The-Home-Depot-Inc

The Home Depot Inc.: Some Basic FactsYear of Inception Founded by : 1978 : Bernard Mercus Arthur Blank No.of Stores Stock Listing : 50 (end of 1985) Market Market Segment Selling Method Expansion Target : Home Remodeling : Do-It-Yourself (DIY) : Cash-and-Carry : 9 Stores (1986)

: New York Stock Exchange (April, 1984).

QUESTIONS: 1. Evaluate Home Depot¶s business strategy. Do you think it is a viable strategy in the long run? Ans. Business strategy analysis gives the picture of key profit drivers, business risks as well as profit potentials with qualitative judgments. Strategy Analysis is generally comprised of industry, competitive strategy and corporate strategy analysis. Since, The Home Depot Inc. has only one business, the corporate strategy analysis is not relevant for this case analysis. Identifying key success factors and key risk through business strategy analysis helps the firm to find out key accounting policies.

A. Industry Analysis: Though The Home Depot Inc. 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. In terms of Porter¶s five forces, the company has been facing challenges by the existing firms and the competition is heating up. The Home Depot does not have much challenge from new entrants, but it has possible threats from the suppliers since the rivals are expected to be stronger and stronger. As a result it will also have high threat from the bargaining power of buyers.

Fig-1: Industry Analysis

Rivalry among Firms

3Industry Growth-14% CAG 3Rivals-Hechinger Co. -55 stores (1985) -Sales Share-0.6% (1985) - Sales grew by-18%(1985) 3High Switching Cost

3 Competition based on cost

Threat of New Entrants

- Huge Inventory cost - Large Warehouse - Scale of Operations

3 Low Threats

Threats of Substitutes -Homogeneous Product -Low buyer¶s willingness to switch 3Low Threats

Industry analysis Home Depot -Sales Share-0.9%...