As per the case study Home Depot was the biggest home improvement retailer in the world in 2004. Set up in the late 1970s, to provide low price, warehouse-like products, Home Depot grew rapidly over the 1980s and early 1990s, adding stores at the average annual rate of 20 percent. However, in the late 1990s, the company's comparable store growth rate began declining. It was also experiencing operational difficulties due to its tardiness in developing systems to manage its rapid growth. In this situation, the board brought in Bob Nardelli as the CEO of the company in 2000. Nardelli was responsible for implementing new initiatives that changed Home Depot's culture and strategic direction. The case discusses the changes implemented by Nardelli at Home Depot in the early 2000s. Home Depot offers good quality products such as home improvement products, lawn and garden supplies. Installation services for these products are offered too. Home Depot like Wal-Mart Company offers low prices everyday.
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Operational efficiency had been a crucial part of achieving these low prices while still offering a high level of customer service. The company assesses and upgrades its information to support its growth, reduce and control costs and enable better decision-making. From the installation of computerized checkout systems, to the implementation of satellite communications systems in most of the stores, the company had shown that it has been and would continue to be innovative in its operating strategy. In year 1994 Home Depot introduced a prototype store format that offered about 32,000 more square feet of selling space and a significantly broader and deeper selection of products and services, as well as a more convenient layout than the traditional stores. These Type stores were designed around a design center, which grouped complementary product categories. Therefore, this wide store capacity enabled Home Depot to stock like 4,00,000 to 50,000 products in each store. I think that this is a very good strategic factor that enables the store to offer a wide variety of products.Â Lowes is the main competitor against Home Depot. Both companies have big stores, and many products. But Home Depot is still number one. Mike Brune from the Rainforest Action Network declared that "It's been a busy month for us all as we attempt to find out the implications.
1.0. Home depot history
Home Depot was founded in 1978, and has grown to become the world's largest home improvement retailer and the second largest retail chain in the USA with total sales of $53.6 billion in 2001. The company employs a workforce of more than 250 000 "associates" in 1436 retail locations of which there are 18 000 associates and 83 locations in Canada. It plans to open 600 new stores in the next three years. Home Depot also operates in Mexico.
Home Depot specializes in building materials, home improvement supplies and lawn and garden products. The company has been recognized as an innovator in the home improvement retail industry for combining the economies of scale of a warehouse format with the high-level of customer service of smaller retailers. Home Depot stores are large typically, 114 000 square feet and offer between 40 000 and 50 000 different products.
Home Depot also wholly owns: EXPO Design Center, a one-stop design and decorating retailer;; Maintenance Warehouse Commerce Direct in Canada a supplier of building repair and replacement products to owners of multi-family housing and commercial properties Georgia Lighting, a distributor and retailer of in specialty lighting; Apex Supply Company, a wholesale distributor of plumbing; Your "Other" Warehouse, a premier plumbing distributor with a focus on special orders; and, Home Depot Landscape Supply, serving landscape professionals and garden enthusiasts.
1.1. Internal influences to change (AC 1A)
InnovationÂ is a change in the thought process for doing something, or the useful application of new inventions or discoveries. It may refer to an incrementalÂ emergentÂ or radical and revolutionary changes in thinking, products, processes, or organizations The key point for home depot to change its business strategy is to be the leader in the changing times in the United States It is important to note that as Home Depot has grown so quickly, it has been able to garner significant concessions in prices from suppliers. Home Depot has been working to keep pace among the U.S. retailers who are looking internationally not only for sourcing and outsourcing products and services but for new consumer markets and growth. Home Depot is committed to competitive pricing. To maintain their consistent high marks in customer service and knowledge of home improvement projects Home Depot has been working accordingly and moving forward in this competitive industry. The change that is often overlooked is that associated with a true desire for high achievement that drives the search for continuous improvement. The impact of warehouse pricing is reflected in several ways. Every year new developments and strategies are produced to keep The Home Depot competitive with other companies in the industry and profitable enough to continue to grow and prosper.
1.2. External Influences:
Always on Time
Marked to Standard
There are four main categories that are divided as follows:
Political influence - governments will often pass laws or pursue policies that can affect the way businesses operate: for example, directives on school lunches or booster seats for children in cars. Remember also that they create legislation on employment rights. Political influences might also be seen in the actions of pressure groups.
Economic influence this has to do with such things as changes in interest rates, changes in inflation, economic growth and so on.
Technological influence - changes in technology can revolutionize the way a business works or leave it in a position where it will be difficult to survive.
Social influence- Over time, people change and develop different views, wants and needs. A drive towards social awareness of the need for recycling or the use of packaging, the environment, fashion, obesity, vegetarianism and so on can all affect different business in different ways.
And the other external factors are as under:
rivalry on price and quality provided by the competitor and Changes in economic activity economic growth and the business cycle
The manufacture and exchange process of the whole economy as opposed to individual markets within the economy
business affect by changes in the macro-economy and by government policies
1.3. Strategic view point of change management
Change management is a systematic approach to dealing with change, both from the perspective of an organization and on the individual level. A somewhat ambiguous term, change management has at least three different aspects, including: adapting to change, controlling change, and effecting change. A proactive approach to dealing with change is at the core of all three aspects. For an organization, change management means defining and implementing procedures and/or technologies to deal with changes in the business environment and to profit from changing opportunities.
Successful adaptation to change is as crucial within an organization as it is in the natural world. Just like plants and animals, organizations and the individuals in them inevitably encounter changing conditions that they are powerless to control. The more effectively you deal with change, the more likely you are to thrive. Adaptation might involve establishing a structured methodology for responding to changes in the business environment (such as a fluctuation in the economy, or a threat from a competitor) or establishing coping mechanisms for responding to changes in the workplace (such as new policies, or technologies).
As the company has been exploring from one store into hundreds, it soon became the largest supplier of home improvement and building materials in the United States. As the days passed by other companies were closing in on the same idea and the market was shrinking, and so the planning managers, at that time, needed to develop a strategic plan for The Home Depot. The Home Depot was formed in 1979 by Bernie Marcus and Arthur Blank in Atlanta, Georgia. These two upper level managers decided to relinquish their jobs with the small hardware store they were working at, they had a vision and set out to develop a company that catered to the "do-it-yourselfer," and with that idea, and The "Home Depot" was born. The Home Depot was formed in 1979 by Bernie Marcus and Arthur Blank in Atlanta, Georgia. These two upper level managers decided to relinquish their jobs with the small hardware store they were working at, they had a vision and set out to develop a company that catered to the "do-it-yourselfer," and with that idea, and The "Home Depot" was born.
1.4. Recruitment and selection
Recruitment, as a human resource management function, is one of the activities that impact most critically on the performance of an organization. While it is understood and accepted that poor recruitment decisions continue to affect organizational performance and limit goal achievement, it is taking a long time for public service agencies in many jurisdictions to identify and implement new, effective hiring strategies. In some areas, existing laws inhibit change; in others, the inhibiting factor is managerial inertia. This paper discusses some of the strategies that organizations can and do employ to ensure the existence of the best possible pool of qualified applicants from which they can fill vacancies as and when required. It will identify the advantages of each of the strategies, highlight the drawbacks of its use and offer suggestions for ensuring its utility.
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Acquiring and retaining high-quality talent is critical to an organization's success. As the job market becomes increasingly competitive and the available skills grow more diverse, recruiters need to be more selective in their choices, since poor recruiting decisions can produce long-term negative effects, among them high training and development costs to minimize the incidence of poor performance and high turnover which, in turn, impact staff morale, the production of high quality goods and services and the retention of organizational memory. At worst, the organization can fail to achieve its objectives thereby losing its competitive edge and its share of the market. Traditionally, Public Service organizations have had little need to worry about market share and increasing competition since they operate in a monopolistic environment. No longer are citizens content to grumble about poorly-produced goods and services and the under-qualified, untrained employees who provide them.
As societies become more critical and litigious, public service organizations must seek all possible avenues for improving their output and providing the satisfaction their clients require and deserve. The provision of high-quality goods and services begins with the recruitment process. Successful recruitment begins with proper employment planning and forecasting. In this phase of the staffing process, an organization formulates plans to fill or eliminate future job openings based on an analysis of future needs.
Home deports are uses sophisticated selection criteria to select people with a customer-friendly orientation. Home Depot's strategy of employing is combined with the advantages of high energy leadership, a high esprit de corps, and success feeding upon success. Home Depot's approach to customer service is linked to their initial and primary customer focus - the consumer. About half of industry sales are to contractors. Because of changing demographics and socioeconomic factors, home building and home sales activities are expected to decline relative to recent business cycles. Thus, the consumer segment is viewed as having a faster growth rate.
The sales support, educational clinics, and factory demos bring an increasing array of more complicated projects within reach of the customer. The Home Depot assertion that they don't simply take market share from others when they enter a new market has strong plausibility. While undoubtedly they do take market share from others, they also significantly expand the market with their empowerment through technical support.
1.5. Implications of culture in home depot (AC 1B)
The ability of The Home Depot to implement its growth strategies will have far-reaching implications for home improvement retailing. Most important is its ability to stay ahead of Lowe's, which emerged as a significant threat in the mid-1990s. The Home Depot will face many other obstacles to growth in the coming years. Among the most challenging will be the need to surmount saturated domestic markets. When discussing organizational culture, we are actually referring to the dominant culture that is, the themes shared most widely by the organization's members. However, organizations are also comprised of subcultures located throughout its various divisions, geographic regions, and occupational groups.10 some subcultures enhance the dominant culture by espousing parallel assumptions, values, and beliefs; others are called countercultures because they directly oppose the organization's core values. Subcultures, particularly countercultures, potentially create conflict and dissension among employees, but they also serve two important functions. First, they maintain the organization's standards of performance and ethical behavior. Employees who hold countercultural values are an important source.
1.6. Cultural change in a home depot:
Increased profits, market share or electoral votes can be a powerful motivator for change. But the benefits must be immediate and tangible. Even if they are not immediate in time, they must be immediate in perception. You need to be able to see the benefits very clearly. The promise presented by the change must be easy to accept.
Identify the one or two cultural attributes that are most essential for long-term success and focus attention on them. As progress is made in that area, attention can be turned to other cultural attributes. This is not to minimize the necessity of being successful in all areas, but a recognition that employees cannot cope with the stress and confusion of too many changes at one time.
Communicate the vision of the desired culture in all available communication mediums including the informal channels.
Establish structural enablers of behavior consistent with the desired culture. At the same time identify and remove barriers that are preventing such behavior from occurring.
Establish structural barriers for behaviors that are associated with the undesirable culture.
Assess progress toward the desired culture and refine the above actions.
The ideal design of change is to suggest something where the benefits are easily perceived. In addition it should be possible to try the change in a pilot scheme or small area so that the benefits can be seen. These benefits would act as a motivator for extending the reach of the change.
1.7. Impact of H.R.M. in change management (AC 1C)
Different kinds of change require different strategies and plans to gain effective employee engagement and acceptance of change. Change can be classified into three different types:
1) Developmental change:
This type of change should cause little stress to employees as long as the rationale for the new process is clearly conveyed and the employees are educated on the new techniques making changes to the current business to be the global leader comes under developmental change. If a company decided to improve their process of business and methods or performance standards this would be considered developmental change. Training is used to build knowledge after employees have made the personal decision to support the change as this leads to the performance of the employee in business.
Momentum is built throughout different areas and levels within the organization which may impact every individual to work more effectively and so the organization begins to build a history of successful change, creating a better 'backdrop' for the next change initiative. Old values of control and predictability have been replaced by new values to push decision making, authority and responsibility down into the organization. While this shift has delivered many benefits, it has also made top-down changes more difficult and increased the resistance they face. Organizations with empowered workforces need to manage the human side of change more effectively than they did in the very hierarchical structure of the past.
In upcoming years, speed and agility will be a central differentiator in the market place. Many sources of competitive advantage have eroded as information moves more quickly and across the globe in seconds. And organizations that do not use change management cannot build their internal competency to quickly and effectively implement change.
2) Transitional Change:
Transitional change may not require a significant shift in culture or behavior but it is more challenging to implement than developmental change. The outcome of transitional change is not known, so employees may feel that their job is unstable and their own personal insecurities may increase. Transitional change is to replace existing processes or procedures with something that is completely new to the company and is more intrusive than developmental change. A corporate reorganization, merger, acquisition, creating new products or services, and implementing new technology are examples of transitional change. Education on the new procedures should be commenced at each stage of the new process. This allows the employees to feel that they are actively involved and engaged in the change.
3) Transformational Change:
This change occurs after the transition period. Transformational change may involve both developmental and transitional change. It is common for transitional and transformation change to occur in tandem. When companies face the emergence of radically different technologies, significant changes in supply and demand, lack of revenue and unexpected competition, or other major shifts in how they do business, developmental or transitional change may not offer the company the solution they need to stay competitive. Instead of methodically implementing new processes, the company may be forces to drastically transform themselves. This meant almost everyone at Home Depot somehow had to change the way they did business for the changes to be successfully implemented.
This unifies different risk and quality management activities and the related lessons learned in order to provide transparency and continuous communication throughout the risk management process, ensuring better compliance with governing regulations and risk legislation, and enabling companies to deliver high quality, reliable products faster and at less cost than the competition.
Change in management enables dramatic improvements in risk mitigation and Environmental Health and Safety initiatives, as well as early planning and specification of quality, through company-wide visibility of risks and quality processes, identified by a continuous improvement approach
1.8. Scope of change:
There has been a need to rise situation for Home Depot as the competition among the retail is growing rapidly. For a long time, the Home Depot was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. Time was of the essence for several reasons. Rival Lowe's was gaining market share. Home Depot's stock prices had dropped; other financial numbers were weakening and same-store sales stagnating when Nardelli took over Changes had to happen quickly to turn the company around, otherwise Home Depot risked losing its positioning and market dominance. By insisting on changes but honoring social networking, even though it would eventually need to be adapted, Nardelli brought a number of his staff into an awareness of the need for changes and subsequent willingness to commit to those changes.
Financial numbers had begun to fall and the change in management is the only way for increasing the market value of home depot.The scope of changes Nardelli needed to implement was company-wide. Many of the changes required centralization of company functions and implementation of accountability and specific systems.
1.9. Strategic importance of human resources:
A wise man once declared that a happy workplace is a productive workplace. There are few points that help in the achievement of the organizational goal. Every employee has his/her own ideas and opinions in playing their part towards the growth of the organization and they feel valuable only if you value their opinions and ideas. Employees will feel like a valuable part of the workplace if they know that you value their ideas and opinions. Open door policy has to be implemented so that they are always welcome to speak with you if they have any concerns. Reduce the pressure on individuals to reach targets and increase team work among employees by setting targets for groups of people, rather than personal targets.
Demonstrate that you recognize your staff as people, not resources, by celebrating achievements and milestones within the workplace. Token gestures to recognize birthdays, Christmas, promotions and reaching achievements will show employees that you appreciate and care about them. Such habits will also breed in the workplace, making it a happier environment for all. Allow staff to see their colleagues as people too by facilitating office social events. Bi-annual or quarterly get-togethers will give your employees the chance to get to know each other away from the desk and form stronger professional relationships.
Give employees the opportunity to contribute to the community in way that differs from their day-to-day job by allowing them the opportunity to volunteer for a local charity. Many companies now give their staff one day a year to conduct volunteer work on their companies' behalf. It's a nice way for employees to get out of the office, try something new and feel good about their achievements improving staff morale doesn't need to be costly or difficult as it can often be as simple as taking the time to ask how an employee is and actually stopping long enough to hear the reply. If you demonstrate that you recognize employees as people and that you value their opinions, you'll be on your way to having a happy and productive workplace.
When management implements change the way it was working many key points has to taken to ensure employee satisfaction at work. An organizations external environment consists of three interrelated sets of factors that play a principal role in determining the opportunities, threats, and constraints that the company will face. The first factor is the remote environment that comprises of factors originating beyond any organizations operating situation such as economic and technological factors. The second factor is industry environment. Human resource plays a vital role in developing strong relationship among the team and every employee feels proud to come up with new ideas, no matter it may work or not.
2.0. Old and new model's of home depot (AC 2A)
As per the case study, When Bernard Marcus stepped down as CEO in 1997, Home Depot had distinctive culture, based on personal rapport and involvement he and co-founder Arthur Blank had with employees. Marcus and Blank are opposites in many ways. Marcus is gregarious and outgoing, whilst Blank is a detailed number man. The two both emphasized customer service, however, encouraging sales staff to help customers with their hardware problems instead of just trying to sell them a tool. To accomplish this, most sales people were plumbers, contractors, carpenters, or others with similar "handy" experience. Marcus and Blank believed this expert advice would help empower homeowners to do their own work, and subsequently would grow Home Depot's potential market, a strategy that proved successful
However Blank tried to maintain Home Depot's traditional culture, decision-making and communication systems, a plan that was unsuccessful. In his three years in charge, things went from bad to worse. By 2000, stock prices were down, net income and same stores sales were slowing, customer service varied widely from store to store. This dramatic fall in business happened because Home Depot has simply continued to expand without adjusting its internal systems, the main office was not able to either monitor or support the increasing number of stores.
The culture at Home Depot before Nardelli took over was like a networked community. Managers had little accountability; worked things out on their own, and depended on social contacts for getting much of their jobs done. Almost all jobs above entry level were filled internally, causing a system of personal networks to dominate communication within the company. This was further reinforced by senior management, who managed by regularly visiting stores to develop personal relationships with workers and check store operations.
2.1. Factors militating change at home depot (AC 2B)
Most of Nardelli's initial changes at Home Depot involved systems and centralization. He additionally mandated changes in how stores operated. Stores interiors were brightened and made more attractive, whilst a standardization of merchandising improved displays. Advertising and web presence were also revamped, and the company began to court the female customers it was rapidly loosing to competitor Lowe's, increasing the number of how-to clinics in areas of women's interests and more clearly marking item locations.
Stores were required to operate according to company-wide regulations in many areas, such as moving restocking activities to nights to improve safety and customer service. Nardelli also changed the company's cash-return policy, which many saw as an unalterable part of Home Depot culture. Earlier a customer could return any item bought from Home Depot at anytime for a full cash refund with no receipt or proof of purchase was required, but Nardelli required a receipt for cash back and placed a time limit on returns and this new policy is predicted to save Home Depot over ten million dollars annually.
Fortunately Nardelli realized the importance of continuing to solicit, value and use suggestions from all levels of the company, and included in his plan communication systems from the store level to headquarters and vice versa. Coming in as an outsider was a tremendous benefit to Nardelli in successfully implementing such drastic company-wide changes, and in such a short time. Eight change contexts are typically considered, scope, time, power, readiness, capacity, capability, uniformity, and preservation. Change is so complex that it is impossible to create a specific formula for it, but considering each of these factors and the relationships between them can assist in change analysis. Nardelli needed to consider each of these change contexts when he arrived at Home Depot.
Many criticized Nardelli for the changes he made and how quickly he made them. Complained the changes being implemented both damaged worker morale and were counter-cultural to Home Depot. Almost two-thirds of the senior managers, such as this man quoted, were unsupportive enough of the changes to leave the company or be fired and these Specific changes were also vital to Home Depot's ability to sustain growth.
Many stakeholders within the company felt he was also trying to make changes too quickly. Others believed the changes were being implemented too swiftly; some even accused him of trying to make Home Depot into General Electric overnight. Some Wall Street analysts were amongst this group, and their opinions led to a rapid dropt in the company stock, which decreased almost by half in Nardelli's first year.
3.0. Strategic drift and strategic alignment of home depot (AC 3A)
As per the case study while the U.S. housing market remains in a slump, the Home Depot believes the worst is over, and says its earnings in the year ahead will be slightly better than previous forecasts. And in a presentation to investors, the Atlanta-based retailer offered a peek at sweeping changes intended to help the No. 1 home-improvement build market share in the coming months. it says its new mantra is simplification, and that for a company that built its rep on making home-improvements easy -- it has been hampered by an overly complicated corporate structure. Companywide, says Frank Blake, chairman and CEO, the Home Depot is looking to take care of associates, put customers first and simplify the business. In fact, he says, the renewed focus on customer service represents the first time in many years that we've set out a simple framework for customer satisfaction, and then trained all our associates.
Other changes are enough to make overworked Americans swoon with envy: In an attempt to free store managers from endless demands from the corporate office, executives eliminated over 200 weekly reports and email. Store managers now get a one-page scorecard each week, says Marvin Ellison, EVP of the company's U.S. stores division. Even better is a companywide communications blackout on Tuesdays and Sundays, when absolutely no emails can be sent to stores. Instead, managers are now given a playbook of 10 pages or less each week, freeing them to do what's really important take care of their customers, he says.
That sense of simplicity is also reshaping marketing, as the chain looks for new ways to convince consumers that shopping at Home Depot is easier than other options. There is a greater emphasis on products that simplify chores, says Craig Menear, EVP of merchandising such as lithium-battery powered tools and paints that also include primer. We've reduced the number of SKUs, and increased in-store marketing. And we're striving to eliminate rebates, coupons, sweepstakes, and gift cards. They don't have to want consumers to have to do something else to save money when they leave the store, like fill in a rebate card.
The chain is also focusing more on Hispanic marketing, including recruiting more Hispanic associates. And while national brands continue to be very important to the store's strategy, "and we still strive to stock the No. 1 and No. 2 brand in every category, at a bare minimum," he says the chain has also increased its emphasis on proprietary and exclusive brands. Several months ago, the Home Depot quietly ditched its advertising tagline.
3.1. Implementation and plan of home depot (AC 3B)
Home Depot uses a clustering strategy to locate new stores closer to existing ones. The short-term effect is to lower same-store sales. On the other hand, this strategy can create a strategic advantage by raising the barrier of entry to competitors. It reduces overcrowding in the existing stores. It also allows the company to spread its advertising and distribution costs over a larger store base. I think that this strategy led Home Depot to have fewer competitors, and lowered the distribution cost. On the other hand, opening too much stores increase the expenses from equipments, products and employees. Even if, the company can afford to open all these stores, I do not think that the company should open many stores in one area.Â Another strategy that your company is following is focusing on customer service and satisfaction or what is referred to customer cultivation. Customer cultivation is the result of the provision of highly qualified and helpful employees, professional clinics and in-store clinics.
When the company was faced with clogged aisles, endless checkout lines, and too few salespersons, it sought creative ways to improve customer service. Workers were added to the sales floor, shelf stocking and price tagging were shifted to nighttime, when the aisles were empty. Therefore, the availability of sales personnel to attend to customer needs was one clear objective of the Home Depot customer service strategy. It gave the customers the support and confidence that no home project was beyond their capabilities. Home Depot attitude of complete customer satisfaction has led the company to constantly seek ways to improve customer service. I think that this strategy is great and was worth all the expenses because the employees were free to sell during the day and focus more on the customers needs. It the good experience that brings the customer again and it's the word of mouth that brings other new customers, customer satisfaction is the most important strategy that any company shall followÂ ,The third strategy that you company is following is focusing on extensive advertisement.
In year 2002, Home Depot spent $895 million on advertising, 9.5 percent more than the $817 million it spent in 2001 and 24 percent more than the $722 million it spent in 2000. Home Depot is one of the nation's largest retail advertisers and spends far more on advertising than comparable stores. Home Depot spent nearly eight times as much on advertising in 2002 than its nearest competitor, Lowe's Cos. Lowe's, which has just half the annual sales of Home Depot, spent about $114 million on advertising in year 2002.Â Therefore, extensive advertising is giving Home Depot a distinctive competency against other companies in the same industry.Â
These strategies are implying higher expenses in order to be achieved, especially the huge expenses on advertising. I would like to make a comparison between two most growing companies in the USA .In 2002; Home Depot spent 32 percent more than Wal-Mart Stores Inc., the world's largest retailer. Wal-Mart with annual sales almost five times higher than Home Depot's spent $676 million on advertising last year.Â Therefore, the more money you spend on advertising, does not lead to increase in annual sales but it leads to increase in expenses. Even though, the extensive advertising made this company have a distinctive competency against other companies but Home Depot spent $ 895 million on advertising and Lowe's company spend only $114 million.
It is true that the annual sales of Home Depot were more than half than Lowe's but Home Depot can lower its expenses of advertising to 5 times and can still be able to compete with Lowe's company. I am not implying that these strategies are not working but I think that there should be a strategy that keeps the company growing but at least lower the expenses.