Ethics in Today’s Organizations
John Furr
January 28, 2012
Week 4
Case Study Analysis
Home Depot
A.
Summary: Home Depot, the well known home improvement giant, opened its first store in Atlanta in 1979. Founded by Bernie Marcus, and Arthur Blank, they envisioned a warehouse style shopping experience with a vast selection of products, at competitive prices (Ferrell, Fraedrich, & Ferrell, 2010, p. 466).
Today, Home Depot has over 2,238 stores and employs more than 300,000 people. They are the largest home improvement retailer in the world. Home Depot’s worldwide are visited by over 22 million people a week resulting in annual earnings of sixty five to eighty five billion dollars (Ferrell, Fraedrich, & Ferrell, 2010, p. 466).
Home Depot also owns four subsidiary companies that make products which are distributed in Home Depot’s stores; these products are also distributed in Home Depot’s competitor’s stores, competitors such as Lowes and other building suppliers. As a result of this arrangement, Home Depot makes money even when people are shopping at
Lowes.

With Home Depot being as big as they are, they will inevitably run in to some issues. In
2006 their customer satisfaction rating was near the bottom of the barrel according to
University of Michigan’s Annual Customer Satisfaction Index. Although Home Depot’s
CEO, Robert Nardelli referred to the survey as a sham, the fact was that the stock was stagnant, and they were getting outperformed in customer satisfaction by Lowes—Home
Depot’s leading competitor (Ferrell, Fraedrich, & Ferrell, 2010, p. 467).
Home Depot has also been under attack from environmental activists who claim that
Home Depot isn’t doing enough to preserve the environment. Home Depot only purchases wood from environmentally friendly providers, who stay away from old growth forests. They offer CFL light bulbs in their stores, as well as free disposal of these light bulbs. They even have a car pooling program that helps over 3000 people carpool in the Atlanta area. Despite all these efforts, environmental activists grasp at straws—for example, by tying Home Depot to a Chilean Wood provider who supported the construction of a dam in the Chilean Region of Patagonia (Ferrell, Fraedrich, &
Ferrell, 2010, p. 468).
B.
Analysis:
1.
Although there is a lot of attention drawn towards the environmental aspect of
Home Depot, I don’t believe that is the foremost problem ailing Home Depot.
Customer satisfaction is the most paramount issue that Home Depot needs to tackle. In this day and age customers have too many choices, and if they are not

satisfied, they will go elsewhere. Without the customer, there would be no Home
Depot. The vast majority of customers who walk into any retail store expect to be greeted by knowledgeable friendly staff that cares about their business. Most customers don’t think to inquire as to how environmentally friendly the products are, some probably don’t care.
People don’t want to deal with aisles that are blocked off, so the employees can re-stock to get ahead on closing. They don’t want to hear “I don’t know…” or
“I’m on break…” (Personal experience). These types of things boil down to a company philosophy that doesn’t put the customer first. Companies might be able to get away with this during a booming economy; however, they will feel it during a recession when consumers start holding their dollars tight.
2.
Home Depot has began to address their lack of customer satisfaction by offering more training to employees in an attempt to make them subject matter experts in their department. The other major issue that was addressed was the equal pay issue for men vs. women. Although Home Depot settled on this, I believe the difference in pay had nothing to do with gender, but rather position. Home Depot pays their department sales associates more than cashiers. Typically men are more knowledgeable in trades, because the vast majority of workers in the construction trades are men. Men apply for, and get those jobs. Whereas a man or a woman with no construction background would most likely apply for, and get a cashier job.

3.
I have worked for Home Depot, and I wasn’t impressed. I worked in building materials and I received no training, or product education. I found the management to be very one track minded, and did not look out for their employee’s wellbeing. I would never work their again, nor would I shop there again. Knowing what I know, I wouldn’t be willing to risk my money in Home
Depot. I would however, invest in, shop, and work at Lowes; I think they are the better company.
C.
Updates: Today, Home Depot’s stock is trading at $44.87 a share as opposed to Lowes’s stock which is trading at $26.91 a share. Although Home Depot stock is worth more than
Lowes, it is important to note that Home Depot has slowed its expansion dramatically— while Lowes has increased its expansion. This could result in Lowes surpassing Home
Depot when the economy rebounds. Either way, both companies are considered a strong buy according to investment analysts. Home Depot continues to be profitable, despite the ailing economy (USAA Federal Savings Bank, 2012).
D.
Concept: Although I’m not a huge fan of Home Depot, I ‘am intrigued at how they have cornered the market, and can manage to make money off the backs off their competitors. By getting their fingers into just enough, and still not spreading themselves thin, they have managed to become one of the most profitable companies in history.

E.
Application: I will apply what I have learned during this case study by doing more research on who I invest my money in. Knowing what types of things can cause plight for a company is important when choosing what types of companies to invest in.
Although this study didn’t give me a favorable opinion of Home Depot, I was impressed to learn that Lowes continues to expand, and provide jobs. I like the fact they are willing to take chances, and that is worth investing in.

Ferrell, O., Fraedrich, J., & Ferrell, L. (2010). Business Ethics: Ethical Decision Making and
Cases.
Mason, OH: South-Western, Cengage Learning.
USAA Federal Savings Bank. (2012, 01 28). USAA.com
. Retrieved 01 28, 2012, from USAA
Brokerage Services: www.usaa.com