In 2006, Home Depot had taken steps to expand its business-to-business serving division that was called HD Supply. It offered maintenance, repairs and operation supplies (MRO) to numerous businesses and institutions. Since Home Depot is no ordinary company with about a 100 locations across Canada and the United States of America (USA), people have come to expect a lot from its business and services. It was, therefore, a surprise that it announced it had decided to find a way of divesting from its HD Supply business unit
The divestiture of HD Supply of Home Depot was superficially not a wise decision, mainly because it reflected poorly on the company to retreat from a strategy that they had just initiated a couple of years ago. It showed the uncertainty of the company in terms of its business strategies. On the other hand, if Home Depot's new strategy is scrutinized closely, then the company planned on selling the HD Supply division to recapitalize and focus on its retail stores. In that case, in the long run, the decision to sell a business unit is not entirely harmful, but, in fact, a source of further improvement in the company. In the short run, this strategy change seems worrying and alarming for business investors however, Home Depot does not seem to be shying away from going back to its strategy that implies that it is extremely sure of its decision to divest.
Home Depot has been in tight competition with Lowe's Companies which is also in the retail business of home supplies. Competitively Lowe's Companies is perhaps Home depots biggest external competitive challenge, followed closely by True Value Company and Menard, Incorporated. Rising costs of transport and other supplies is also a problem for the company since it has always strived to offer the best possible value to the customer. Trying to keep the prices low in today’s day and age is a challenge in itself especially when low prices are one of its main features in the business world. Internally, however, the company is faced with the task of further improving and developing its retail stores and adjusting its capital and stocks as it tries to sell the HD Supply Business Unit.
Home Depot currently follows an integrated cost leadership and differentiation strategy, since it focuses on providing all items at the lowest possible cost and tries to differentiate itself from the other competitors in terms of availability of a large variety of products. The customers at Home Depot know very well that if they need any item for their household needs, a Home Depot store should be their definite destination.
In terms of recommendations, it would be advised to the company to structure the organization in such a manner, that its retail stores become dynamic and highly responsive to any new situation or demand. The world is advancing, and companies can no longer take the risk of keeping all their eggs in one basket. It is therefore also advised that although the company took a decision to sell one of its business divisions, it would be unwise to focus solely on the retail business. Diversity in terms of investments is always a wise choice. In terms of organization structure a flatter hierarchy would enable the company to be highly responsive to any demand changes and enable it to become the first choice of most of the potential customers since they will always be sure that the Home Depot outlets will always be catering to the forever changing needs of the public.
Good Example Of Home Depot Case Study
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