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Home Depot
Matt Greene
Submitted in partial fulfillment of requirements
for BA 422W Strategic Business Planning
Pennsylvania State University
4/25/2017
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Background
Back in 1978, there was a management change at Handy Dan home center
chain. The result of a new owner left 3 executives out of a job. They soon teamed up
and with the investment from a New York venture capital firm they started Home Depot.
They first opened a store in Atlanta, Georgia. The way they got their investment was by
pitching an idea that customer service, even in a low-priced home improvement store
was one the most important things to help increase sales. They started the company
with the idea that the customers’ needs were the most important thing.
This was a successful approach because by 1984 the company expanded to 19
stores and over 250 million in sales which was a 118% increase from the year before.
Within the next two years they would reach 1 billion in sales. They then later bought out
the Bowater warehouse chain with locations in Texas, Louisiana, and Alabama but this
would start to cause some issues. The Bowater’s store were not up to Home Depot’s
expectations and carried different products than normal Home Depot stores along with a
lack of customer service. This lead Home Depot to drop the stores, which was a difficult
blow because with the price of sales increasing and the companies long term debt
growing from 4 million to 200million in just two years because of the building of new
stores.
The company knew it needed to make a change and so it slowed its expansion
and started choosing its markets wisely. This helped along with selling 2.99 million
shares at $17 the store was back on its feet and in control of its debt. By 1989 it past
Lowes in sales and because the biggest home repair chain in the US. From there on out
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the company has continued to grow and try new things throughout the industry to give
them an edge. (1)
External Assessment
Industry Map
Supply Chain
Home Depot started out with a very poor supply chain plan. They had all items
delivered directly from suppliers to the individual stores. This raised a problem because
they would have to use a full truck to deliver small quantities of items. In 2007, they
solved this by implementing a distribution system that consisted of 18 USA based
distribution warehouses that loaded trucks and shipped products to all the stores in their
area (2).
Suppliers
Home Depot has many suppliers and new ones are always being added, they
range from larger companies overseas and domestic to smaller local companies that
will only be available at certain locations. The Home Depot website has an application
for any business that would like to become a supplier for any of the products they carry.
They carry the main brands of appliances such as Whirlpool, Samsung, General
Electric, and Stanley Black & Decker who provided appliances and tools to be sold in
the store (3).
Stores
When you walk into a Home Depot store it looks more like a warehouse than a
retail store and for some people that might be offsetting but for someone working in a
home improvement or construction field it is not out of the ordinary. The floors are
usually just bare concrete and the aisles are lined with ceiling high racks that anything
over the second shelf would need to take off with a fork lift. The only color you will really
see is the orange signage used to mark the different departments and aisles. The stores
are all very large with the average retail store being over 100,000sq feet with an outdoor
