Extensive SWOT Analysis of Home Depot – America’s Leading Home Upscaling Retail

About Home Depot

The Home Depot is the world’s biggest specialised shop for home improvement products. The Home Depot was founded in 1978 by Bernie Marcus and Arthur Blank in a coffee shop in Los Angeles. They envisioned a supermarket that would provide a wide selection of products at low rates, as avid DIYers. Home Depot has expanded from two shops in Atlanta to more than 2,200 locations across three continents.

In line with Marcus’s aim for slower, more prudent expansion, the business continues to establish new locations to totally capture existing markets rather than branching out into new geographic areas. Home Depot had overtaken Lowe’s Companies as the leading home-repair company in the United States by 1989. 

Almost all outlets were using the company’s new satellite data communications network by the end of the year. By improving the company’s reaction to market changes, the rapid and reliable interchange of information now linking outlets allowed for continuous expansion.

Products of Home Depot

• Tools & Equipments
• Building Hardware & Materials
• Garden & Lawn
• Fixtures & Flooring
• Plumbing, Plumbing, Electrical & Millwork
• Kitchen & Furniture
• Paint

Competitors of Home Depot

• Lowe’s 
• Amazon
• Walmart
• Williams Sonoma 
• Mohawk Industries

SWOT Analysis of Home Depot

1. Strengths of Home Depot

Starting this SWOT with the Strengths of Home Depot. These are internal factors that push the company reputation and business, helping them secure their leading position – 

• Largest Retailer – Home Depot is the largest retailer of home improvement products and services. Having the highest benefits of economies of scale than any one of its competitors in the world and has an abundance of resources to defeat its competitors as well as protect its overall market share.
• Highly Profitable – Home Depot’s revenues have been rising tremendously in the past five years; its revenue has been increasing at an average of 8.4% per annum and the profit to earnings ratio of Home Depot has increased from 20.5x to a phenomenal 33.2x in a short span of 3 years. This shows that the company is highly profitable and has good growth potential in the future.
• Monetary Value – The products and services offered by Home Depot have the highest value for their customer’s hard-earned money. The company has introduced a program known as Match and Beat program wherein customers can compare the prices of the products of Home Depot with that of their competitors in real-time and the prices offered by Home Depot is 10% lower than the prices offered by its competitors.
• Widest Variety – Home Depot offers its customers a wide variety of products and services to choose from namely building materials, home improvement products, lawn mowing equipment and others including home decor installation services and rental services for tools. 

2. Weaknesses of Home Depot

Second, under the segment of the SWOT analysis of Home Depot, are the Weaknesses. These are internal factors that the organisation has stronger control over. Following are where Home Depot is failing at and can work on – 

• Lack of Geographical Diversification – Even though Home Depot has around 2100 stores scattered across the USA, with about 160 stores in Canada and with about 140 stores spread across Mexico and the USA. While their stores in the USA and Canada are doing very well but their stores located in Mexico are not doing very well as Mexico’s market is slightly an under-penetrated market which is causing the brand’s downfall in Mexico.
• Ageing Infrastructure – Home Depot’s major challenge is due to its ageing infrastructure, as the company was set up way back so the majority of their stores are quite old. The company had invested more than $9 billion in digital transformation but that failed due to its poor infrastructure. 
• Negative Publicity – In the year 2017, an employee of Home Depot faced disability discrimination who was working at a store located in the USA. The employee had asked for a disability-related emergency brake which was denied by the company, the employee took the company to court wherein the judgement was in favour of the employee and the company was ordered to pay $100,000 to the employee and this case caused a dent in the reputation of the company.
• Late Adoption into E-commerce – Home Depot had an e-commerce presence since 2001 but the website had a lot of glitches and many times the site didn’t load properly it was only after 2017 the company realised this point and started a new e-commerce website but when compared to its competitors Home Depot opened its e-commerce platform very later. As opening earlier than their competitors would have earned them more customers as well as an increase in revenue.

3. Opportunities for Home Depot

Opportunities are under the external umbrella of factors that can affect the company. These factors are usually ways the operations should focus on and capture to help grow the business. Following are Home Depot’s opportunities – 

• Expand beyond North America – With more than 2100 stores located across The US, Canada, Mexico wherein the company has had a strong base for many years. But the company has no presence in growing markets like India, China so the company must expand its operations to developing countries as it has a high potential to grow its market share in these areas.
• Increase Online Sales – Home Depot earns 94% of its revenue through its offline stores it has geared up its online presence to get most of the internet, currently, the Covid-19 pandemic has had retail stores shut this can be a great medium to increase sales.
• Diversify Offering – Home Depot has a lot of variety of home decor products and services which surpass even that of their competitors but it would be beneficial if they could increase the diversity in their company by including apparel and food items.
• Growth through Acquisition – Home Decor in spite of having a strong base in the US, Canada and Mexico has still a lot of potentials to grow by acquiring companies that are not doing very well like Bed, Bath and Beyond.

4. Threats to Home Depot

Last, under the segment of the SWOT analysis of Home Depot, we dive into the Threats. These are considered as the external factors that cause potential damages to either the reputation or sales of the organisation. Here’s are a few of Home Depot’s recognised threats – 

• Intense Competition – The competitors of Home Depot like Amazon, Lowe’s are closing the gap at an alarming level, by introducing huge discounts and a wide range of products and services they are posing a significant amount of threat to the company
• Looming Recession – The Coronavirus pandemic caused a meltdown in all sectors of the economy especially the construction and home improvement sectors, as the recession has set in due to the pandemic Home Depot’s profits may decrease.
• Price Deflation – Lumber, one of the biggest competitors of Home Depot has been significantly reducing the prices of its products in the past two years which has hammered the revenue of Home Depot by 17%.
• Possibility of Strikes – The adoption of a law in the USA has significantly helped employees by strengthening their bargaining power due to which employees of Home Depot in Mexico are demanding a 15% pay hike so that they get the same salary as their North American counterparts.

For large international corporations like Home Depot, a SWOT Analysis is an ideal technique to break down their operations and analyse their strongest and weakest factors. With this, we conclude the SWOT Analysis of Home Depot. 

Conclusion

Home Depot is gaining immense popularity and is one of the most important home decor companies in the world. In this case study, we learned the SWOT Analysis of Home Depot and how the company, despite facing a lot of competition from its competitors, has become the market leader that has stood the test of time. 

Home Depot’s success can be reiterated by its diverse offerings and innovation. The company’s success has been credited in part to its excellent customer service, as well as reasonable prices and a large product assortment. However, they do need to expand their services globally and build a stronger and positive online presence. 

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