Home Depot Case Study Essay
Home Depot Case Study
Bernie Marcus and Arthur Blank opened the first Home Depot in Atlanta, Georgia in 1979. They had big plans for the hardware and home improvement industry. Today, Home Depot is extremely successful with over 22 million customers shopping weekly and 66 billion in revenue, which makes them the largest home improvement retailer in the world. Home Depot employs over 300,000 people and operates over 2200 stores in the US, Mexico, Puerto Rico, China, the Virgin Islands, Guam and Canada. Just like most companies, Home Depot has had its share of challenges.
In 2002, the reputation of Home Depot was wavering. A new chief marketing officer, John Costello, arrived and had big plans to help improve the website, as well as integrating mass marketing and direct marketing with the in-store experience. During his time as “chief customer officer”, Costello consolidated marketing and merchandising functions in order to help consumers achieve their goals in home improvement projects more effectively and efficiently. In 2006, however, Home Depot slipped into last place in the University of Michigan’s annual American Customer Satisfaction Index.
Home Depot CEO, Robert Nardelli, claimed the survey was a “sham”, but several former Home Depot managers cited the strict company culture as a reason for the drop in customer satisfaction. In 2008, Frank Bifulco became the new Chief Marketing Officer. In an attempt to remain competitive during the recession, Home Depot developed a new marketing strategy that would emphasize low prices, high product value and quality energy saving products, a strategy still used today. Social responsibility is very important to Home Depot.
This is evident in all the programs that they offer that directly benefit society. On the first Saturday of the month, free workshops are offered for children where kids learn how to make fun projects that can be used around their homes or neighborhoods. On average, 75 kids attend workshops per store, but some have as many as 200. Home Depot also offers free workshops for women & new homeowners. It is also extremely important for Home Depot to help improve the environment. On Earth Day 1990, the company began their environmental program by adopting a set of environmental principles.
Some of these principles are strive to eliminate unnecessary packaging, recycling and encouraging the use of materials and products with recycled content, conserving natural resources by using energy and water wisely and seek further opportunities to improve the resource efficiency of our stores, and encouraging our customers to become environmentally conscious shoppers. Home Depot also focuses efforts on affordable housing and disaster relief by working with Habitat for Humanity. Home Depot pledged to provide 30 million dollars to Habitat for Humanity in order to fund 5000 energy efficient homes.
The company also set up 3 command centers to help coordinate supplies after 9/11. After the 2010 earthquake in Haiti, stores in Mexico, Canada and the United States, donated over $180,000 to assist with recovery efforts there. In 1997, a class action lawsuit was brought against Home Depot by female employees who alleged they were paid less and promoted less than male employees. The company settled for $87. 5 million, making it one of the largest settlements in a gender discrimination lawsuit in US history. Since then, Home Depot has shown diversity in the workforce.
Home Depot has partnered with companies like the Hispanic Association of Colleges and University, the American Association of Retired Persons and the Women’s Business Enterprise National Council. In 2010, Home Depot’s supplier diversity program ranked number 13 for the Top 50 American Organizations for Multicultural Business Opportunities. Since the recession of 2008-2009, Home Depot’s plans for expansion have changed dramatically. CEO Frank Blake decided to focus on the existing stores instead of working on expanding. When the recession hit, Home Depot was prepared because Blake had seen the warning signs.
In early 2007, Blake began slowing expansion to only opening 5 new stores a year. In September 2008, Home Depot management moved their extra money to headquarters, cut capital spending, and suspended a stock buy-back program in order to avoid losses and prevent having to borrow. Home Depot is now paying all its expenses from its own revenue. This conservative strategy limits their ability to grow, yet reduces risk. As the recession slowed and customers begin to work on home improvement projects again, revenues will likely rise once again. As the company grows, Home Depot is looking towards technology as a way to improve customer service.
In the past, the company had not been technologically savvy, but it is attempting to improve. Home Depot has had several small victories, one of which is their mobile app. They are also working on a device for the employees in stores that will help associates spend more time on customer service and less on routine tasks. Home Depot has had some challenges in the past, and, just like most businesses, will face more in the future. Working on customer service and their environmental impact has created better relationships with their customers and suppliers.
Along with these factors, promoting low products and high quality ensure Home Depot will be a popular shopping destination for home improvement items for the future. 1. Home Depot seems to be very responsible when it comes to environmental issues. It has adopted a number of principles to minimize their impact on the environment. I think that the stakeholder would be happy to see how Home Depot has responded to their demands. The stakeholder decides where they will buy their materials, and if they want to buy from a company that is environmentally friendly.
The customers have power to demand this from a company, or they will take their business elsewhere. They have legitimacy to research that Home Depot is actually doing what they say they are doing. And they have urgency because they want the company to respond quickly. I think Home Depot is going above and beyond with their social responsibility and it makes me happy to spend my money there knowing they are supporting good causes. 2. As a publically traded corporation, Home Depot justifies budgeting so much money for philanthropy because that’s what people like to see.
It gives customers warm fuzzies when you know that you are giving money to a company that does so much good with it. I think that Home Depot is doing a great job with social responsibility. If I was going to suggest another area for philanthropy, I might suggest donating money to the city of that Home Depot. Maybe donating time or money working with the homeless, or single mothers. Everyone pays attention when there is a national disaster, but there are issues in our individual cities that need help too. 3. I think Home Depot’s recessionary strategy of eliminating debt and halting growth is a wise strategy.
From my perspective, it is smart to reduce risk. In reducing risk, they are also limiting growth. However, I wouldn’t think that would be as big of an issue for such a big company. Everyone knows about Home Depot, so limiting their growth to 5 new stores a year doesn’t seem like it should be such a big issue. I would recommend to the CEO to continue with the expansion plans, just don’t jump back into it too quickly. If the economy crashes, they don’t want to be in a worse situation just because they got ahead of themselves.