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Home Depot Inc. SWOT & PESTLE Analysis

ID : 52170853| May 2018

COMPANY PROFILE -Home Depot Inc.

Business Sector :Consumer Products Retail

Operating Geography :North America, USA, Global

About Home Depot Inc. :

Home Depot, Inc. founded in 1978, is an American home improvement retailer that sells building materials and home improvement products. The company is headquartered in Atlanta, Georgia and has over 385,000 employees globally.

Home Depot Inc. Revenue :

$88,519 million

Competitive Analysis of Home Depot Inc.

SWOT
PESTLE
The SWOT analysis for Home Depot, Inc. is presented below:
Strengths
Weaknesses
1. Increasing sales growth rate reflecting business expansion
2. Innovation lab for attracting the best talent
3. Effective assistance for affected communities during natural disaster
4. Efficient employee management and well maintained work environment
5. First Call2Recycle participant in North America
1. High debt level from the industry perspective
2. Majorly concentrated in U.S., Canada, and Mexico market
Opportunities
Threats
1. Virtual reality’s scope in optimizing its products
2. Extend its market internationally and focus on online retailing
3. Merge with real estate developers to reap productive competitiveness
1. Imitable business model leading to intensified threat of new entrant
2. Payment systems breached by hackers leading to huge loss in terms of money as well as company’s credibility
3. Bad weather leading to postponement of home improvement projects
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Detailed SWOT Analysis of Home Depot Inc.

Strengths

1) Increasing sales growth reflecting business expansion: Home Depot recorded net sales of $88,519 million in 2016, an increase of 6.4% over the previous year. Along with increasing sales, Home Depot has also maintained its net earnings and customer satisfaction scores highest in the company’s history.

2) Innovation lab for attracting the best talent: With the objective of connecting with engineering students, exploring technologies with potential retail impact and hosting brainstorming sessions with employees, in 2015 Home Depot opened an innovation center on the campus of Georgia Tech. The program helps students to gain work experience to complement their education and it gives Home Depot, an option of hiring students who performed well during the training.

3) Effective assistance for affected communities during natural disaster: During any disaster, Human Resources team along with the Homer Fund, activates its support associates, merchandising team, supply chain team and operations team to work around the clock in a complex effort of moving necessary products and equipment to stores caught in crippling events. This has helped the company in building a better social image in the eyes of stakeholders.

4) Efficient employee management and well maintained work environment: Home Depot has a bonus program for all its associates and has been paying, in an excess of $1 billion in bonus checks over the past five years. The company’s continuous efforts for its employees, has greatly benefitted in maintaining better work environment.

5) First Call2Recycle participant in North America: Through the partnership with a non-profit battery stewardship program, known as Call2Recycle, Home Depot recycled more than a million pounds of rechargeable batteries in 2016 and became the first Call2Recycle retail participant in North America. This step helped the company to improve its image of giving back to the community and sensitive thinking towards environment.

Weaknesses

1) High debt level from the industry perspective: Home Depot has a debt to equity ratio of almost 7:1, which is high from the industry perspective. An interesting fact which can be observed from the balance sheet of Home Depot is that it has less amount to be paid in short term loans but has significantly high amounts accumulated as long term loans. These high levels of debts will result in high interest and a negative impact on the profitability and cash flows of the company.

2) Majorly concentrated in U.S., Canada, and Mexico market: Home Depot has established a good market in U.S., Canada, and Mexico but, in a move to enter Chinese market it failed miserably because the company’s service model of “do it yourself” was rejected by Chinese people as they perceive manual labor as an activity only for low-class citizen and they preferred “do it for me” business model. Also, the venture with United Kingdom and South America, which earlier was viewed with great optimism, eventually proved incorrect. Thus, it can be stated that Home Depot is majorly concentrated in U.S., Canada, and Mexico market and it can be a critical factor in company’s performance if these economies fail to perform well.

Opportunities

1) Virtual Reality’s scope in optimizing its products: Home Depot has started giving its visitors a look inside a virtual supply chain environment which is designed to optimize its products to the customers. Looking at the phenomenal growth of both the Virtual Reality and the Augmented Reality, it can be stated that Home Depot has an opportunity to enter in this business, once they get accustomed to this technology.

2) Extend its market internationally and focus on online retailing: As mentioned in Home Depot’s annual reports, it’s strategy is anchored on three strategic platforms viz., identification of potential disruptors to their business, ideas to expand their sales growth and spending on productivity ideas. It is essential that Home Depot considers online retailing as a platform to extend their business, since millennials are an important target in this industry and the best way to attract them is through online platform.

3) Merge with real estate developers to reap productive competitiveness: With the increasing infrastructural development, there are some countries across the globe who lack in terms of infrastructure like Myanmar, Libya, Lebanon, Burundi to name a few. Thus, there is an opportunity for Home Depot to merge with the real estate developers of these countries and reap their productivity competitiveness to full extent.

Threats

1) Imitable business model leading to intensified threat of new entrant: Home Depot has a major threat from its competitors like Lowe’s, Walmart, Amazon, etc. Since, Home Depot’s main products are its construction tools and services, which can be provided by the above-mentioned competitors implies that, there is a constant threat of these competitors overtaking Home Depot’s business. Also, it can be inferred that Home Depot’s business model is imitable, resulting in constant threat of new entrants with similar business model.

2) Payment systems breached by hackers leading to huge loss in terms of money as well as company’s credibility: In 2014, a news reporter reported that, the credit card numbers linked to Home Depot purchases were being sold online, resulting in payment systems breached by hackers. Thus, there is a possibility of occurrence of similar incidence and the company must be prepared to tackle such situations.

3) Bad weather leading to postponement of home improvement projects: Customers tend to postpone home improvement projects due to bad weather and especially in subcontinental regions the effects can be critical.

Home Depot SWOT analysis has been conducted by Yelve Abhishek Aniruddha and reviewed by senior analysts from Barakaat Consulting.
SWOT & PESTLE (combined)
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