Dean Barbera
Exam #1 – Question #1
Submitted by:
Dean Barbera
To:
Professor Russell KH Ching, Ph.D.
In Partial Fulfillment of The Course Requirements
For MIS 271
At:
Department of MIS
College of Business Administration
California State University, Sacramento
On:
October 24th, 2005
Home Depot (HD) and Waste Management, Inc (WMI) are two dissimilar organizations with
little superficially in common. Home Depot started their first location in Atlanta, June of 1979.
Their original store stocked 25,000 products and was attached to a Treasure Island store, a local
food retailer. Currently average Home Depot’s have 40,000 products and store sizes are
approximately 106,000 square feet. Home Depot’s industry is a subset of Retail, Home
Improvement. They sit atop their industry, a giant that all others have settled for taking a small
piece of their pie. Annual revenues for 2005 are estimated to be $86.7 Billion, with profits of
approximately $6.46 Billion. Home Depot continues to open new stores at a rate of one every 48
hours, adding to their 1,900 stores located in the United States, Canada and Mexico. Waste
Management Inc., headquartered in Houston is a conglomerate with numerous subsidiaries. The
underlying industry is Waste Management Services. Their organization consists of various
activities relating to waste; 429 collection operations, 366 transfer stations, 289 active landfill
disposal sites, 17 waste-to-energy plants, 138 recycling plants and 85 beneficial-use landfill gas
projects. Waste Management, Inc. services almost 21 million customers in residential,
municipal, commercial and industrial. Like Home Depot, Waste Management sits atop the
Waste Management Services industry. Estimated revenues for 2005 are $12.98 Billion, with
profits approximately $1.4 Billion. To summarize their industry in an unpretentious way is to
say Waste Management, Inc. takes peoples garbage, moves it, dumps it, recycles it, buries it, lets
nature turn some of it into natural gas, converts it into electricity and sells it right back to the
original customer. Turning this process into a $13 Billion dollar organization really has put
Waste Management, Inc. on the top of their heap.
Home Depot and Waste Management, Inc. fall into different categories relating to the Model of
Strategic IT Planning. Home Depot inhabits the Turnaround sector of the grid. The impact of
existing IT applications is low, although the impact of future IT applications is high. Certainly
Home Depot currently relies heavily on EFTPOS technology (Electronic Funds Transfer at Point
of Sales), but so do their competitors. Home Depot currently has a web presence, providing
product information, store location and an ability for customer feedback and questions. These
web-based services are also provided by Home Depot’s competitors, and have become an
industry standard. Home Depot, in recent years, has committed significant resources in order to
secure their IT position within the Home Improvement industry. Between 2002 and 2004 Home
Depot invested more than $1 Billion in new technology, including a technology center located in
Atlanta eventually employing 500 people. The new center will differentiate Home Depot from
their competitors in recognizing IT as an integral part of future strategic planning. Security,
web-based ordering, online kitchen and bath design centers and real-time stocking information
are just a few of their forthcoming services. Currently Home Depot sits near their competition
relating to IT applications, but current investments will vault them to an IT level that will create
envy among the competition. Waste Management, Inc. resides within the Factory sector of the
grid. The impact of existing IT applications is high, although the impact of future IT
applications is low. Information Technology is a key factor in the day-to-day operations of all
facets; from collection to processing as well as maintenance of vehicles. 389 of their vehicles
have been converted from diesel fuel to clean-burning natural gas. The future will continue this
conversion process, but there are no plans for other technologies to be implemented. Waste
Management, Inc. heavily uses technology in their operations and it has become an important
ingredient of their strategic IT plan. The continued use and maintenance of existing technologies
clearly locates Waste Management, Inc. in the Factory segment of the Model of Strategic IT
Planning.
The differences in threats and opportunities differ significantly in the corresponding industries of
Home Depot and Waste Management, Inc. Porter’s Model is useful in summarizing these
potential threats and opportunities. Home Depot and the small number of large corporations that
constitute the Home Improvement industry have positioned themselves in such a way making it
almost impossible for new entrants to amount to any level of threat. Large warehouse stores
have been located and continue to be located in the prime areas of all major metropolitan areas.
This factor aside, the barriers to entry are significant with the inventory and floor space required
to compete in this industry. Customers in the Home Improvement industry have a few additional
choices, which keep Home Depot aware of the importance of customer service, pricing and
location. Lowe’s and OSH are the nearest competitors in this oligopoly known as Home
Improvement. Competitive pricing is key to maintaining customer loyalty as well as expanding
the existing customer base. Suppliers have little power to bargain with Home Depot. Home
Depot can make or break suppliers and operates on large volume on smaller margins; suppliers
work within this model or search elsewhere to sell their goods. Limited substitutes are available.
It would be a daunting task to cut down your own tree, mill it, and cut it just to build an addition
to your home. Hiring your project out to a contractor is not an affective substitute, since your
contractor will purchase material from Home Depot or one of its competitors. Home Depot’s
industry, as mentioned previously, is an oligopoly. Home Depot’s nearest competitor has about
half of their annual revenue. The next nearest competitor has less than 10% of their revenues.
The main rivalry in this industry exists between Home Depot and Lowes. Each of these stores
competes significantly among price, store location and customer service. Waste Management
does not have the same threats and opportunities per Porter’s Five Forces Model. Waste
Management in many ways represents a monopoly to the end-customer. Contracts are negotiated
at a municipal level, often providing for little or no competition. The economies of scale, such as
the Home Improvement industry, limit potential entrants into the industry. Bargaining for
pricing is done at the municipality level. In some areas, customers have a few options for
different levels of waste service; large or small trash bins and recycles or green bins. Endcustomers may slightly modify their services, but often have not choice to simply stop service.
Substitutes in this industry are limited. Customers may choose to recycle their own cans, bottles
and paper products. This creates incentives in the industry to provide a simple solution to this
valuable commodity. Many markets provide for free recycle and green bins in order to prevent
customers from seeking other avenues for these products. Rivalries in existing firms are few and
far between. Often no alternative is in play for municipalities, creating a non-competitive
industry littered with unanswered complaints.
Information Technology could help foster both companies into a new level of strategic planning.
Home Depot, with future enhancements to their web presence could offer less expensive order
gathering and product delivery services. IT as a tool could in some cases eliminate the
warehouse as the intermediary between the various suppliers and the end-user. Home depot has
made this technology investment and stands to gain competitive advantage over their rivals in
this area over the next several years. Waste Management, Inc., due to its location on the Model
of Strategic IT Planning, will not be looking to increase future IT strategies. Continued
developments of existing Strategies will maintain status quo in an industry that relies on
technology, but has few plans to advance these technologies in the near future.
Home Depot and Waste Management Inc. have different IT strategies that will both succeed in
their respective industries. Home Depot’s move towards future IT applications is a direct result
of competition from rivals such as Lowes. Home Depot’s shire size and commitment to IT being
an aggregate part of strategic planning will increase their market position in the near future.
Waste Management Inc.’s, with little competition, will continue to attempt to increase profits
through efficiencies and implementation of existing technologies. This focus will not be oriented
from an end-customers standpoint as there are often few alternatives for the customer. They will
add or eliminate services based on cost savings rather than competitive forces.
Each of the IT strategies is appropriate for the corresponding industries that Home Depot and
Waste Management, Inc. belong. Each organization is moving forward with the appropriate
level of Information Technology investment.
Bibliography
"New Locations to Create 850 Jobs" The Home Depot
Jul 30, 2004 http://ir.homedepot.com/ReleaseDetail.cfm?ReleaseID=14921
"Home Depot Launches Online Kitchen & Bath Design Center" URLwire
June 4, 2002 http://www.urlwire.com/news/060402.html
"About WM" Waste Management
October 19, 2005 http://www.wm.com/wm/about/Overview.asp
"Home Depot: Thinking Outside the Big Box" BusinessWeek Online
October 25, 2004
http://www.businessweek.com/print/magazine/contect/04_43/b3905090_mz017.htm?chan=gl
"The Home Depot" Answers.com
October 19, 2005 http://www.answers.com/topic/home-depot
"Waste Management, Inc." Answers.com
October 19, 2005 http://www.answers.com/Waste%20management%2C%20Inc