Sample Business-Level and Corporate-Level Strategies: Home Depot

The Home Depot incorporates a dynamic business-level and corporate-level strategy that is centered on the company’s capability to sustain rapid expansion. Since inception four decades ago, Home Depot has enjoyed an average annual growth rate of 30%, somewhat a partial product of the organization’s 21st-century strategy (Rothaermel, 2013). In a volatile market that is challenging to master, the company focuses on expanding products distribution into several geographic localities at the same point in their value chain as it simultaneously increases the range of products as well as services offered to current markets. The organization’s effective corporate and business level strategies and market analysis have put it on course to become a market leader in its field in the world.

Corporate Level Strategy

Leadership

Home Depot’s most significant corporate strength lies its leadership as it has consistently made the best decisions for the organization. Despite being highly reliant on macroeconomic aspects for success, the retailer maintained its growth during the 2008 recession. As explained by Garvin and Levesque (2016), when revenues throughout the retail industry were declining at an estimated annual rate of 7 and 8% between 2008 and 2010, Home Depot management refused to let EPS (Earnings per Share) figures go below the $1.37 mark that was detailed in fiscal 2008. Additionally, the company’s focus on cost-saving, as well as productivity-enhancing strategies under the guidance of former CEO Frank Blake, helped to lead the firm through the global meltdown. The lessons from the 2008 financial meltdown have led Home Depot to adopt a cluster strategy as a pillar of its corporate culture, which is the best way for the organization to expand to new markets with minimal risk. According to Khanna, Palepu, and Sinha (2015), a cluster strategy takes advantage of the sales in existing stores in a particular market while setting up entrance barriers and redistributing advertising and distribution costs, which translates additional competitive advantage. For instance, The Home Depot took over Aikenhead’s Home Improvements Warehouse infrastructure in Canada. Additionally, in the acquisition process, it formed a joint venture that led to a smooth change in its corporate culture in the country.

Executive Succession

Home Depot has adopted the strategy of promoting from within itself, which has promoted the growth of the organization. Today, a majority of The Home Depot managers begin their careers in local stores and move up the ranks through improved performance. The company’s organizational structure is linear; thus, it breeds staff members that have the knowledge of the corporate culture from the ground up (Garvin & Levesque, 2016). Additionally, a survey by Khanna,  Palepu, and Sinha (2015) indicated that the Home Depot “staffing follows” approach that promotes managers that are appropriately suited to a relaxed corporate culture environment has been a pillar in the long-short growth that the company has witnessed. For instance, Bell Peña was selected as the Vice-President of Mexico due to his extensive Mexican retail familiarity.

Business-Level Strategy

Diversification

Home Depot’s business has grown over time because of diversification in its product portfolio as well as operational areas. The enterprise operates a network of about 2,269 stores across the U.S., Canada, and Mexico. Additionally, the Home Depot has penetrated markets across the United States Sunbelt by enlarging its store’s garden centers and introducing an “Expo Design Center” storefront. According to Bianchi and Arnold (2014), the expo centers have proved to be a geographic market niche, which the company has used to target upscale homeowners by employing computer-aided design technology (CAD) as well as offering top-of-the-line major kitchen appliances. The company’s product portfolio includes an assortment of kitchen and home appliances plus construction and building materials that include painting supplies, flooring supplies, plumbing, electrical, tools, as well as hardware supplies. With such a portfolio, Home Depot has over time gained the aptitude to adequately meet a majority of home improvement demand under one roof (Khanna, Palepu, & Sinha, 2015). The wide range of products has led the firm to gain a significant edge over other competitors such as Wal-Mart and Costco (Khanna, Palepu, & Sinha, 2015). Moreover, with a wide store network, Home Depot has capitalized on any skewed housing market recovery across the U.S., which has been key to Home Depot’s growth. Additionally, the corporation has influenced the uneven housing market improvement areas such as Florida and California; hence, it has outdone its rivals.

International Store Management

Home Depot’s success as the leading home improvement retail store chain is also linked to its ability to manage international stores similar to those in the United States Division. A survey by Berman and Thelen (2017) on the Home Depot’s organization chart revealed that the presidents in each geographical location, the entity operates have a direct link to all functional division. For example, Home depot initially created a Vice President position when the company first ventured into the Mexican market. The reason not to open up a fully-fledged division centered on Mexico’s volatile economy. However, with time, other regional presidents from functional divisions analyzed the economic environment in the nation and eventually developed strategies that have seen the expansion of the Mexican division and growth across other Central and South America markets.

Market Analysis

Home Depot is subject to the strong force of competitive rivalry that has high risks of substitution, low customer loyalty, and a significant threat by new market entrants. The firm’s biggest rival is Lowe’s, an entity that serves a similar demographic as well as product portfolio. According to Berman and Thelen, (2017) the home improvement industry has low switching costs; thus, it makes easy for customers to move from Home Depot to its rivals that retail similar home progress products. Additionally, the moderate exit barriers suggest that such rivals are unlikely to readily leave the market a move that increases the market competition. It should be noted that over time, it has become apparent that general merchandise stores; for instance, Walmart have began offering similar goods. Furthermore, home improvement contractors are substitutes to Home Depot’s products and expert advice. With it being easy to use substitutes (at low switching costs), in addition to the adequate performance of these alternates, has to lead to the strong competition against Home Depot’s products.

Slow-cycle markets traditionally affect a firm’s competitive advantages as most companies are shielded from imitation for long periods. By building a unique and proprietary capability through product diversification and international store management, Home Depot has achieved a competitive advantage in a slow-cycle market. Nonetheless, this type of advantage is problematic for competitors to understand. On the other hand, Fast-cycle markets contribute to competitive advantages that are short-lived, thus unsustainable.

Home depot has enjoys a sustainable revenue and growth return in a highly volatile market chiefly because of its corporate-level and business-level strategies. Operating over 2,000 stores globally, Home Depot has become a booming enterprise because of its ability to groom its leadership, thus grooming grassroots executives managing oversees stores in a tried and tested management style. Additionally, the company has diversified its product portfolio while incorporating new digital technology to boost sales. Indeed, Home Depot serves as a case study of how significant strategic management is in running corporate operation in the 21st century.

References

Berman, B., & Thelen, S. (2017). A guide to developing and managing a well-integrated multichannel retail strategy. International Journal of Retail & Distribution Management32(3), 147-156.

Bianchi, C. C., & Arnold, S. J. (2014). An institutional perspective on retail internationalization success: Home Depot in Chile. The International Review of Retail, Distribution and Consumer Research14(2), 149-169.

Garvin, D. A., & Levesque, L. C. (2016). Meeting the challenge of corporate entrepreneurship. Harvard Business Review84(10), 102.

Khanna, T., Palepu, K. G., & Sinha, J. (2015). Strategies that fit emerging markets. Harvard Business Review83(6), 4-19.

Rothaermel, F. T. (2013). Strategic Management: Concepts. New York, NY: McGraw-Hill Irwin.