Home Depot Case Analysis
INTRODUCTION
Home Depot enjoyed high growth of revenues and profits in the period 1978-2003. From 7 mio USD of revenues in 1979 to 64,8 bn in 2003. Revenue growth was generated mainly due to external growth coming from mergers and acquisitions. Home Depot has four product categories: Building and Remodeling, Home Décor and Organizing, Outdoor Living and Tool and Hardware. Company went through some structural changes when in 2000 first non funder Bob Nerdelli became the CEO of the company. Nerdelli previously worked for 27 years at General Electric and was known to be detailed oriented leader concerned with industrial cycles and archiving operational efficiency. After Nerdelli become CEO of Home Depot the company introduced several operational improvements like improved supply chain, self check out kiosk, introduction of advance IT technology, offering more services, etc. Even dough these improvements were well perceived by the customers and analysts the stock price fell to all-time low bottom 22 USD in year 2000. The operating margin and net profit margin were increasing during the years 2002-04, however, the revenue growth was below the expected revenue growth of 16% in the first quarter 2001 compared to the company 5-year annual average of 25%. The strategies chosen by Home Depot seem to have worked effectively till this day. However, if the company continues to ignore the low profit that it is making and just expands the number of its stores, in the long run, the company might fail to achieve its business goals.
SITUATION ALALYSIS
The case does not provide any industry or competitive analysis of margins and revenue growth but I can assume that they performed better than Home Deposit because its stocks were declining in value. For the purpose of this paper I will analyze the industry, Home Depots generic strategies and analysis of the main competitor (Lowe) position. I find it interesting that in 1980 the situation was reversed – Lowe was the largest home
Home Depot enjoyed high growth of revenues and profits in the period 1978-2003. From 7 mio USD of revenues in 1979 to 64,8 bn in 2003. Revenue growth was generated mainly due to external growth coming from mergers and acquisitions. Home Depot has four product categories: Building and Remodeling, Home Décor and Organizing, Outdoor Living and Tool and Hardware. Company went through some structural changes when in 2000 first non funder Bob Nerdelli became the CEO of the company. Nerdelli previously worked for 27 years at General Electric and was known to be detailed oriented leader concerned with industrial cycles and archiving operational efficiency. After Nerdelli become CEO of Home Depot the company introduced several operational improvements like improved supply chain, self check out kiosk, introduction of advance IT technology, offering more services, etc. Even dough these improvements were well perceived by the customers and analysts the stock price fell to all-time low bottom 22 USD in year 2000. The operating margin and net profit margin were increasing during the years 2002-04, however, the revenue growth was below the expected revenue growth of 16% in the first quarter 2001 compared to the company 5-year annual average of 25%. The strategies chosen by Home Depot seem to have worked effectively till this day. However, if the company continues to ignore the low profit that it is making and just expands the number of its stores, in the long run, the company might fail to achieve its business goals.
SITUATION ALALYSIS
The case does not provide any industry or competitive analysis of margins and revenue growth but I can assume that they performed better than Home Deposit because its stocks were declining in value. For the purpose of this paper I will analyze the industry, Home Depots generic strategies and analysis of the main competitor (Lowe) position. I find it interesting that in 1980 the situation was reversed – Lowe was the largest home