SWOT Case Study - Home Depot

Strengths

• Brand Awareness - Home Depot is the world’s largest company in the home improvement retail industry with revenues exceeding $70 billion. Specifically, while Home Depot is the fourth largest retailer in the United States, it is the largest in both Canada and Mexico. In addition, it ranks 127th in Forbes Global list of the 2000 largest companies.
  Such dominance boosts brand awareness for such private brands as Pegasus Faucets, Husky Hand Tools, and Vigoro Lawn Care Products. Such brand awareness is fortunate for Home Depot since recent studies show that 80% shoppers have a positive attitude about private brand labels and some even perceive their quality as being superior.
• Rapid Deployment Centers -Home Depot plans on increasing its utilization of Rapid Deployment Centers (RDC). RDCs allow the use of a single purchase order to consolidate product needs and more rapidly replenish inventories to individual stores from the center locations. Home Depot currently employs five Rapid Deployment Centers and plans to open additional centers in 2010. The result of this implementation will be improved transportation, and reduced lead time from notification of needs to inventory replacement. It is anticipated that this method will increase efficiently substantially.

Weaknesses

• Negative Comparable Store Sales Figures - Home Depot suffered a decrease in same store sales, down 8.7% is 2009 as compared to a smaller decrease of 6.7% in 2008. The decline is significant because it is a measure of operational productivity. In the case of Home Depot, some of the decrease may be attributable to the economic decline and the accompanying reduction of construction and home improvement expenditures. The current economic client and comparable store sales figures will force Home Depot to increase its focus on finding a merchandise mix that attracts more customers.
• Product Recalls - A Home Depot practice of buying products from a large number of vendors makes it vulnerable when quality levels are insufficient; recently the company has found it necessary to announce several product recalls. In-wall electronic timers, patio umbrellas, and candle holders are among products recently deemed unsafe. These recalls join others initiated in 2004, 2005, and 2006 suggest poor quality control practices and negatively impact Home Depot’s brand image.

  Opportunities

• Reorganization Initiatives- Home Depot has responded to the current unfavorable economic conditions by readjusting its business focus and business practices. Specifically, the company has left behind its participation in such ventures as Yardbirds, THD Design Center, Expo and HD Bath businesses. Its new focus is also seen in the closure of 15 stores and renewed efforts to maximize productivity at existing stores.
• Increased Demand for Power Tools - Home Depot will probably benefit from the growing demand for power tools. There was a forecasted increase of over 3% or $15.1 billion in sales in 2009. At the core of the increased popularity of these tools is the demand for high end power tools such as electric screwdrivers, electric drills and saws. Thanks to products like its Makita and Milwaukee Lithium-ion power tools; Home Depot is well positioned to take advantage of the growing demand.
• Growth in Online Purchasing Home Depot should benefit from the projected growth in online sales. Online retail revenues for 2009 were projected to increase 4.1% from 2008 to $142.4 billion in sales. Despite an anticipated economic slowdown, online sales revenue is still estimated to increase by 9.5% in 2010 and 9.2% in 2011. Home Depot is positioned to capture its share of these online sales via its websites homedepot.com, homedepot.com.ca and homedepot.com.mx. Since these revenues can be obtained through online sales; Home Depot will benefit through a reduction in operating costs.

Threats

• Rise in Customer Service Complaints Recently, visitors to Home Depot have encountered employees who did not have a thorough understanding of store inventory or product utility. This apparent lack of training has contributed to a rise in customer complaints. According to the J.D. Power and Associates 2009 Home Improvement Retail Store Study approximately one-half of shoppers (51%) asked the sales staff for assistance during their most recent visit to a home improvement retail store--down from 61 percent in 2008. The two most common reasons customers ask for assistance are for help locating a product or for additional information about a product. If these encounters are negative they will no doubt have an adverse impact on company image and bottom line.
• Government Investigations and Litigation The Home Depot Brand image may also suffer from a number of government inquiries and investigations. For example, in 2008 the Environmental Protection Department of New Jersey alleged recordkeeping violations with respect to its use of generators. The department issued an Administrative Order and Notice of Civil Penalty Assessment.
• A slumping US Economy The continuing economic doldrums gripping the United States has dampened consumer appetite for making major purchases. Spending on home improvement projects is expected to decline at an annual rate of 12.1% by the third quarter, according to a report by Harvard University's Joint Center for Housing Studies. Home Depot joins competitors such as Lowes and Menards in taking a second look at expansion plans.
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• by Mkt Teacher