US. The history of the company began in 1978 with the opening of the first store of household goods (The Home Depot, 2022a). The main niches that the company occupies are household products, gardening, outdoor and barbecue equipment, plumbing and power supply elements, kitchen appliances (IBISWorld, 2022). The company is successfully developing and, retaining a stable home improvement retailer.
Industry, Life Cycle, Competitors
The industry in which Home Depot operates can be described as ‘home and garden products’. At the moment, the home and garden products industry is mature, risking to become stagnant (Yun et al., 2019). With a similar assortment and an established international reputation, companies are entering a period of stagnation as they are less adaptable due to their success (Parnell, 2017). Lowe’s, Amazon and Walmart are the main competitors for Home Depot in the US market (IBISWorld, 2022). Home Depot’s main competitors in the international market may be the Swedish IKEA and the German OBI.
Critical Success Factors
The home and garden retail sector has grown over the past few years. Giants like Walmart have succeeded by adding home and garden products to their range. Against the backdrop of international giants, companies like Bed Bath and Beyonds are losing out in the industry (Esty & Fisher, 2021. The key success factors for a home and garden retailer are strategic focus, people, operations, marketing, and finances (Parnell, 2017). The success factor for the industry will be an energetic leader, increasing employee motivation, developing an efficient supply chain, monitoring competitors’ prices, and aggressive marketing.
Political-Legal Forces
Political and legal factors determine how the whole industry will operate. Political-legal forces include election results, legislation and court decisions, as well as decisions made by various commissions and bodies at all levels of government (Parnell, 2017). For large retailers, in legal and political terms, antitrust laws are especially important (Steinbaum & Stucke, 2020). For Home Depot, this factor means the need to maintain healthy competition.
Economic Forces and Market Structure
Economic forces primarily characterize the state of the world economy. The home and garden retailer industry seems to show post-pandemic steady growth (Bitterman & Hess, 2021). The US labor market and economy are currently favorable for giants like Home Depot. There are four main types of market structure in retail trade: perfect competition, monopolistic competition, oligopoly and monopoly (Parnell, 2017). The current situation in the home and garden market can be described as monopolistic competition in which large retailers compete for customers.
Social Forces
Social trends have a big impact on the retail sector and its profitability. For retailers like Home Depot, the factor of changing shopping behavior is especially important. Home and garden products are still a profitable and interesting industry for buyers. After the pandemic, an increasing number of buyers prefer online delivery to going to the store (Aryani et al., 2021). Home Depot should focus on maintaining fast delivery while remaining attractive to traditional customers.
Technological Forces
The main technological factor affecting retailers is the growing need for digital technologies. To attract more customers, retailers are increasingly using augmented reality, artificial intelligence, moving to electronic databases and calculating shopping behavior through innovative tools. By using electronic data interchange with thousands of suppliers, Home Depot can keep communication to know when the store is running out of stock. In the coming years, the company will need to make changes in policy to ensure a technological competitive advantage.
Corporate-Level Strategy
A corporate-level strategy is a company’s multi-level plan that describes the overall strategy for the near future. There are strategies for stability, expansion, reduction and combined methods (Parnell, 2017). Home Depot is pursuing an expansion strategy to remain attractive to traditional customers and expand into new markets with changing customer’s behavior. Home Depot’s overall strategy defines the company’s overall approach to capturing the largest market share.
Business-Level Strategy
Business-level strategies define how a company plans to achieve competitive advantage in a particular area of operating. With regard to the overall strategy of broad differentiation, Home Depot’s strategic goal is to offer impressive services and a wide range of products at the lowest possible cost (Spanke, 2020). Home Depot captures a large share of the market, while providing unique products at an average price level.
Financial Strategy
Home Depot has been a financial success and has seen impressive growth since its inception. The financial strategy of the company has long been based on the capture of a large DIY market (Marcus et al., 2019). Home Depot is currently investing in capturing an even more lucrative market for professional builders and other bulk buyers (Marcus et al., 2019). Home Depot believes it is important to invest in innovation. In the coming years the company will continue the financial strategy of concentrating on increasing profits and reducing costs.
Strengths and Weaknesses
Strengths:
- High reputation based on sustainable success
- Market leadership based on a smart differentiation strategy
- Established network of suppliers based on long-term cooperation
Weaknesses:
- Imitative business format based on a significant number of strong competitors
- Dependence on the US market, which signals the need to strengthen in new markets
Opportunities and Threats
Strategic Alternatives
Currently, Home Depot’s strategy is to concentrate on the US market, provide a wide range of products, reduce own costs and constantly expand. To ensure competitive advantage, an organization needs an alternative strategy. It will consist in entering new international markets following the example of IKEA. The organization has the financial capacity to expand internationally and has a good reputation for building visibility. Entering new markets will make it less dependent on economic stability in the United States.
Timeless Principles
For an organization to be successful, it must adhere to timeless principles. These principles include leadership, sustainability, organizational values and a business culture (Collins, 2011). Starting with three enthusiasts, the company currently has a stable and open top management (Marcus et al., 2019). The company has always maintained stability by adapting to the customer: starting with a small store of household goods, to a huge online catalog. A major part of organizational culture centers on caring for people, both customers and employees (The Home Depot, 2022b). These factors provide Home Depot with a solid reputation and a huge market share.
Conclusion
Home Depot is a leader in the home and garden products industry. The main competitive advantage is a wide range of products and an affordable price. The organization has a good reputation for a clear organizational culture and strong leadership. In order to stay in the stage of stable growth Home Depot needs to master the market outside the US. In this case, the company will continue its stable growth and development.
References
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Bitterman, A., & Hess, D. B. (2021). Going dark: The post-pandemic transformation of the metropolitan retail landscape. Town Planning Review, 92(3), 385-394. Web.
Collins, J. (2011). Good to Great: Why Some Companies Make the Leap…And Others Don’t. United Kingdom: HarperCollins.
Esty, B.C., & Fisher, D. (2021). Bed Bath & Beyond: The New Strategy to Drive Shareholder Value. HBS Case No. 722-408. Web.
IBISWorld (2022). The Home Depot, Inc. Web.
Marcus, B., Blank, A., & Andelman, B. (2019). Built from scratch: How a couple of regular guys grew the Home Depot from nothing to $30 billion. United States: Currency.
Parnell, J.A. (2017). Strategic Management: Theory and Practice, 6edition. United States: Academic Media Solutions.
Spanke, M. (2020). Retail isn’t dead: Innovative strategies for brick and mortar retail success. United States: Springer Nature.
Steinbaum, M., & Stucke, M. E. (2020). The Effective Competition Standard. The University of Chicago Law Review, 87(2), 595-623. Web.
The Home Depot (2022a). About Us. Web.
The Home Depot (2022b). Our Values. Web.
Yun, J. J., Won, D., Park, K., Jeong, E., & Zhao, X. (2019). The role of a business model in market growth: The difference between the converted industry and the emerging industry. Technological Forecasting and Social Change, 146(1), 534-562. Web.