I.
Current Situation
A. Current Performance
The company continued to expand and topped many company records in 2005 including
earnings per share, operating margin and net earnings records. They retained the spot
as the world’s largest home improvement retailer and the second largest retailer in the
United States behind Wal-Mart.
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Opened more than 900 stores from 2000-2005
Sales increased from $45.7 billion in 2000 to $81.5 billion in 2005
Earnings per share more than doubled in the same time
Employed 345,000 associates
Average sales per customer ticket reached 57.98, an all-time high
1,832 Home Depot stores (This includes all 50 states and the District of
Columbia, Puerto Rico, and the Virgin Islands, plus 143 stores in Canada and
57 in Mexico. The average Home Depot store had approximately 105,000
square feet of indoor selling space with an additional 23,000 square feet of
outside garden center space.)
Went from 0 to number 3 in the core appliance market share (They began
to offer many Home appliances.)
B. Strategic Posture
1. Mission:
(The mission of Home Depot is clearly stated in its mission statement but is also
implied by its strong business code of conduct and ethics and also their
performance as a company.)
The Board of Directors (the "Board") of The Home Depot, Inc. (the "Company") is
committed to maximizing long term shareholder value while supporting
management in the business and operations of the Company, observing the highest
ethical standards and adhering to the laws of the jurisdictions within which the
Company operates.
Strong Business Code of Conduct and Ethics (Stated in short that acting with
integrity and doing the right thing are the driving forces behind The Home Depot’s
extraordinary success. That they are committed to conducting its business in an
ethical manner and all that they do must be consistent with the values of the
company. They believe in doing the right thing, having respect for all people building
strong relationships, taking care of our people, giving back, providing excellent
customer service, encouraging entrepreneurial spirit and providing strong
shareholder returns.)
2. Objectives:
(There are many objectives that the company has as you can see but these
objectives are strongly supported by the company’s strategies which will be
verbalized in the next section.)
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Enhancing the Core, extending the business and expanding the market.
Maintain and grow its leadership position in the home improvement retail
worldwide.
Become the nation’s largest diversified wholesale distributor
Become number one in services (currently have more than 11,000
installations per day and expect to continue their growth through 2010)
Become the largest home improvement retailer in both Canada and Mexico.
Increase direct-to-consumer channels
Compounded annual sales growth of 9%-12%
Compounded earnings per share growth of 10%-14%
Open 400-500 new stores (which will create an additional 40-55 million
square feet of new selling space.)
Increase operation margin
Have a cumulative operating cash flow of $50 billion
Cumulative capital expenditures of $17-20 billion
Grow Home Depot Supply sales
Increase efficiency
Increase number of customers applying for credit
3. Strategies:
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Introduced self checkout, Back End Automation and Re-engineering and
centralized automated replenishment. (These advancements in automation
helped to successfully improve the efficiency of Home Depot’s operations.)
Acquired 21 companies (These companies were acquired in an attempt to
increase the amount of installations that Home Depot could perform. One
of the major companies that Home Depot purchased was Hughes Supply.)
Remain prepared for weather phenomenon such as hurricane Katrina. (Two
days prior to Katrina making landfall maintenance teams battened down
stores in the projected path of the hurricane and electrical generators and
hundreds of extra workers were moved into place.)
Served both the Do-It-Yourself (DIY) and Do-It-For-Me (DIFM) customer.
Better serve the professional customer. (To do so, Home Depot acquired the
previously stated 21 stores while the Home Depot Supply distributed
products and sold installation services primarily to professional business
contractors, businesses and municipalities. 1. They focused on three main
areas. Supplying maintenance, repair and operating products to multifamily
housing, hospitality and lodging facilities, 2. Builder provided products and
arranged installation services for production homebuilders and 3. Providing
specialty hardware, tools, and materials to construction contractors.)
Modernize the stores while updating their product lines. (This strategy is in
place to meet the objective of Enhancing the Core of the company. In order
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to enhance the company it must be able to adjust to changing customer
needs.)
Expand into multiple channels. (The objective to extend the business is met
by expanding to channels such as homedpot.com and various catalogs and
also by selling new products and services.)
Expand into new markets. (The company plans on expanding into new
markets with new products to better serve existing customers and to attract
new ones.)
Use technology to increase efficiency examples in clued computerized point
of sale system, electronic bar code scanning system, and a UNIX server. (In
so doing the associates will be able to spend more time serving and focusing
on the customer. It will also help with the store-based inventory
management, rapid order replenishment and item movement information.)
Become Sustainable. ( In order to achieve sustainability Home Depot plans
on selling products that are manufactured, packaged, and labeled in a
responsible manner, that take the environment into consideration and that
provide greater value to its customers.)
Differentiate itself from its competitors through customer service.
Employ only highly qualified and helpful employees. (This along with helpful
in-store displays is done in an attempt to cultivate customers.)
Demonstrate methods and techniques of performing a job safely and
efficiently to the customer. (Instead of just recommending appropriate
products, tools, and materials employees are urged to go the extra-mile and
provide tips.)
Offered credit programs and reduced charge card approval process time.
(The approval process time had been reduced to less than 30 seconds to
increase the number of customers applying for credit. In 2005
approximately 4 million new Home Depot credit accounts were opened,
bringing the total number of Home Depot account holders to about 16
million. The credit card sales accounted for around 26% of store sales.)
4. Policies:
Main Policies
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Improve everything we touch (The company adopted this slogan and policy
after Nardelli became CEO and he stated that you can improve everything
you touch whether you’re a lot attendant, store manager, or chairman of
the company.)
Superb Service
Be a good corporate citizen
Behave Ethically
Act with integrity
Prior to Bob Nardelli in December of 2005
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Decentralized management and decision making.
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Entrepreneurial innovation and risk taking.
High levels of employee commitment and enthusiasm.
Bond with customers and the communities
Orange-blooded culture which emphasized individuality, informality,
nonconformity, growth and pride. (This allowed for ideas from employees
to be heard by upper management because of the ease of information
communication. Instead of conforming to other organizations Home Depot
employed a bottom-to-top type of training sequence in which they trained
the carryout people first because they believed that the last person to come
in contact with the customer makes a huge impact and they wanted the
contact to be positive.)
(These policies were formed by the founders of the company. Some of the
policies prior to Nardelli are still applied by the company but he changed it
to a more centralized, military standard type of company. He did this
because he believed it was partially responsible for the firm’s stagnation in
sales growth.)
After Bob Nadelli
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Centralized management
Organize the company
Emphasis on military efficiency
Hire veterans
Disciplined manager corps (This is done in an attempt to produce managers
that follow orders, operate in high-pressure environments, and execute
with high standards.
(The new policies prohibited the constant flow of ideas and suggestions from
employees in the organization and replaced it with major decisions and goals
that flow down from top management. Some people used to the old way of
doing things felt a “culture of fear” because instead of just using their
experience to sell at their maximum the company set forth exact goals for each
store. Customer satisfaction fell off in 2005 and some say it was because
Nardelli tried to measure good customer service instead of inspiring it. In 2006
the customer satisfaction was improving.)
II.
Strategic Managers
A. Board of Directors
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(Information)
B. Top Management
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(Information)
III.
External Environment
A. Natural Physical Environment: Sustainability Issues
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(Information)
B. Societal Environment
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C.
Task Environment
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IV.
(Information)
(Information)
Internal Environment: Strengths and Weaknesses
A. Corporate Structure
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(Information)
B. Corporate Culture
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(Information)
C. Corporate Resources
1. Marketing
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(Information)
2. Finance
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(Information)
3. Research and Development
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(Information)
4. Operations and Logistics
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(Information)
5. Human Resources Management
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(Information)
6. Information Technology
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V.
(Information)
Analysis of Strategic Factors
A. Situational Analysis (SWOT)
1. Strengths
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(Information)
2. Weaknesses
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(Information)
3. Opportunities
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(Information)
4. Threats
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(Information)
B. Review of Current Mission and Objectives
Mission Statement
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(Information)
Objective
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VI.
(Information)
Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
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(Information)
B. Recommended Strategy
VII.
Implementation
A. What kinds of Programs Should be Developed to Implement the Recommended Strategy?
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(Information)
B. Are the programs financially feasible? Can Pro Forma Budgets be developed and agreed
on? Are priorities and timetables appropriate to individual programs?
C. Will New Standard Operating Procedures Need to Be Developed?
VIII.
Evaluation and Control
A. Is the current information system capable of Providing Sufficient Feedback on
Implementation Activities and Performance? Can It Measure Strategic Factors?
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(Information)
B. Are Adequate Control Measures in Place to Ensure Conformance with the Recommended
Strategic Plan?
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(Information)
Exhibit #1
D. Summary of External Factors
External Factors
Weight
Rating
Weighted
Score
Comments
Opportunities
25 yr GSM license to
operate in Turkey
0.05
3.6
0.18
Ensures
stability
Established
standards
GPRS advancement
0.05
3.2
0.16
MMIS for Outlook
0.05
3.9
0.2
Entrance into the EU
customer relation
and social
responsibility
0.1
0.15
3
4.4
0.3
0.66
PDA like access
Economic
reliability
Essential for
businesses
Threats
Debt created by Lira
nosedive
Taxation of 66%
0.15
0.2
2.9
2.5
0.44
Slows
margin
profit
0.5
Decreases
income
Possible ten year
wait for 3G profit
Rural users
uncertainty
0.1
2
0.05
Marketing campaigns
too expensive
0.1
Totals
1
4.1
3.8
0.2
Long wait for
profit
0.21
Need everyone
onboard
0.38
Develop
simpler ads
3.23
Exhibit #2
Table 5-2
Internal Factors
Strengths:
Quality known with name
Highly trained employees
Large market share
100% coverage
Immediate response
Internal Factor Analysis Summary
Weight Rating Weighted Score Comments
0.1
0.15
0.1
0.2
0.15
4
5
3.4
4.7
4.6
0.4
0.75
0.34
0.94
0.69
snabbit icon
80% college degree
small competition
5000+ populations
troubleshooting
Weaknesses:
Potential customers do not
understand mobile
communications
3G technology is almost
out of reach
Government restrictions
Total scores
0.15
2
0.05
0.1
2.3
1.6
need to educate
0.3 citizens
0.12 too expensive
0.16 taxes
1
3.7
Exhibit #4
Year Ending December 31
Assests
Current Assets:
Cash and cash equivalents
Trade receivables
Due from related parties
Inventiories
Prepaid expenses
Other current assets
2001
2000
243,114
256,143
164,448
12,154
20,843
46,965
363,365
325,636
113,860
16,402
22,484
44,476
Total current assets
Advances to related parties
Due from related parties
Prepaid expenses
Investments
Fixed assets
Construction in progress
Intagibles
Other long-term assets
Total Assets
Liabilities and Shareholders' Equity
Current Liabilities
Short-term borrowings
Trade payables
Due to related parties
Tax Payable
Deferred tax liability
Other current liabilities and accrued
expenses
Total Current Liabilities
Long-term lease obligations
Long-term lease obligations
Retirement pay liability
Deferred tax liabilities
Minority interest
Other long-term liabilites
Shareholders' equity:
Common Stock
Additional paid in capital
Advances for common stock
Legal Reserves
Accumulated other comprehensive loss
Retained Earnings
Total shareholders' equity
Total Liabilities and Shareholders' equity
$743,667
10,085
3,300
58,329
1,655,110
119,363
916,920
28,996
$3,535,770
$383,167
302,039
3,626
130
$886,223
1,020
11,765
60,068
1,762,168
233,299
892,995
37,382
$3,884,920
$438,081
208,890
2,811
21,103
303, 425
992,387
1,218,903
37,103
4,737
896
6,792
636,116
178
119
5
-1,875
650,682
1,285,225
3,546,043
271,194
942,079
1,600,676
34,472
3,545
3,491
12
5,838
458,239
141
5
-1,049
837,471
1,294,807
3,884,920
Exhibit #5
Exhibit #5
Revenues
Direct cost of revenues
2002
2003
2004
1,973,850 2,219,237 3,200,765
-
1,366,899 1,613,150 2,001,223
Gross profit
General and administrative expenses
Selling and marketing expenses
Operating income
Income (expense) from related parties
Interest income
Interest expense
Other income, net
Equity in net (loss) income of unconsolidated
investees
Minority interest in income of consolidated
subsidiaries
Translation loss
Income (loss) before taxes
Income tax benefit (expense)
Net income
606,951
-104,523
-223,496
278,932
-225
95,548
-302,335
13,560
606,087 1,199,542
-137,222 -137,315
-294,611 -349,249
174,254
712,978
3,738
1,919
117,240
152,751
-483,622 -121,500
6,190
7,113
-20,392
18,927
43,646
333
-18,045
47,376
3,558
-102,403
-262,118
477,285
215,167
7,466
-11,192
793,181
-281,360
511,821
47,376