Home Depot 2005.ppt

Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,1,2005,A Strategic Management Case Study,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,2,Overview,A brief history of The Home DepotEOY 2004Mission,Vision,Objectives,Strategies2005 New Vision and MissionExternal AnalysisOpportunities&Threats CPMEFEInternal AnalysisFinancial DataStrengths and weaknesses IFEFinancial ratiosStrategic Analysis SWOT MatrixSPACE BCGIE matrixGrand Strategy MatrixMatrix AnalysisQSPM,Possible alternative strategiesOur RecommendationStrategies Long range objectivesEPS/EBIT Implementation IssuesProposed annual objectives(goal)and policesProposed procedures for evaluationEpilogueCurrent PerformanceResources UtilizedQuestions,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,3,History of the Home Depot,1978Founded by Bernie Marcus and Arthur Blank;zero locations;20 associates1979 3 store location;200 associates;$7 million in sales1980 4 stores;300 associates;$22 million in sales1981Stock goes public on NASDAQ,raising$4.1 million;8 stores;700 associates;$51 Million in sales1984Moved to the New York Stock Exchange(NYSE)in1986 Sales exceed$1 billion;60 stores1987Day-in/Day-out pricing policy;UPC scanning system;health program for associates introduced;75 stores;$1.45 billion sales1988Named retailer of the Year by Building Supply Home centers for second time;named High Performance Retailer for 7th consecutive year by Management Horizons;96 stores;$2 billion in sales,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,4,History of the Home Depot,1994The company arrived in Canada with the acquisition of Aikenheads home improvement centers1997624 stores;124,000 associates;$24.2 billion sales1999The Legend opened in the Atlanta Store Support Center;chronicles the history of The Home Depot and illustrates the values that set us apart 2001 Began flying its flag proudly in Mexico in 2001 through the acquisition of Total HOME20021,532 stores;300,000 associates;$58.3 billion in sales2003$64.8 billion in sales2004Sales reach 73.1 billion;over 1,818 stores and 54 EXPO centers making Home Depot the worlds largest home improvement retailer,2nd largest retailer in the United States,3rd largest retailer in the world,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,5,2004 Mission,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.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,Giving Back,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,6,In 2004 Home Depot committed to its first ever week of service.260,000 volunteers hours were donated by 34,500 associates.Completing 1,600 service projects.Due to its success we have decided to make it an annual event.,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,7,2004 Strategies and objectives,Approximately$1 billion is being invested in infrastructure Self check out computersProduct scanning devices175 new stores in North AmericaModernize current stores,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,8,2004 Issues,Strong competition with Lowes is driving down pricesContractor shortages causing a backlog in home remodelingA class-action lawsuit alleges that Home Depot and rival Lowes misled customers with interest-deferred credit card promotions in 2003,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,9,Exclusive Brands,The Home Depot carries several exclusive brands,including:BEHR PaintChem-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,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,10,Creating a worldwide presence,Add the end of 2004 we had 44 stores in Mexico and 117 in Canada,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,11,A New Vision,To be the first choice for affordable,diverse,innovative,and modern products in the home improvement industry.,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,12,A New Mission,The Home Depots mission is to be a superior retailer in the home improvement business by providing an extensive range of products worldwide.(2,3,7)We offer first-rate customer service to all home owners and businesses,from housewives to contractors.(1)The Home Depot values its relationship with its employees,shareholders,customers,and the community as well as the environment and maintains a high level of respect for all.(6,8,9)These relationships are maintained through vast community involvement and a dedication to increasing our presence internationally,thereby providing to those in need and increasing profits to our shareholders.(4,6,5)We utilize technological advancements to assist in our growth and further develop our innovated stores.(4),Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,13,The Home Depots mission,The new mission answers the following questions Customers:Who are the firms customers?Products or services:What are the firms major products?Markets:Geographically,where does the firm compete?Technology:Is the firm technologically current?Concern for survival,growth,and profitability:Is the firm committed to growth and financial soundness?Philosophy:What are the basic beliefs,values,aspirations,and ethical priorities of the firm?Self-concept:What is the firms distinctive competence or major competitive advantage?Concern for public image:Is the firm responsive to social,community,and environmental concerns?Concern for employees:Are employees a valuable asset of the firm?,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,14,External Audit:Opportunities,International expansionConsumer interest in one-stop shopping to save time and gas moneyGrowth in global sourcingHardware stores,home centers,and retail-oriented lumberyards,industry expected to grow(from$236.3 billion in 2004 to$281.7 billion by 2008)Slow housing sales(people are likely to stay home and spend money on remodeling and on improvements to make a home more attractive to purchase)The growing number of woman who are making home improvement decisions and spending an increasing amount of time on DIY(do-it-yourself)projects,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,15,External Audit:Threats,Competitors(Lowes,Sears,Wal-Mart)Reaching market saturation within North AmericaContractor shortage causing backlog in home remodelingOverlap between Home Depot and LowesA class-action lawsuit alleges that Home Depot and rival Lowes misled customers with interest-deferred credit card promotions in 2003,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,16,The Home Depot CPM,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,17,The Home Depot EFE,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,18,Consolidated Balance Sheet,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,19,Consolidated Balance Sheet,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,20,Consolidated Statement of cash flows,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,21,Internal Audit: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 2004Innovative methods of differentiatingDominant in the lumber and building materials industryDistinctive product rangeEfficient business model,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,22,Internal Audit:Weaknesses,Rising expensesStore layout and appearanceNew store productivity remains weakRevenue growth is slower than industry average and Lowes18%decrease in cash and cash equivalents FY from 2002 and 2003 to 2004,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,23,The Home Depot IFE,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,24,Financial Ratio Analysis,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,25,Financial Ratio Analysis,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,26,Financial Ratio Analysis,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,27,Financial Trends(January 1999-January 2005),Financial data in U.S.dollarsIndustry:Home Improvement Stores,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,28,The Home depot stock Performance,Source:Dividends()Splits(),Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,29,The Home depot Net Worth(January 2005,in Millions of U.S.Dollars Except Per Share items),*Stock price is based on a closing price at 1/28/2005 from,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,30,Strategic Analysis:SWOT Matrix,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,31,Strategic Analysis:Space Matrix,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,32,Strategic Analysis:Space Matrix,Home Depot has achieved moderate competitive advantages and financial strength in a growing and stable industry.,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,33,Strategic Analysis:Grand Strategy Matrix,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,34,Strategic Analysis:IE Matrix,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,35,Strategic Analysis:BCG Matrix,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,36,Matrix Analysis,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,37,The Home Depot QSPM,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,38,The Home Depot QSPM,Key Internal Factors,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,39,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 suits their quality,and amount that they need.Horizontal integration:Home Depot can acquire other home improvement companies taking greater control of the industry,and gaining more control in various regions.,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,40,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 purchased home.Market Penetration:Go after Lowes,Ace Hardware and True Values market share,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,41,Recommendations,Strategy 1Domestic ExpansionOpen up more full service hardware stores throughout the united states thus creating a presence in all areas within a state.Goal would be to have at 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.Estimated cost of such an expansion:$4 million per store 10 stores=$40 Million,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,42,Recommendations,Strategy 2International ExpansionAcquire European home improvement company Kingfisher plc.By acquiring this company,we will create a presence in Europe.This will also give us presence and possession of companies that are part of the Kingfisher group such as B&G(UK:Ireland:China:Taiwan and Hong Kong),Brico Depot(France and Spain),Castorama(France:Italy:Poland and Russia)Hombach Holding AG(21%Kingfisher stake),KOCTAS(Turkey,and Screwfix Direct Ltd(England).Estimated cost for such an acquisition:$10 Billion,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,43,Recommendations,Strategy 3Provide fuel servicesAside from being a home improvement store,Home Depot will have filling stations at select Home Depot stores.This will create a one stop shop for customers,and businesses providing fuel,food,and other quick stop necessities.Estimated cost:8 million,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,44,EPS/EBIT,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,45,EPS/EBIT,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,46,Implementation Issues,Importing goods overseasDealing with changes in supply chain with distributorsDealing with new culturesCustomersEmployeesEnvironmental issues and regulationsHostile takeoverHesitancy of KingFisher to sell,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,47,Proposed Annual Objectives(goal)and Policies,Increase sales revenues by 20%annually for the next 3 yearsReduce expenses by 20%annually for the next 3 yearsby 10%in selling and store operating costsby 10%in general and administrative costsNew capital expenditure priorities;not over investing in a maturing business90%reduction in a new store development in domestic 40%increase in remodeling older stores and upgrading IT systems50%increase in international expansion,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,48,Proposed Procedures For Evaluation,Track competitors price changesCompany rankingSAP Top 100 retailersBusiness WeekFortune Quarterly financial reportsQuarterly meetings to evaluate current plan and respond as necessary to changes,Danielle Boucher,Takefumi Kawahara,Matthew Bouchard,Darius Parker,49,Epilogue,2005 launches its high-end online home-furnishings store,10 Crescent Lane,shortly followed by the launch of Paces Trading Company,its high-end online lighting store.2005Former employee Michael Davis filed a whistleblower lawsuit against 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 was placed as an additional brand under its Home Depot Direct Division;Sales totaled US$90.8 billion;10%increase in revenue2006Started testing with fuel centers at some of its stores.The first centers are expected to earn$5-$7 million per year.The fuel centers sell beer,hot food,snacks along with providing diesel at a separate island.This allows contractors with large trucks to be able to fill their vehicles.The fuel cen