Home Depot

Q1. Evaluate Home Depot’s business strategy. Do you think it is a viable strategy in the long run?

Industry Analysis

Though The Home Depot is the leader in the industry, its market share is negligible(only 0.9% in 1985). However, its sales grew by 62% in 1985 which far above the industry average. The company has been challenges by the existing firms and the competition is heating up.

corporate strategy

Home Depot establishes a valuable brand name in Do-It-Yourself warehouse retailing industry. As the concept is new, customers as likely to rely on well known brands to reduce the risk of bad experience. Home Depot·s expansion strategy is sensible because it exploits this valuable resource. Home Depot has been able to acquire expertise in execution of home improvement projects & their applications through special training programs. Home Depot has been able to create a tremendous amount of loyalty among its customers through aggressive marketing and execution.

competitive strategies

1. Cost Leadership : Enables a firm to supply same product or service offered by its competitors at a lower cost.

2. Differentiation : It offered low, competitive prices to individual homeowners, small contractors thereby following cost leadership strategy. It differentiated its services by increasing convenience, minimizing out-of-stock occurrences and providing excellent sales assistance in home improvement projects.

A viable strategy or not?

It seems that The Home Depot's business strategy seems successful in the short run. But, the company will not survive in the long run with its present strategy. As the industry is growing rapidly, the company needs more expansion. Since, the operation activities could not succeed to generate cash for its expansion : the company may face obstacles for financing even through debt. So, the company has to have enough cash generating operations as well as net earnings. Moreover, it is not difficult for the rivals to imitate Home...