The Home Depot is a US-based company that operates across the US and other countries, with its core business being home improvement enterprising by selling construction products, appliances, tools, and services. As of 2021, the company was the leading in retailing home improvement components in the US (Hess, 2017). There are about 490,000 employees at The Home Depot, and the company boasts revenue of approximately $150 billion (“Our Story”, 2022). The business’s headquarters is based in Cobb County in Georgia, and Atlanta serves as its mailing address. The Home Depot operates many large retail establishments across the US, in ten provinces of Canada, and in all thirty-two Mexican states (“Our Story”, 2022). The company was previously known as MRO and had about 70 distribution centers in the home country (“Our Story”, 2022). The Home Depot was founded in 1978 by Bernard Marcus, Arthur Blank, Ron Brill, and others (“Our Story”, 2022). By 2021, the firm had around 2300 locations and is led by Ted Decker as its chief executive officer (“Our Story”, 2022). Hence, the company has a rich history that is significantly imitable.
The establishment has a raft of products that complement the key items in its business. For instance, some supporting business portfolios are hardware, plumbing, supplies and plants, lighting, and electrical products. The net income for the company is $16.43, and total assets are $1,88 billion, with equity totaling $1.7 billion as of 2021 (“Our Story”, 2022). Initially, the founders planned to start a home improvement superstore to compete with other firms offering similar business, through Ken Langone, Marcus, and Blank secured the necessary capital to start. By 1979, they spearheaded expansion to two stores that opened another in Atlanta. The Home Depot went public and raised more than $4.1 million; it later joined New York Stock Exchange in 1984 (“Our Story”, 2022). The business surpassed any other home improvement business in 1989 in the United States. There were about 350 stores as of 1995, where the firm had reached $10 billion in sales (“Our Story”, 2022). Until today, the company has grown tremendously with the acquisition of other companies, such as The Company Store, operated under Hanover Direct. The enterprise is among the productive enterprises in the US and regions near the country.
Strategic Thinking: International Expansion with Exporting and Licensing
The Home Depot had to create a strategy to penetrate the market more than before to support its tertiary intensive operations. Through the help of critical thinkers, the company initiated the ‘One Home Depot’ strategy to develop a fully interlinked shopping experience within the US and other parts where it operated (Cochrane, 2017). Their market penetration was the core supporting idea that was encompassed under their strategic thinking. The company grew its business by making more sales while selling in the same markets its competitors covered. The ‘One Home Depot’ included practices that would sustain the business, such as value chain analysis in the neighboring markets (Smithson, 2017). The Home Depot uses approaches such as generic structuring to intensify its international home improvement retailing. The main strategy adopted the intensive growth methodology to ensure stability before expanding to other companies (Smithson, 2017). The reason why the management was concerned about the business stability was to ensure in case of any constraint in the affiliate businesses; a receivership agreement would help to ensure the enterprise will not collapse.
The generic strategy that Home Depot uses is based on Porter’s Model. Based on the model, broad differentiation is combined with cost leadership. For example, in 1979, the cost leadership strategy insisted on ‘everyday low prices’ that attracted more customers hence growing its popularity (Smithson, 2017). However, the company currently uses broad differentiation whereby unique products are offered to compete with rival firms such as Lowe’s. Today, Home Depot applies broad differentiation as its basic generic strategy incorporated under the ‘One Home Depot’ umbrella (Repko, 2021). Through the strategy, the company has dealt with competition and entered global markets in Mexican and Canadian markets hence becoming a giant firm in the specialization.
Regarding exporting and licensing, the company established many shipping components that would ease the movement of products from the production areas to the market places. The company expanded its operations in the Asian region in the late 1990s by serving as a subsidiary company (Hess, 2017). President Ted Becker confirmed that the company takes shipments carefully by suggesting the need to have their exporting strategy that is not affected by social factors such as the coronavirus pandemic that altered shipment strategies. He said that “We have a ship that’s solely going to be ours, and it’s just going to go back and forth with 100% dedicated to Home Depot” (Repko, 2021 par.6). The statement shows that the company has dedicated itself in having their shipping operations based on sole ownership to ease importing and exporting.
The ownership factor has enabled the company to have an outstanding worldwide shipping business. Later, the company added licensing as part of the merchandising plan to enable contractors to have appropriate insurance. The globalization factor attracted many firms interested in the Home Depot marks (Cochrane, 2017). As a result, the company attracted international recognition for its trademark, which was one way of implementing strategic thinking within the business.
Why The Home Depot’s Strategy is Better than Other Strategies
There are many strategies that The Home Depot firm could have used. However, broad differentiation with cost leadership was the perfect idea to gain a competitive advantage. It is better to produce unique goods that are preferential rather than franchising, which will make a brand popular without high returns (Murray, 2021). The company opted to avoid strategic alliances and joint ventures because the ideas meant a lack of sustainability due to the likelihood of collisions while conducting business collaboratively. The reason why the strategy worked for The Home Depot was due to the aspect of providing customers with quality products and exemplary services when compared to other firms offering similar business (Murray, 2021). Additionally, the strategy has helped the firm to offer a wide array of products, as seen in the introductory paragraphs. The Home Depot has maintained high-quality services with various products because it hires individuals with knowledge and expertise in the field.
The strategy works better for Home Depot since it has enabled them to increase customers. Going by a whole-owned subsidiary model is risky since the stock shall be controlled by another company. For that matter, the enterprise will lack the self-developed value chain analysis due to fear of future collapse. It is important to note that the firm has been emphasizing low pricing to maximize volume sales, a subject that has given them a breakthrough more than competitors in the home improvement market. For example, the ‘Lifeproof Vinyl Plank Flooring’ system has benefited the company significantly by frequently keeping customers back to the company (Smithson, 2017). The vinyl flooring is durable, waterproof, scratch-resistant, light, and easy to install where aesthetic value is maintained. Thus, differentiation has been a key driving factor toward strategic thinking at The Home Depot.
References
Cochrane, M. (2017). Home Depot’s exclusive and innovative products keep customers coming back. The Motley Fool.
Hess, E. (2017). The Home Depot, Inc. Darden Business Publishing Cases, 3(4), 1-14.
Murray, M. (2021). The Home Depot builds in the pandemic. SSRN Electronic Journal, 8(5), 77-79.
Our Story. The Home Depot. (2022).
Repko, M. (2021). How bad are global shipping snafus? Home Depot contracted its container ship as a safeguard. CNBC.
Smithson, N. (2017). Home Depot’s generic strategy and intensive growth strategies. Panmure Institute.