SWOT Analysis
Virginia L. Boyce
Casey Hardi
Suzanne Tullis
Martin Bell
California State University Monterey Bay
BUS 305: Understanding Management, Professor Susan Johnson
April 17, 2014
INTRODUCTION
PURPOSE
This report attempts to provide a current analysis of the strengths, weaknesses, opportunities, and
threats (SWOT Analysis) of The Home Depot—the world’s largest home improvement retailer.
During the course of the analysis, key considerations for changes and trends in consumer
preferences and technological advances were evaluated. From these indicators, recommendations
are made for further evaluation and strategic planning purposes.
APPROACH
Each team member was assigned an element of the report and research was conducted
independently as follows:
● Strengths - Martin Bell
● Weaknesses - Casey Hardi
● Opportunities - Virginia Boyce
● Threats - Suzanne Tullis
Research was compiled from online sources available publicly and through the California State
University Monterey Bay, School of Business, library resources. Once the research was
compiled, the team discussed which elements were the most important and where focus should
be placed.
SWOT ANALYSIS
EXECUTIVE SUMMARY
The fastest growing retailer in U.S. history, The Home Depot (THD), has revolutionized the
home improvement industry by providing one-stop shopping for the do-it-yourselfer. THD’s
core customer base includes the Do-it-Yourselfer (DIY), Do-It- For-Me (DIFM), and
Professional builders, contractors, and trades persons (Pro). With revenues averaging $1 billion
a week, THD is the largest home improvement and the 4th largest retailer in the world. THD
currently has 2,263 stores and approximately 360,000 employees, with the majority of their
stores in the U.S., Canada, and Mexico. (THD, 2014.)
This report addresses key strengths, weaknesses, opportunities, and threats of THD operations,
both internally and externally. The exploration of each of these fundamental elements provides
an in-depth understanding of how THD functions as a business in today’s market. Along with
providing an outside objective view of the business, a number of recommendations for THD’s
management have been included in this report.
Each of the recommendations aims to utilize or improve upon different aspects of THD’s
strengths, weaknesses, opportunities and threats in order to increase overall market share,
increase efficiency in the use of resources, improve the consumer’s view of the company, and
provide the customer with a pleasant shopping experience. These recommendations are as
follows:
• Focus on changing customer preferences
• Improve multi-channel sales efforts
• Focus on eco-friendly materials market
• Focus on competitive employee training programs
Purely unbiased and objective research has been conducted with the use of online sources
(provided in the references), along with resources from the School of Business at California State
University Monterey Bay library.
SWOT ANALYSIS
STRENGTHS
One determinate of a business’ strength is found in the advantages it has over its competition.
Another determinant is its consistency in the market, when the overall market is fluctuating
dramatically during a financial crises. THD exhibits both of these characteristics, and remains
the leader in the home improvement industry. Areas THD excels in are: executive leadership,
product authority, employee relations, brand exclusivity, and in its sustainability efforts.
Excellent Leadership. Frank Blake, President and CEO, was an asset during the housing crisis
of 2008 and continues to yield high results. Despite laying off 11,000 employees and shutting
down certain parts of the business, THD managed to pull through the crisis and quickly returned
to increased profits. Mr. Blake’s restructuring of the customer service department and increased
discipline around the use of company capital, has led THD to its highest stock prices of all time
(CNN Money, 2013). Effective leadership during the crisis influenced the rest of the company to
succeed. Calculating risks successfully, he remained focused on seeking opportunities to
maximize sales and improving the company in several key areas.
Product Authority. Low prices of good quality products was instrumental in their quick rise and
allows them to remain the leader in the home improvement industry. THD offers equally reliable
items for marginally cheaper prices; competing companies struggle to match their low prices and
maintaining their customer base. This is an advantage, not only do most people prefer to pay less
and save money; but also it provides THD with more customers, because more people are in the
low- to middle-class incomes.
Brand Exclusivity. Another advantage THD has over its competition is brand exclusivity.
Many other corporations carry the same items from the same brands; but THD has many
exclusive well-known brands unavailable to other retailers. Some of their well know exclusive
items include: Behr Paints, Chem-dry , Martha Stewart Living storage system, and Ryobi/Ridgid
power tools. (THD, 2014.) Subsequently, if a customer uses a product and likes it, they have to
come back to the store again to get the same quality. Brand exclusivity of respected products
increases customer footfall, creates new demand, and improves annual inventory turnover.
Sustainability. THD has made an exceptional commitment to sustainability efforts. From their
2013 Sustainability Report, From One Generation to the Next, they have outlined their
achievements and future goals. Back in 1991, they were the “first retailer to establish
environmental principles.” In 2013, they were awarded the Environmental Protection Agency’s
(EPA’s) WaterSense Retailer of the Year and EPA’s ENERGY STAR® Partner of the Year.
THD participates in the World Resource Institute’s/World Business Council for Sustainable
Development’s Greenhouse Gas Protocol. Since they began tracking and recording their
footprint, their achievements have “placed them in the top of the Global Leadership Index,” as
recorded by the Carbon Disclosure Project. (THD, Sustainability Report, 2013.)
WEAKNESSES
THD’s rapid growth and expansion over the last thirty years makes the company a forerunner
giant in the market of low-cost home improvements. While their business model has proved
successful and provided large returns over the years, this does not mean that THD does not have
a few structural weaknesses of their own.
Website Sales and Offers. The market today is highly evolved and highly technology-centric.
As a result, many retail companies have moved to online “click and mortar” stores and many are
strictly online. THD seems to have left their internet presence by the wayside. There is an online
store and website where you can browse items, order merchandise, and learn about the brand, but
a few key elements that make online shopping more attractive have been lost (Research Hub,
THD Short SWOT, 2014). For example, when a retail store has an online store as well, there are
offers to consumers not normally received in-store, resulting in more online sales. Store
employees can focus on fewer walk-in customers; increasing the quality of customer service.
However, THD does not appear to have exclusive online offers for its customers. This could be
one reason that the stores always seem so overcrowded no matter what time of day it is.
Eventually, an overcrowded store can lead to poor customer service.
Professional Client Demographic. General contractors (GCs) could be a huge part of THD’s
revenue. However, while GCs do make up a number of their customers, most do not choose to
purchase materials from THD. This is due to the store’s “Walmart” like approach. The building
product that is stocked is not always the best quality, there is a limited supply on hand, and prices
for bulk purchases are too high. This leads contractors to buy their supplies from specialty
suppliers such as lumber yards and rock yards who sell high quality products at a discount for
bulk purchases.
Return Policy. THD’s return policy, while good for the consumer, has the potential to harm the
performance of the company. Their policy is as follows:
“Returns within 90 days of purchase and with a valid sales receipt will be exchanged,
refunded in cash, credited to your account or refunded via The Home Depot store credit.”
(THD, Customer Support: Return Policy, 2014.)
The policy states nothing about the condition of the product, i.e., possible damage or wear and
tear due to use. This means that a customer can purchase a tool at full retail price, use it for their
project, and return it for a full refund as long as the product is returned within 90 days and the
customer has a receipt.
In Store Aesthetics. Hardware stores are not necessarily supposed to be aesthetically pleasing,
but THD seems to have neglected this aspect almost completely. If THD were a wholesale outlet,
like Costco, this would be expected. But for a retail store to put so little effort into its appearance
is a problem. This has been shown to drive away female customers along with others, so THD is
not capturing as much of the home improvement market as it could potentially (THD SWOT,
Strategic Management, 2014).
OPPORTUNITIES
There are many exciting opportunities for THD to pursue; many of which revolve around the
dramatically changing demand for eco-friendly building materials. Through sharing their own
experience in applying sustainability efforts to their retail spaces, they also have opportunities for
management of the supply chain within green protocols and expanding their Saturday How-To
sessions to include green building principles.
Changing Approaches. A majority of the materials used in creating and maintaining a home
are natural resources. Although transformative training and education is under way, there exists
a mix between the old and new ways of not only constructing homes, but also in handling the
entire supply chain of these products and materials. In the home building industry, some
architects, builders, and contractors continue to produce works as traditionally done, while others
strive to learn and incorporate best practices with consideration of the environment in mind. As
a result of this rapid change, resources for the homeowner are difficult to find without knowledge
of what and where to look for solutions. For the manufacturer of building materials, production
and delivery scheduling is going through a similar transition. THD has a unique opportunity to
capitalize on the transition.
Eco-Friendly Building Materials. Market researchers from Freedonia Group, Inc. projected 11
percent annual growth in green building materials in their 2013 report entitled, “Green Building
Materials.” By 2017, this translates into a demand of approximately $86.6 billion; and therefore,
a profitable opportunity for THD. (Concrete Product, 2013.)
Become “How To” Leader in Sustainability Activities.. THD has internally focused on
energy saving measures, greenhouse gas (GHG) emission reductions, water savings, and many
other environmentally sensitive measures in all of their retail spaces. (THD, 2014.) With this
practical, internal experience and commitment, THD is positioned to be the leader in “how to”
from a sustainability standpoint.
Collaboration Opportunities. The commissioning process by an independent LEED
accrediting agency can cost from as little as two percent upward to 20% of a total project’s
budget; depending on the level of certification and size of the project (NRDC.org, 2014).
Because of these costs, many environmentally conscientious property owners choose to forego
the official certifying process; yet, they desire the same end results, and need assistance to keep
the costs closest to the two percent levels. The information provided on the leed.homedepot.com
website has potential to be an extremely helpful tool for all three of THD’s customer base—DIY,
DIFM, and Professional; however, it is a little known source.
THREATS
Despite THD’s many strengths, they are not immune to changing customer preferences, criminal
activity, nor the state of the economy, specifically the housing industry.
Competition from Lowes. Outstanding customer service at Lowe’s is proving to be a major
threat to THD. With an untrained and unskilled work force, THD is unable to provide adequate
customer service for do-it-yourselfers, who make up the majority of THD’s customers. This
encourages shoppers to go to Lowe’s, where they can get knowledgeable staff to help them
through every step of their home renovation project. Although THD offers a variety of benefits
to their employees including tuition reimbursement, medical insurance, a 401K plan, on-the-job
training, and online training, reviews show that Lowe’s offers their employees more. Lowe’s has
a strong belief that “an engaged workforce will help deliver seamless, supportive, and inspiring
customer experiences wherever and whenever customers engage (Lowe’s, 2014).”
Female Demographic. Women are the primary decision makers in the household; this is true
for purchases from every category. THD can, at times, be hard to navigate with its narrower
aisles and overwhelmingly cluttered displays. Women are; therefore, inclined to shop at stores
that are more appealing and easy to navigate. The layout of THD stores transfers significant
buying power to THD’s competitors.
Interest Rates and the Economy. Interest rates are almost a full percent higher than they were
this time last year. With the recent economic crisis and rising interest rates, people may be
apprehensive when it comes to large purchases--such as buying a new home or investing in home
improvements.) THD saw a substantial decrease in revenue during the recession; and must
continue to pay attention to the after effects.
Consumer Fraud. Consumer fraud is a major threat to THD and its bottom line. In May of
2013, two men were charged with stealing over $300,000 worth of inventory by switching out
UPC codes on expensive items with UPC codes from less expense items. Returning the
expensive items, they then received a store credit for the higher unpaid amounts. Losses due to
fraud, coupled by increased spending on security, affects a company’s bottom line.
KEY RECOMMENDED STRATEGIC ACTIONS
One recommendation addressing each of the segments analyzed is
provided below.
STRENGTH: Focus on Changing Customer Preferences
THD is the top retailer in the home improvement market. Innovation and leadership are the key
elements that have kept them at the top and make them the model of success many similar
corporations try to emulate. To keep their position, THD needs to remain focused on the ever
changing needs of its customers. Recently, over 65% of respondents to an online survey thought
that Lowe’s had a better store set up and an easier environment to shop in (InvestorPlace RSS,
n.d.). THD leadership needs to look at this as a weakness, and improve those areas in the store
which lack customer satisfaction.
WEAKNESS: Improve Multi Channel Sales Efforts
Since THD’s online presence is lacking, for the most part, it would be highly beneficial for the
company to allocate some of its resources to evaluating and retooling the company website. A
website with exclusive online offers, simple navigation between different THD projects (i.e.
LEED and Green Technology), and lower prices would help THD compete better in the click and
mortar arena. Websites like Amazon and Ebay are leaders in low prices on just about any
consumer product today. These companies can afford such low prices because of their lack of
overhead from tangible stores; and while THD has a significant amount of overhead due to their
2,263 retail locations, they remain a market leader. This gives them the power to drive prices
higher or lower in whichever channel they choose in the home improvement market. With this
buying power, THD can afford to put a small amount of its resources toward a website overhaul.
This would be a relatively easy and inexpensive way to reach more customers; while providing
the consumer with a comprehensive resource that they can use to learn more about products,
THD’s message, sign up for classes, or purchase merchandise.
OPPORTUNITY: Focus on Eco-Friendly Materials Market
This recommendation involves hiring an environmental scientist, an architect, an electrical
engineer, a mechanical engineer, and a green supply chain manager at the corporate office for
product assessment and selection criteria of eco-friendly building materials and for the
management of a green supply chain. Having these professionals, with extensive experience and
knowledge of the industry and the science behind the industry, can produce product authority in
the eco-friendly materials market by understanding what really works, what can be substituted,
and where efforts in the market should be concentrated. The inclusion of a green supply chain
manager extends sustainability efforts to material suppliers and manufacturers, and has the
potential for far reaching impacts. This option has little to no impact on the normal course of
business at the store level and has minimal costs for implementation. Most importantly, this
option has the potential to affect increased sustainability and reduced footprint impacts
throughout the entire supply chain.
THREAT: Focus on Competitive Employee Training
In September of 2013, Forbes published a piece listing seven ways to keep employees happy.
Among the seven things listed was found, to “build ownership among your crew. In other
words, make sure employees feel responsible for what the customer is buying (Strauss, 2013).”
The best way to increase customer loyalty is by ensuring customers walk away with a good
experience and a working product in hand. When employees feel responsible for what they are
selling, they tend to work harder at providing a positive experience for the customer.
Additionally, it is essential to “trust employees to leave their comfort zones.” Granting
responsibility allows growth and confidence of employees; giving them a sense of value.
(Strauss, 2013.) Therefore, providing a competitive employee training program should prove
beneficial in many ways. Most importantly, THD’s employees will feel respected and more
connected to the company. Customers will notice. There is a direct correlation between
providing an inviting workplace and customer’s attitudes toward the organization.
REFERENCES
About.com Home Renovations. (n.d.). Lowe's or Home Depot?.
Retrieved April 9, 2014, from
http://homerenovations.about.com/od/planningtorenovate/a/
Lowes-Or-Home-Depot.htm>.
CNNMoney. (2013, Sep 19). Home Depot blew away the analysts'
estimates in the last quarter. How come?. "Housing is back."
CNNMoney. Cable News Network. Retrieved April 9, 2014, from
http://money.cnn.com/2013/09/19/leadership/home-depot-blake.pr.fortune/>.
Concrete Products. (2013, May). Architecture 2030 chief to NRMCA: Climate solution at
building sector’s doorstep. www.concreteproducts.com E16(5). 14.
Customer Support: Return Policy. (n.d.). Home Depot. Retrieved April 2, 2014, from http://
www.homedepot.com/c/Return_Policy
Home Depot, The. (2014). Official website. THD Corporate Page. Retrieved April 10,
2014 from https://corporate.homedepot.com/Pages/default.aspx
Home Depot, The (2013). From One Generation to the Next. 2013 Sustainability Report.
Retrieved April 10, 2014 from https://corporate.homedepot.com/CorporateResponsibility/
Environment/Documents/Sustainability__Brochure_pages.pdf
InvestorPlace RSS. (n.d.) Home Depot vs. Lowe's: It's no contest. Retrieve April 9, 2014,
from http://investorplace.com/2012/08/home-depot-vs-lowes-its-no-contest/#.
U0XenBz2u68>.
M. (2014, March 28). Interest Rate Trends ~ Historical Graphs for Mortgage Rates.
Retrieved April 2, 2014, from http://mortgage-x.com/trends.htm
MarketLine. (2013, Dec 27). The Home Depot, Inc. SWOT Analysis. www.marketline.com,
reference code: 7AB1346C-B8CF-42E8-92D2-88C114E7F88F.
NAHB.org. (2014). Building America Solution Center: Linking Innovations to Industry.
Retrieved March 28, 2014, from
http://www.nahb.org/generic.aspx?sectionID=2629&genericContentID=210413
NRDC.org. (2014). Building Green from Principal to Practice. Retrieved April 3, 2014,
from https://www.nrdc.org/buildinggreen/goals/default.asp
Research Hub. (n.d.). The Home Depot: A Short SWOT Analysis. Retrieved April 2, 2014,
from
http://www.valueline.com/Stocks/Highlights/The_Home_Depot__A_SWOT_Analysis.aspx
Ridley, G. (2013, May 23). Two men charged with operating $300,000 Home Depot fraud
ring in Michigan, 12 other states. Retrieved from
http://www.mlive.com/news/flint/index.ssf/2013/05/two_men_charged_with_operating.html
Strauss, K. (2013, September 08). 7 Ways To Keep Your Employees Happy (And Working
Really Hard). Retrieved from http://www.forbes.com/sites/karstenstrauss/2013/09/08/7ways-to-keep-your-employees-happy-and-working-really-hard/
123Helpme.com. (n.d.). The Home Depot SWOT Analysis: Strategic Management. retrieved
April 2, 2014, from
http://www.123helpme.com/home-depot-swot-analysis-view.asp?id=165420