PART II

STATEMENT OF THE PROBLEM

In todays global markets, every business is pitted against worldwide competitors
with consistently improving productivity, better performance, and shrinking prices
( Pinto, J., 2010). As the same thing, Business sectors like Home Depot experience the
inconsistent growth and productivity of their business.
The Home Depot is the United States largest home improvement and
construction retailer with 35 years experience. Established in 1978 by Bernard Marcus,
Arthur Blank, Ron Brill and Pat Farrah, Home Depot is headquartered in Atlanta,
Georgia. The company has a long history of success largely due to its customer
oriented approach, focusing on customer service and providing value added products to
their customer base.
Moreover, Home Depot faces a hard time in past five to six years after the
resignation of former CEO Robert Nardelli on January 3, 2007. He was replaced with
vice chairman Francis (Frank) S. Blake at this time. During the time of leadership of
Francis Blake he enumerated the problems that Home Depot faces. These are;
succession which is the main problem, specifically ; core competencies of Home Depot,
weak stock performance, slowing profits, and weak performance of employees. In fact,
the net income of fourth quarter 2006 dropped 28% since the previous year, signifying
the largest quarterly profit drop in a decade.
In line with this, when Francis Blake took over as CEO after Bob Nardelli's abrupt
and painful departure. Blake wants to see for himself the way regular folks are treated

when they shop at the big orange box. And he's not sure what to expect. "This is going
to be like a Cracker Jack box," he says, a bit nervously. "You don't know what you'll get."
However, On the University of Michigan's American Customer Satisfaction Index,
Home Depot fell eight points in seven years, to 67 at the end of 2007. It was the largest
drop for any retailer in the index, while rival Lowe's remained steady at 75.
That kind of deterioration would be a challenge for any newly minted chief
executive. But trying to recast the company's image in the middle of the worst housing
downturn in decades multiplies the challenge.
Furthermore, the following are the symptoms and root causes of the problems
experience by Home Depot;
1. Operational Aspect
The Replacement of CEO
Due to the resignation of former CEO Nardelli, some operations was change and
by that problems occurred such as, the policies and rules that govern by the new CEO
Francis Blake that may lead to the weak performance of the staff of Home Depot.
Poor Customer Service
Due to the shrinking consumer demand and lack of new market space, competition
between the existing retailers is fierce. The incumbent firms each have a large financial
stake to protect and are eager to dominate their existing space and prevent new-comers
from entering. They have begun to differentiate based on things such as customer service

where before they only had to provide a larger selection of products. Lowes has been
taking away market share from Home Depot based on this attention towards customer
service.

2. Marketing Aspect
Core Competencies
The strategic management problem at hand is that Blake's lost sight of Home
Depots core competencies which consist of their: Retail stores ,Customer service,
Low Prices and wide range of products

3. Financial Aspect
Weak Stock Performance and Slowing Profits
Because of its' transition, weak stock and slowing profits are the causes of
problems in financial stability of Home Depot that dropped 28% since the previous year,
signifying the largest quarterly profit drop in a decade.

Hence, these are the short term and long term that had been faces with Home
Depot;
Short Term Problems were:
The replacement of CEO

 The core competencies

Long Term Problems were:

Weak Stocks
Slowing Profits

Having these particular problems, the CEO Francis S. Blake should innovate with
such strategy that could enhance the performance of the staff towards customers and to
their works, the stocks and the profits. These could help him to bring Home Depot on
top in lined with this particular industry.

PART III
CAUSES OF THE PROBLEM
The main problem of this case is the succession of leadership of Home Depot.
The following was the cause;
The Replacement of CEO
Due to its transition, there was a change in the operations of Home Depot
specifically the leadership of the new CEO namely Francis S. Blake. With this particular
change, the sales of Home Depot were inconsistently growth. The performance of the
staff towards its' works and customers was affected. That is why the operation was
worsening. According to Sharf , (2004), Today thats certainly not the case. In fact, at least
one analyst at the Smear Value Fund gave Home Depot a slightly stronger buy rating than its
rival, although both stocks are expected to perform well as the housing market continues to
improve. This begs the question: What has changed under the leadership of Frank Blake? What
is Home Depot doing right? The answers can be found not today, but in the doldrums of the
Great Recession, which Mr. Blakes team took as an opportunity to right a very shaky ship.
Changes were steady, yet sweeping, and included marketing, technologies, stores, and human
resource allocation

The Core Competencies

The strategic management was also affected due to the unproductive growth of
the Home Depot. After the transition, Blake lost sight of Home Depots core
competencies which consist of their: Retail stores, Customer service, Low Prices and
wide range of products. Moreover, the goal of Home Depot that to expand the company
worldwide was also affected. It was stated in an article that, Due to the overall market
slowing down and HDs lack in quality customer service, its biggest rival, Lowes, has
been stealing much of their market share. John Parsons of Shreveport, LA owns a 50year-old house that needs constant repair, and for years he was a regular customer of a
nearby HD store. About a year ago, he switched to a Lowe's store, even though it is
farther from his house, because he received better service there. "The people at Home
Depot don't want to talk to you," he says. "They hide or they say they're busy." Perhaps
this slacking quality of customer service is due to big changes in employee policy during
Nardellis term. One former employee of Home Depot stated that the company began
slashing benefits and would only begin to hire part-timeand cheaper,
unknowledgeablelabor as well as increasing the employee-to-customer ratio.
Customers quickly became frustrated with the lack of adequate service at a store that
was once known for its knowledgeable staff.

Weak Stock Performance and Slowing Profits

The inconsistent growth and productivity of sales during the five to six years of
Home Depot was affects the stock performance and slowing profits of the business.
According to the article, the net income of fourth quarter 2006 dropped 28% since the
previous year, signifying the largest quarterly profit drop in a decade

BENCHMARK ANALYSIS
THE HOME DEPOT vs. LOWES COMPANIES, INC.
Lowe's Companies, Inc. is an American company that operates a chain
of retail home

improvement and appliance

stores

in

the United

States, Canada,

and Mexico. Founded in 1946 in North Wilkesboro, North Carolina, the chain has 1,840
stores in the United States, Canada, and Mexico. Expansion into Canada began in 2007
with the opening of a store in Hamilton, Ontario in early 2008. Lowe's started the
construction of two stores in the Mexican city of Monterrey officially entering the
Mexican market. In 2011, Lowe's released plans to build over 150 stores
in Australia (as Masters Home Improvement) over the next five years, hoping to
compete with the a $46 billion industry. Lowe's Companies, Inc. is ranked #50 on
the Fortune 500 list. As of 2010, the chain is based in Mooresville, North Carolina.
Lowe's is the second-largest hardware chain in the United States behind The Home
Depot and ahead of Menards. Globally, Lowe's is also the second-largest hardware
chain, again behind The Home Depot but ahead of the European stores B&Q and OBI.

Category

HOME DEPOT

LOWES COMPANIES, INC.

Type

Public Company

Public Company

Industry

Retailing

Retailing

Location

Marietta,

Focus

States
Customer

Georgia,

United North

Wilkesboro,

Carolina
by Customer

retention

North

retention

by

improving customer service as improving customer service

Fund Sourcing

well as stores
Investors,

Business Investors,

Business

Establishments, Income from Establishments,

performances,
Audience

Members
(Target Home
Owners,

Board from performances

Interior Abandoned Stores

Market)

Designers, Renovators, and

Goal

Contractors
1. To create a stronger
connection

with

customers and simplify

its business.
2.
To

1. To become a more
sustainable
organization/
operate

improve
sustainably.

merchandise
assortment and value.
3.
To
improve
shareholder value.
4. To
develop
competitive

Income

platform

to
more

across
Current Innovations

all

commerce

channels.
LED Light Bulb

LOWES Innovation Labs:

Creating

The

Future

Of

Retail

Home Depot
As a conclusion, the benchmark analysis also shows that being attached to a
media-giant would be a great help in creating audiences, investors or stakeholders.
Home Depot must also learn to get out of its comfort zone and try to innovate some of
its furniture that can lead to customers satisfaction. Home Depots goal must not just
focus on providing performances to the audience or customers but also to educate the
listeners regarding the performances that they make.