Bernie Marcus and Arthur Blank founded Home Depot Corp in 1978 (The Home Depot, 2013). The business created strategic product analysis providing an assortment of items to consumers. From the beginning, workers have been able to deliver superior customer satisfaction in the business, helping consumers with jobs such as handling power tools, changing out parts on appliances, laying tile, etc. The Home Depot employees all underwent arduous training to familiarize each employee with products. In addition, the business began hosting workshops to teach consumers on how to do things themselves.
Home Depot progressed into a globally known hardware retailer that has an inventory consisting of up to 40,000 various types of constructing and home improvement materials, supplies, outdoor, lawn and garden equipment, appliances, and more than 250,000 other items that can be acquired through special order online or in store (The Home Depot, 2013). Home Depot offers extensive dedication to developing every source in the creating an operational competitive advantage in addition to managing logistics surrounded by the supply chain. An impenetrable basis surrounded by the symbol of home improvement creates the opportunities impact and generates properties on obtaining policies, strategies and measures, which are recognized in Home Depot’s procurement technique.
Depending on the number of sellers in any one industry, the differentiation of products and the barriers to entry, a market structure could be an oligopoly, monopoly, perfect competition, or a monopolistic competition. The price elasticity of demand ranges from relatively low in a monopolistic market to very high in a perfectly competitive market. The higher the price elasticity of demand, the more a modification in cost will affect demand for
product. The Home Depot asserts various domestic and international customers, ranking as the fourth leading home improvement merchant in the U.S. and fifth biggest in the world. Home Depot customers range from in-house associates to external novice homeowners to industrious commercial contractors. The Home Depot works closely with suppliers to ensure customer satisfaction globally, and domestically.
The program is aimed to backup and heighten the service process for The Home Depot stores, deliver efficiencies to our Suppliers, enhance accountability, efficiency and effectiveness, ensuring a superior shopping experience to The Home Depot customers (The Home Depot, 2013). The business also offers a well-designed Internet site that emphasizes supplier collaboration. The New Supplier Toolbox designs create successful partnerships without complicated rerouting and puzzling forms. The material of Home Depot customers differ from needing insecticides to attaining enough drywall supplied to complete the inside of an entire home. The Home Depot also offers an innovative easy to use Internet site that highlights supplier teamwork. Even pricing and SKU number changes have clear procedures to follow ensuring The Home Depot and its partners interconnect. Looking up products is as easy as ever by simply entering the SKU number and selecting from a pictured list of products matching that number.
Revenue and Profit Maximization
Understanding what the customer perceives as value is important. A company like Home Depot needs to review its services to maintain and develop a customer base. Adjustments in trends in the market because of economic factors or to the point that they current established practice of services does not meet the customer’s demands. The domestic outlook of expectations on procurement policies and procedures explains Home Depots Annual report. At one time, Home Depot set up design centers for kitchens and baths. These design centers are set as a service to the customer who would have embed Home Depot products into the designs of each customer’s home. Home Depot has altered its procurement strategies and purchasing measures. The business set up design examples of kitchen and bathroom designs. These design examples are set as a design service and example to the consumers who install Home Depot merchandise in the plans of his or her home remodel, renovation, or design.
This strategy did not increase the production at each store, as many consumers would take ideas from the example designs completed at the Home Depot and acquire similar merchandise from other stores like the Internet or other home improvement retailers. The procurement policy has changed to include higher product lines like Thomasville furniture and RIDGID tools known high-end items in the furniture and professional grade tools industry. In addition, Home Depot has collaborated with Martha Stewart Living offering a select brand of home improvement merchandise in certain types like paint, outdoor living, and home organization merchandise from Martha Stewart Living (Home Depot, 2013).
By modifying strategies from internal industries such as example design stations that drive merchandise, the emphasis should be retaining the consumer through purchasing Home Depot’s products and guaranteeing that products remain available. Home Depot has changed their strategy and policy of purchasing to reflect the changes in the domestic market. Given is an outcome to raise demand for a service, fluctuating the demand curve to the right. By adding features to the provision or constructing it quicker or more dependable, Home Depot can lessen production outlays, shifting the supply curve to the right.
It is important to understand what patterns arise from the local markets when operating from a global perspective. Sourcing local markets is a serious link a company like Home Depot can establish. Setting a strategy for domestic sourcing creates a rooted market existence. From a global outlook, Home Depot preserves a global sourcing merchandise program. Home Depot maintains a global tracking merchandise database to source superior products straight from manufacturers all over the world (The Home Depot, 2013). Their merchant team recognizes and buys high demand advanced products directly for its various store locations. Moreover, Home Depot has sourcing headquarters located in China, India, Italy, Mexico, and Canada (The Home Depot, 2013).
Revenue is maximized when Marginal Revenue equals Marginal Cost. To use it, a business needs to know how much it costs to produce one more unit of a service. By setting this global sourcing strategy, the anticipation for Home Depot is that it will understand what sells in a domestic market and sourcing from that specific area. Local connections and pricing will support Home Depot’s objective of global increase since the consumer base will recognize local merchandise lines and supplies. A local area network can understand specific needs of that area. For example if a country like India has monsoon rains and winds the local office in India can understand the trends and seasons. Home Depot has developed these regional offices to understand the flow of goods to support its local customer base (The Home Depot, 2013). Moreover, having recognition in the local area can also respond to difficulties for that area.
Home Depot’s procurement process summaries the business’s supplier facts inside the reference manual. This manual offers definite data to guarantee effective collaboration and partnerships. The ordering cycle for Home Depot’s consists of electronic data exchange needs, delivery statistics, buying order approaches, store environment settings, engineering superiority, customs compliance, and shipping restraints.
Figure 1: The Home Depot Ordering Cycle Diagram
Distribution statistics include product and packaging characteristics, freight requirements, and product flows (Amadeo, 2014). The Home Depot outlines distribution necessities to limit misperception and quandaries upon entrance. The data describes where product distributions should be contingent on point of foundation, creation, and final distribution.
The final requirements of The Home Depot supplier reference manual include customs compliance and transportation. The Home Depot outlines how suppliers need to handle international imports or exports, from having the appropriate documentation to sufficient packaging and security. Home Depot summarizes how suppliers must handle worldwide imports or exports, from having the correct documentation to adequate packaging and security. Pricing strategies involve movement along the demand curve (Amadeo, 2014). In a marketplace with high price elasticity of demand, like a monopolistic competitive market, a small decrease in cost will have a huge influence on demand (Amadeo, 2014). Non-pricing strategies shifting the demand curve to the right include TV advertisements. This is a joint strategy in markets with low price elasticity of demand, such as oligopolies. Selecting a mixture of strategies having the greatest effect on demand in the business’s industry may be best.
Barriers and the Service
Patents or lobbying for increased industry regulation, or making service expensive while entering the industry by selling a service that requires specialized tools in a workforce like Home Depot is a definite barrier entry. Money back guarantee is another option for dissatisfied service or products within product and service differentiation. Labor cost is reduced by capital.
Home Depot’s organization demands for the uppermost levels of merchandise excellence, modernization, obtainability, on-time delivery, security in fabrication and delivery, compliance with regulations and codes of conduct, and compassion to product reputation (The Home Depot, 2013). This is a major influence to the procurement strategy, policies, and procedures. The supply chain streamlines many global and domestic opportunities, product and service outsourcing and is a cognizant to personnel support. The selection of products, analyzing, sourcing approaches, freight and import cost, export, shipping, import details, contracts information and processes broaden potential business movement controlled by procurement decisions and influences of policies.
Some enforce policies and potentially bring forth benefit, or substantial reasons for internal and external sourcing strategies to create innovative advantage in organizations procedures and decides building and buying solutions. Home Depot faces challenges to unify and coordinate our operations and supply chain from customer to supplier. Challenges involve reducing inventory levels, improving communication between trading partners and changing customer demands, reducing the time from order to arrival of a product, and reducing cost.
Contractor Sales/Comparative Advantage
Transactions in all Home Depot stores continues to rise. This is a strong indication that homeowners simply can invest more into maintenance and home improvement projects. Usually, contractor sales, which account for a significant percent of Home Depot’s business, continue to fall short. Competition for contractor business is aggressive. Top contenders in this market, like Lowe’s, has attuned their strategies to allow local store managers to deliver contractor markdowns without corporate consent.
Expanding e-commerce services with Home Depot provides customers greater access to the products and services deepening the guarantee to improve every resource to generate an effective competitive gain. A solid foundation in the expansion to include contractor sales, web-based imaging solution software, and the Home Depot Foundation community outreach program would benefit the company immensely. Home Depot understands their greatest competitive advantage originates within the organization through the Home Depot associates. By removing department silos and creating cross-functional areas within the organization the associates at Home Depot work together to improving the business through creative innovative ways to improve customer service.
Home Depot’s supply chain value, management, vision or goals and development priorities should focus upon particular objectives in the next 2-year period. Home Depot’s strength to the projected supply chain strategy is the use of e-business and e-commerce processes that enables all information available to the supply chain. Home Depot’s weakness is within the launch of super store concepts ability to suffer postponement. Adding feature late in the process to make products and services grand from data obtained after more accurate or detailed research. Home Depot is creating a tactical decision support tool to assist in managing new projects in addition to the supply chain changes for nonprofit organizations to rebuild homes and contracts for retailed products. Home Depot’s demanding forecast is about control, improvement and deviating through customer demands not supply chain inventory management issues. Most important as technology becomes more innovative, IT strings business technology.
Home Depot’s business demands for the utmost levels of merchandise excellence, revolution, obtainability, timely shipping, protection in fabrication and delivery, compliance with rules and regulations, and understanding of brand and its reputation is a major impact to the customer service strategy and improvement to merchandise, policies, and techniques. The supply chain modernizes many global and domestic occasions, merchandise and service outsourcing and is a familiarity to worker support.
The variety of merchandise, examining, sourcing methods, merchandise and import price, distribute, delivery, import information, contracts statistics, and procedures broaden probable business measures controlled by procurement decisions and influences of policies. The affiliation with many state and federal laws restricts and offer different business treatment and regulations. Some impose policies and theoretically bring forth profit or considerable motives for internal and external sourcing strategies to generate state-of-the-art influence in organizational processes and chooses building and buying solutions.
Kimberly Amadeo. (2014). What Is the Business Cycle? Retrieved from: http://useconomy.about.com/od/glossary/g/business_cycle.htm The Home Depot. (2013). Welcome to the Home Depot. Retrieved from: https://corporate.homedepot.com/Pages/default.aspx