home depot strategic audit _ final _ mmartinez

Running Head: STRATEGIC AUDIT: HOME DEPOT, INC. 1

Strategic Audit: Home Depot, Inc.

Monica VerStraten

National University

BUS480 – Integrated Business Policy

Professor Thomas Bernitt

March 26, 2015

STRATEGIC AUDIT: HOME DEPOT, INC. 2

Table of Contents

I. Executive Summary………………………………………………………………. 4

II. Company Background…………………………………………………………… 5

III. Current Performance……………………………………………………………. 5-6

IV. Strategic Posture……………………………………………………..….……… 6

A. Mission……………………………………………………..…….…….. 7

B. Objectives……………………………………………………..….…….. 7

C. Strategies……………………………………………………….….….... 7-8

V. Corporate Governance…………………………………………..……………… 8-9

VI. External Environment (EFAS Table; see Appendix 1)

A. Natural Environment………………………………………..…………. 9

B. Societal Environment………………………………………..………… 9-10

C. Task Environment………………………………………………….…. 11

D. Summary of External Factors………………………………………… 11-12

VII. Internal Environment (IFAS Table; see Appendix 2)

A. Corporate Structure…………………………………………...……… 12

B. Corporate Culture…………………………………………………..... 12-13

C. Corporate Resources…………………………………………………. 13-15

D. Summary of Internal Factors……………………………...…………. 15

VII. Analysis of Strategic Factors (SWOT)………………………………..…… 16

A. Strengths…………………………………………………………..… 16

B. Weaknesses……………………………………….………………… 16-17

C. Opportunities………………………………………….……………. 17-18

D. Threats…………………………………………………….………... 18


VIII. Strategic Alternatives………………………………………………..……. 18-19

IX. Recommendations Strategy……………………………………………..….. 19-20

X. Cost-Benefit Analysis……………………………………………………..… 20

XI. Implementation……………………………………………………………... 20-21

XII. Evaluation and Control…………………………………………………….. 21

XIII. Conclusion……………………………………………...…………………. 21-22

XIV. References…………………………………………..…………………….. 23-24

XV. Appendix………………………………………………..…………………. 25-26


Executive Summary

Home Depot is public traded company that specializes in Do-It-Yourself (DIY) products

for any household project. Home Depot operates in all 50 states, the US market accounts for

87% of the company’s store-base. Home Depot reportedly has 285 stores outside of the U.S.

which accounts for only 13% of its store population. The company offers wide variety

proprietary products, but also offers a strategically managed and marketed e-commerce business.

The company prides itself with customer friendly strategies that offer a variety of

purchasing alternatives. The company also focuses on a unique set of products like truck rental,

installation services, water treatment options, and free DIY classes for homeowners.

This strategic audit will first focus on Home Depot’s current position in the home

improvement industry. The audit will provide an analysis of the company’s strategic focus and

outline their strengths, weaknesses, opportunities and threats. In addition, this audit will provide

Home Depot, Inc. with strategic alternatives and a recommended strategy that will be

accompanied and supported by a cost-benefit analysis. The audit will conclude with an

implementation plan and steps for continuous evaluation and control.


Company Background

Home Depot was founded in 1978 by owners Bernard Marcus and Arthur Blank. Soon

after, Home Depot opened four stores in S. Florida, Louisiana and then Arizona – and the

company then went public. According to the company history reported by Hoovers (2015), in

1981 sales posted at $50 million and by 1983 they were more than $250 million. Soon after the

company’s stock was listed on the New York Stock Exchange and in 1985 the company

continued to expand into California by opening six new stores. Hoovers (2015) reported, “nearly

one year later, in 1986, sales exceeded $1 billion in the firm's 60 stores.” “Home Depot began

the current policy of ‘low day-in, day-out pricing’ the following year, achieving Marcus' dream

of eliminating sales events” (Company History, 2015). Then in 1994 the company reported a

“series of gender-bias lawsuits plagued the company in 1994 as female workers claimed they

were not treated on an equal basis with male employees. Home Depot reached a $65 million out-

of-court settlement in 1997, but not before the company was ordered to pay another female

employee $1.7 million in a case in California.”

As the world's largest home improvement chain and fourth-largest US retailer, the

company operates about 2,250 stores in the US, Canada, Mexico, and China, as well as an online

business (Company Overview, 2015). It targets the do-it-yourself (DIY) and professional

markets with its selection of some 40,000 items, including lumber, flooring, plumbing supplies,

garden products, tools, paint, and appliances (Company Overview, 2015).

Current Performance

For the 2014 fiscal year, Home Depot, Inc. reported sales worth $19.2 billion for only the

fourth quarter. According to GuruFocus (2015), “the 19.2 billion in sales was up 8.3% from the


prior year period, and the operating income came to $2.2 billion compared to previous year's

$1.8 billion, translating into an improvement of 24.4% year on year.” Home depot financial

records indicate that during the same quarter the amount of transactions increased by 5.1%.

Reports showed that, “this trickled down to the bottom-line as the company posted net earnings

of $1.4 billion, up 36.1% from last year fourth quarter's $1.0 billion. Diluted earnings per share

came to $1.05, up from prior year period's $0.73, improving 43.8%” (GuruFocus, 2015).

For the entire year of 2014 Home Depot posted an astonishing $83.2 billion in sales.

Reported by Home Depot (as cited in GuruFocus, 2015) the company’s, “annual operating

income improved 14.2% year on year and came to $10.5 billion and reported net earnings of $6.3

billion, up 17.8% from previous year's $5.4 billion. Overall in 2014 sales were up by 5.5%,

shares improved by 25.3% at $4.71, and customer transactions increased 3.7%.”

Store locations within the U.S. market is Home Depot’s main playing field. Home Depot

(2015) reported that 85% of its 2,269 stores are located within the United States. According to

the company's Merchandising EVP Ted Decker, areas that showed strength were, "tools, lumber,

millwork, lighting, décor, building materials, kitchen, bath, and hardware."

Online sales were another facet that saw booming development in 2014. Home Depot

(2015) reported that, “online sales grew over $1 billion, resulting in a growth of more than 36%.”

Additionally, “during the year almost 40% of all online orders were picked up from the physical

stores, suggesting retailer's initiatives are working and consumers are finding the option viable”

(GuruFocus, 2015).

Strategic Posture


Mission/Values

Home Depot’s mission, “is to provide the highest level of service, the broadest selection

of products and the most competitive prices” (Home Depot, 2015). Home Depot’s values are

based on eight principles that are the foundation and guide for the company’s beliefs. According

to Home Depot (2015) their values are their “competitive advantage in the marketplace.”

According to the Company Overview (2015) Home Depot’s “competitive advantage” is its

values, which are: “Taking care of our people; Giving back to our communities; Doing the right

thing; Excellent customer service; Creating shareholder value; Building strong relationships;

Entrepreneurial spirit; and Respect for all people.”

Objectives

Home Depot will continue to increase revenue through long-term growth ventures and

steady sales. The company’s growth initiatives will be centered on their core competencies and

must generate synergies with their existing business. The company will continue to test all new

ideas before implementing them companywide. According to Home Depot (2015) “This

approach is not only prudent for our stockholders, but it allows us to refine new programs as we

learn more about them.” The company will continue to deliver a wide variety of high quality

products that will be delivered by excellent customer service.

Strategies

The company’s strategic priorities are focused around four areas: customer service;

product authority; disciplined capital allocation, productivity and efficiency; and interconnected

retail. Now that Home Depot’s E-Commerce accounts for more than 4.2% of the company’s

sales, Home Depot is refocusing their strategic priorities to incorporate a business strategy that


can readily support the online sales growth. As stated by emarketer (2014) “Home Depot is now

putting its attention on building out warehouses and the necessary infrastructure to support a

booming digital business.”

Corporate Governance

Home Depot’s board of directors consists of 11 members. Of those 11 board members

one member is internal; Chairman, Craig Menear, President and CEO since 2014. The

remaining 10 board members consist of external individuals with a wide range of expertise

ranging from seasoned international business and academic leaders, expert experience in

optimizing supply chain and enhancing international markets, commercial real estate

management experts, crafted individual experience in publicly traded companies, and the

country’s leading internet retailing entrepreneurs.

Figure 1. Home Depot Officers. (Hoovers, 2015).

However, in 2000 Home Depot brought in Robert Nardelli, one of the most “vilified”

CEOs in history. He managed to drive up profits while stock prices were down. Investors

wanted nothing to do with the company. He accomplished this by letting go all the journeyman

employees and hired mostly part time. According to CNN money reporter Kavilanz (2007),

“Nardelli had faced growing criticism from shareholders for what some of them called a very

http://money.cnn.com/2006/05/25/news/companies/home_depot/index.htm


"generous" compensation package relative to the stock's weak performance, slowing profits and

a regulatory probe about its options practices, but to his credit, Nardelli's tenure also coincided

with one of the most profitable periods for the company.” In 2007 Nardelli stepped down, and in

total he received a severance of $210 million dollars for essentially being a failed CEO.

External Environment (See EFAS Table; Appendix 1)

Natural Environment

• Home Depot has implemented a sustainability integration system that will quantify the

company’s sustainable goals, achievements, and improvements. (O)

• Strategic sustainability allows for improved business operations, merchandising, supply

chain management, and information technology. (O)

• Worsening US climate conditions could disrupt supply chain manufacturing and product

delivery. (T)

Societal Environment

Economic

• U.S. economic improvement will increase in customer traffic. (O)

• Increased state and federal sales tax rates. (T)

• Increasing labor wages. (T)

• Improving U.S. employment can result in increased customer traffic and spending. (O)

• Rebate incentives offered for electric, water, and lawn related products. (O)

• Unstable and unpredictable world economy and trade regulations. (T)


Technological

• Advancing technology allows for more efficient systems. (O)

• New technologies can offer businesses the option for new innovative products and

services. (O)

• Media sources such as, YouTube allows millions of people easy access to tutorials on

how to complete home improvement projects. (O)

• Increasing cyber-crimes and information security hacking. (T)

Political-Legal

• Data breach potentially impacting some 56 million customers who used a payment card

at Home Depot stores in the US and Canada from April through September 2014. (T)

• The company is facing at least 21 additional lawsuits stemming from the data breach,

which led to fraudulent transactions across the U.S. (T)

Sociocultural

• Mass customization trends are booming due to new DIY television shows and DIY cable

network channels. (O)

• Women are becoming more inclined to do home improvement projects. (O)

• Competitors such as Lowe’s dominate almost all social media outlets. (Emarketer, 2014).

(O/T)

• Society has an increased comfort level when it comes to doing projects that would have

typically required a contractor. (O)


Task Environment

• Home depot has everything a customer would need to complete the job by offering a

large span of products and services they are able to minimize (O)

• Rivalry for Home Depot is low. Home Depot has been able to overcome their rivals due

their massive bargaining power against suppliers. (O)

• Home Depot is ranked number 33 on the 2014 Fortune 500 list and has out-ranked all of

its competitors. (O)

• Home Depot continues to cannibalize sales of existing stores by opening two other stores

in a single area. While this may lower same store sales it is also able to drive existing

stores out of business and keep competition from entering. Home Depot has managed to

raise entry barriers themselves (Industrial Education, 2015). (O)

• International market. (T) Home Depot’s presence in the international market is not one of

their main focal areas. (T) The company has taken a cautious approach. (O)

Summary of External Environment

Home Depot’s has many opportunities that can be taken advantage of. Primarily, the US

economic improvement and increased employment rate. These two external factors can almost

guarantee that Home Depot can expect to see an increase in online and store traffic, which in

return results in sales. Many American’s are now financially capable to make home

improvements and long awaited repairs. But, the company is threatened with increasing federal

and state sales tax rates; hopefully, they can counter this with their proprietary products.

Historically, the company has been known for taking their time when it comes to

international growth. The company prefers to gain familiarity with the market before expanding


into it. This might sound like a smart decision, but in the meantime they remain overly reliant on

the US market. Not every country has a large need for the products and services Home Depot

offers, but the company can still fill the international demand by growing their E-commerce site.

As the global economy begins to improve Home Depot can expect to see a greater demand in the

home improvement industry and will want to be ready for their continued international growth.

Internal Environment (See IFAS Table; Appendix 1)

Corporate Structure

• According to Hoovers (2015) Home Depot operates about 2,265 stores in the US, Canada

and Mexico. (S/W)

• The company is focused on creating an emotional connection with customers, putting

customers first and simplifying the business. (S)

• Continued operational improvement, incremental supply chain benefits and

shareholder value built through higher returns on invested capital. (S)

Corporate Culture

• Wheelen and Hunger (2010) reported that, “in 2007 a record 1,169 shareholder

resolutions were proposed in the U.S. due to concerns with questionable top managers

and weak board of directors.” (W)

• Craig Menear holds a dual role of Chairman and CEO, which means the board of

directors cannot fire the CEO if needed. (W)


• Research revealed that top managers in over 29% of U.S. market stores had manipulated

stock options which resulted in increased executive pay (Wheelen and Hunger, 2010).

(W)

• Home Depot has formed Associate Resource Groups to help strengthen diversity and

inclusion in the workplace. (S)

• According to Home Depot’s military commitment, “in 2004 they joined forces with the

U.S. Departments of Defense, Labor and Veterans Affairs to provide rewarding and

challenging career opportunities.” (S)

Corporate Resources

Marketing

• Low social media marketing involvement. (W)

• Home Depot strives at customer commitment through brand loyalty and image. (S)

• Targets the do-it-yourselfer, laborers and contractors. (S)

• Strategic marketing initiatives for customer options resulted in cyber week producing

record online sales and traffic. (S)

• Promote customer value and loyalty through marketing efforts. (S)

Finance

• Earnings per share are $3.76 which is a 25.3% increase from 2012. (S)

• Online sales increased by 36% in 2014 (excellent for investors). (S)

Research & Development


• Prioritize and develop portfolio strategies, including innovation, assortment and

value. (W)

• Proven eco-friendly products are now offered in stores for a wide range of environmental

safe products. (S)

Operations

• The company opened eight new stores in fiscal 2014 (ended January), including six in

Mexico and two new stores in the US (Hoovers, 2015). (S)

• According to Home Depot’s RSS News Feed (2015), the company is focused on

building a competitive platform across all commerce channels. (S)

• According to Hoovers (2015) Home Depot operates about 285 stores outside the US,

accounting for 13% of its store base. (W)

• The chain has stores in all 50 US states, the District of Columbia, Puerto Rico, Guam,

and the Virgin Islands. (S)

• The sheer size of the company positions them with strong bargaining and trade

power. (S)

• As a part of their supply chain network is company has added direct fulfillment

centers (DFC), designed to support omni-channel capabilities like direct-to-consumer

fulfillment and store pickup for online orders (Bond, 2015). (S)

Human Resources

• The company is planning to hire an additional 80,000 employees. (S)

• As of May 2014 the company employed 365,000 employees. (S)


• Home Depot is non-unionized. (S)

Information Technology

• The company has been working very hard to popularize its e-commerce offering and

making shopping easier as deliveries are available from its physical stores (GuruFocus,

2015). (S)

• In 2015 the company is set to install an in-store mobile technology called the

“FIRST” phone, which is designed to help associates conduct faster checkouts. (S)

Summary of Internal Factors

The company has significant bargaining rights and power within the industry due to their

size. Home Depot is focused on creating an emotional connection with customers, putting

customers first and simplifying the business. The company has a strong E-commerce system, but

lack at offering certain amenities that their competitors provide. Home Depot is the “largest

home improvement retailer in the world” and has had impressive financial improvement since

2012. Home Depot has successfully established itself in multiple markets, but primarily in the

US market. Currently, the company is overly reliant on its 87% US store base.

Financially the company is thriving. In 2014 the company’s annual operating income

improved by 14.2% and totaled to $10.5 billion with reported net earnings of $6.3 billion, up

17.8% from previous year's $5.4 billion, which led to an overall increase in sales by 5.5%

(GuruFocus, 2015). The company currently employs over 365,000 non-unionized employees

and is expected to hire an estimated 80,000 more in 2015.


Analysis of Strategic Factors (SWOT)

Strengths

Home Depot is considered the “world’s largest home improvement retail store.” Home

Depot is filled with strengths that start with their value system. The company’s values are what

they consider to be their competitive advantage. Home Depot has positioned themselves as the

most dominate industry leader by offering low-cost quality products. Their massive size has

given them the bargaining power and contributes significantly towards the top line growth (The

Home Depot, Inc. SWOT, 2015). Because of this bargaining power, the company can offer

exclusive brands, which has directly let to revenue growth and profit.

The company has also been committed to environmental sustainability and in 2007,

launched a robust variety of eco-friendly products. As stated by the (2015) Home Depot, Inc.

SWOT performed by Market-Line, “the company's Eco Options Program has certified more than

7,700 products, and, the products sold through this program include; ENERGY STAR certified

appliances, compact fluorescent light bulbs and LED light bulbs, wifi-programmable

thermostats, tankless water heaters and other products.” The company continues to be involved

in numerous initiatives designed at lowering their carbon footprint.

Weaknesses

One of Home Depot’s greatest weaknesses is their dependency on the US market.

Roughly 87% of their store base is domestically located. If the US should encounter another

devastating economic recession then the company will be at risk of losing huge amounts of sales.

Additionally, the company is only hurting itself by not taking advantage of international growth

opportunities.


Secondly, the company’s recent legal involvement resulting from the 2014 data breach

has made the company financially unpredictable and vulnerable. The company is facing

numerous lawsuits that will strain the company’s operation resources by resulting in civil

penalties and settlement payouts.

Opportunities

The recent US economic improvement has allowed the home improvement industry to

flourish, resulting in increased customer traffic and sales for Home Depot. Spending on

household renovation projects is also on the rise due to new trending factors like the DIY

network, new smartphone applications, and YouTube channels that stream DIY tutorials for

almost any type of project.

Home Depot is taking advantage of the popularity online shopping that today’s society

prefers. They are focused on improving and expanding their E-Commerce website. Through

proper marketing an online purchase promotions the company can expect to see a substantial

increase in online sales, both domestically and internationally.

Lastly, the company is immediately benefiting from government and state offered

incentive programs that are designed to give customers cash rebates when they replace certain

household and lawn items. For example, the Department of Energy offers a variety of tax credits

and rebates for customers who purchase ENERGY STAR appliances, install solar systems,

and/or replace existing lighting with energy efficient bulbs. Similarly, California has numerous

water conservation rebate programs for customers who purchase high efficiency flushing toilets,

and/or install turf and drought tolerant plants. Luckily for Home Depot, they carry all types of


these products and the company utilizing this to help market themselves, which in return

increases sales and customer traffic.

Threats

Currently the company’s most concerning threat is the growing number of lawsuits, legal

fees, and civil actions resulting from a 2014 third quarter data breach. In addition they are also

faced with increasing labor wages. US labor costs have significantly increased and the increased

minimum wage rate impacts the company’s overall operating costs and will greatly affect profit

margins.

Climate changes are another major threat to Home Depot. Since the company has

decided to operate 87% of the business in the US they have put themselves at risk when certain

states continue to get hit with worsening weather conditions. Climate conditions could result in;

decreased demand for seasonal products, disruption of supply chain and delivery, facility

damage, and utility disruptions. All these factors will dramatically impact the company’s bottom

line.

Strategic Alternatives

There are many areas of the business that are thriving, but there are also areas where new

strategic alternatives can be implemented to improve overall functionality. Strategic alternative

#1 would be continued growth through E-Commerce. This strategy is designed to focus on new

products and services through E-Commerce. Home Depot is already successful with online

sales, but continued focus will give a competitive advantage and help improve sales both

domestically and internationally. For every region, the website needs cater to specific

demographics based on their location, allowing optimal use for all market types.


Strategic alternative #2 is growth through sociocultural alliances and services. Currently,

Home Depot is not taking full advantage of today’s culture and social factors. Implementing

stronger social media marketing campaigns allows the company to take presence over their

competitors and will be designed around new technological services and programs.

Strategic alternative #3 is growth of service through differentiation strategy. Home

Depot offers an exclusive line of products. They offer a unique line of tools and paint, but what

they fail to offer is a satisfactory service that will give them superior value over their

competitors. At a minimum, the company needs to design and offer a service that would help

customers stay on budget, track all purchases, and self-design their projects.

Recommendation Strategy

My recommended strategy for Home Depot would be strategic alternative #3. This

strategy is designed with the intent to separate Home Depot from its competitors and give them

unique satisfactory value. Similarly to the, ‘MyLowes’ program offered by Lowe’s Home

Improvement, Home Depot will implement a service that allows customers to track purchase(s),

track and monitor their specified budget(s), but what will differentiate this service above all

others will be the ability for preferred customers to utilize exclusive design software to plan their

next DIY project.

This recommendation is designed to function at two levels. The first level will be offered

to all customers and will include user registration that will tracking of all purchases, budget and

financial planning control features, integrated shopping cart, and home improvement project

planning tips and tools. The second level will be for preferred customers. This level will offer

an advanced feature such as, Auto CAD Design software. This customizable design software


can give customers the opportunity to design their renovation project. However, this software

will be limited and is only intended provide customers with a visualization tool where they can

explore inspirational ideas.

Cost-Benefit Analysis

Positives Negatives • Customer retention • Not an immediate ROI • Added value to customer

experience • Specialized software

• New employment opportunities • Additional servers and

maintenance costs • Remain cost effective and

increase sustainability • Potential delay in phase

implementation • Increased customer traffic

(online & in-store) • Not as many new customer

credit lines as anticipated • Benefit to Stockholders and

Investors • Opportunity to increase

bargaining power • Unique differentiation above

competitors • New sales and growth

opportunities • Growth through E-Commerce

Implementation

This strategy will be implemented in phases and have the ability sustain continued short-

term and long-term success. Home Depot will need to leverage their enormous bargaining

power in order to purchase access rights of software that can be specifically catered to meet the

company’s specifications. These specifications will be derived around the company’s core

competencies. This strategy will be supported by Home Depot’s E-Commerce and customer

service business unit(s).


Home Depot will also reduce O&M costs and become more sustainable by offering

paperless receipt options. Customers who enroll in the member service will be given a key chain

card or can utilize their phone number at the time of purchase to track purchases made either

online or in-store. This recommendation will be rolled out company-wide and will enhance the

customer experience both domestically and internationally.

Evaluation and Control

Home Depot will be able to leverage some functionality of their existing E-Commerce

website, but will need to incorporate the new specifications. Once successful implementation has

been completed, ongoing evaluation and control is a must. Evaluation and control will primarily

be done by a series of success metrics. The company will need to perform continuous website

performance analysis that will be based on internal and external benchmarks.

Initially, the total number of subscribed users will measure the marketing success of this

recommendation. Customer surveys will then help measure satisfaction of the service and data

reports that show the ranges of the websites functional will help in forecasting likes and dislikes.

The evaluation and control process is a huge factor in identifying improvement opportunities,

best practices, and tactical execution of future enhancements.

Conclusion

In summary, Home Depot is a well-established company with many strengths and

potential opportunities, but aside from the company’s brand exclusivity they do not offer any

service that really sets them above their competitors. The goal here is to make Home Depot the

one stop shop that can offer its customers the all the tools necessary for the next project. With

the recent US economic improvement and trending DIY social platforms the company can


implement this recommended strategy and see short-term and long-term growth and through

measurable evaluation and control.


References

24/7 Wall St. (2015). The bullish and bearish case for home depot in 2015. Chatham: Newstex.

Retrieved from,

http://ezproxy.nu.edu/login?url=http://search.proquest.com/docview/1643249016?accountid

=25320

Bond, J. (2015). The Home Depot builds an omni-channel supply chain. (cover story). Modern

Materials Handling, 70(2), 18-22.

Emarketer (2014). The Home Depot Remodels Strategy, Doubles Down on Ecommerce.

Retrieved from, http://www.emarketer.com/Article/Home-Depot-Remodels-Strategy-

Doubles-Down-on-Ecommerce/1011439

GuruFocus.com: Home improvement retailer home depot's Q4 2014 earnings: What you need to

know. (2015). Chatham: Newstex. Retrieved from,


=25320

Home Depot (2015). Corporate Company Values; Corporate Governance; RSS News Feed.

Retrieved from, https://corporate.homedepot.com/OurCompany/Values/Pages/default.aspx

The Home Depot, Inc. SWOT Analysis. (2015). Home Depot SWOT Analysis, 1-9. Business

Source Premier, EBSCOhost.

Trefis: Home depot: Four factors to watch out for in 2015. (2015). Chatham: Newstex. Retrieved

from,

https://corporate.homedepot.com/OurCompany/Values/Pages/default.aspx



=25320

Industrial Educations (2015). HBS CASE : Home Depot. Home Depot - Strategic Internal

Organization & Financial Analysis. Retrieved from,

http://industrialeducation.blogspot.com/2009/10/hbs-case-home-depot.html

Wheelen, T. L., & Hunger, J. D. (2012), Strategic Management and Business Policy, (13th Ed.),

Prentice Hall.


Appendix 1: EFAS and IFAS Table

INTERNAL FACTORS WEIGHT RATING WEIGHTED

SCORE COMMENTS STRENGHTS

S1-Bargaining Power 0.20 4.5 0.90

Huge bargaining power with vendors due to the company size.

S2-Customer commitment through brand loyalty 0.15 4.0 0.60

Offering a wide variety of home and garden product brands ensure long-term success.

S3-Strong Customer Service Focus 0.10 4.5 0.45 S4-Earnings Per Share is up by 25.3% since '12 0.05 3.5 0.175

S5-Free DIY Workshops 0.05 2.0 0.10

Free workshops are offered to help teach customers how to complete a variety of home improvement projects. Increase future revenue.

WEAKNESSESS W1-Lack of Social Media Presence/Marketing 0.10 1.5 0.15

Competitors such as, Lowe's is ruling the social media platform.

W2-Manipulated Stock Options 0.05 1.0 0.50

Shareholder risk. Top executives in 29% of US stores manipulated stocks to increase executive pay.

W3-Weak Board of Directors 0.10 1.0 0.10 Dual designation of Chairman & CEO.

W4-US Territory has 87% of Stores 0.20 1.5 0.30 Overly reliant on US stores TOTAL SCORES 1.00 3.28

EXTERNAL FACTORS WEIGHT RATING WEIGHTED

SCORE COMMENTS OPPORTUNITIES

O1-Improved US Economy 0.20 3.0 0.60 An improving economy increases store traffic and sales.

O2-Increasing sociocultural DIY Trends 0.10 2.0 0.20

Utilize new smartphone apps such as, Pinterest & Houzz to promote DIY projects and services.

O3-New US Stores 0.10 3.5 0.35

In 2014 the company opened 8 US stores. Future and economic investment.

O4-Sustainability Advancement 0.20 4.0 0.80

Advanced sustainability has led to an improved supply chain and environmental initiatives throughout the business.

O5-Rebate Incentives 0.10 2.5 0.25

Many product lines are sold with rebate incentives offered by local electric or water companies.

THREATS


T1-Unstable International Economy 0.05 3.5 0.175

An unstable world economy makes international growth risky.

T2-Competitors/Rivals 0.05 1.5 0.075

Competitors offer services that track customer purchases, projects & budgets.

T3-Increasing Labor Wages 0.05 1.0 0.5 Higher and potentially uncertain risk to overhead.

T4- Climate Changes 0.05 2.5 0.125

Harsh weather conditions can prevent hinder inventory delivery and prevent timely delivery to customers.

T5-Lawsuits 0.10 4.5 0.45 Uncertain legal fees & pending lawsuit from a 2014 data breach

TOTAL SCORES 1.00 3.525

home depot strategic audit _ final _ mmartinez

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