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The Home Depot Overview
In the US market, The Home Depot is the largest retailer in the home improvement segment. The company was incorporated in 1978 and today, the company has been able to reach a market capitalization worth USD 300 billion making it one of the most valuable companies in the world. Further, the major competitors of Home Depot include Walmart, HHGregg, and Hajoca Corporation.
This article features a well-crafted SWOT Analysis of Home Depot for analyzing its internal strengths and capabilities. Furthermore, the article also highlights the considerable opportunities and threats that are available to Home Depot in the external business environment. Besides, in case you wish to know more about how a SWOT analysis is conducted, you can go through our elaborate SWOT Analysis guide .
Table of Contents
Comprehensive SWOT Analysis of The Home Depot
Strengths of The Home Depot
Market leadership- The Home Depot is the largest retailer in the whole of North America with a 47% market share. The customer base can be advantageous for sustainable operations.
Strong profitability- As per the annual report, in 2020 the company generated sales worth $131 billion and witnessed an increase of 19.7% on year on year basis. The earnings per share also increased by 16.5%, this can be beneficial for the company as it would enhance the confidence among the shareholders and the company earned a huge 40.8% return on invested capital.
Wise variety of products- The product range consists of furniture, electrical products, hardware, kitchen components, building materials, appliances, rugs, etc. The huge variety of items means that customers would be able to fulfill all their home improvement needs just from a single store which can lead to an increase in the sales and revenue of the company.
Omni-channel operations- The Home Depot operates both through offline and online means. The company provides the customers with an option of buy-online-pickup-in-store which is proving to be beneficial as this is leading to an increase in online orders and the customers’ satisfaction is enhanced as they do not have to wait in queues for the payment.
Loyal customer base- The Home depot has a loyal customer base because of the various customer service facilities that include shipping of products directly at home. Further, it has a loyalty program named ProXtra wherein the customers can avail of many benefits like reserved parking, dedicated checkout lanes, two-hour turnaround on orders, an expanded selection, exclusive discounts, and reduced pricing on orders over $1,500.
Weaknesses of The Home Depot
Limited presence- The Home depot is just present in the North American region and has no presence anywhere else. This can result in a major loss for the company as the business dynamics are changing and companies are globalizing. This way, The Home Depot might not be able to sustain a competitive advantage for a long time.
Employee-related issues- The Home Depot has been involved many times in a tussle with employees for various reasons. In one instance, a couple was not allowed to wear a black lives matter logo and was forced to quit. Taking such a stand against strong community issues can result in a reputational loss for the company. Further, the employees have also complained about the violation of health and safety regulations.
Opportunities for The Home Depot
Expansion into North American markets- The Home Depot currently serves just the markets of North America and the company has huge growth potential wherein it can expand into other markets like Southeast Asia, Australia, the UK, etc. where the consumption for the home improvement products is on the rise.
Increase in digital infrastructure- The online business comprises 8% of the total sales. The company should look to expand its digital operations by offering various promotional bonuses for orders made through digital means and the delivery services can also be made more efficient by offering a guaranteed same-day delivery.
Systematic product diversification- The Home Depot deals just in home improvement products. It can enhance its offerings by venturing into clothing, footwear, and other retail businesses. For effective diversification, the company will need to rely on effective change management mechanisms.
Threats for The Home Depot
A high degree of rivalry- The online business comprises 8% of the total sales. The company should look to expand its digital operations by offering various promotional bonuses for orders made through digital means and the delivery services can also be made more efficient by offering a guaranteed same-day delivery.
Northern tool+ is the smaller competitor with 120 stores but is increasing its dominance and has been able to triple its profits while the revenues and operating margins rose by 35% and 3% respectively. It has huge expansion plans and is aiming to total 200 stores by 2026 (Kelly, 2021).
Economic downfall- The prices of wood are declining for the last 2 years and as a result, many businesses in this sector have shut down. Home Depot is largely dependent on wood-based products and the recession can lead to a decrease in profitability.
To conclude, The Home Depot is a major brand in North America and controls most of the sales in the home improvement segment. The company has excellent customer service policies wherein the privileged customers are offered benefits like discounts, reserved parking spaces, etc. But, the major thing that can make the company lose out on competition is its limited presence. Many companies who deal in the same segment are present globally, so the company must expand outside the North American market. Other opportunities that await the company are diversification into other retail segments like footwear, apparel, etc. Moreover, as wood is the main input for the products sold by the company and the lumber market is currently down, this can result in a decrease in margins for the company. Furthermore, in order to assess how internal influences impact Home Depot, you can read our intelligible PESTLE Analysis of Home Depot
Recommended Readings
References
EIDELSON, J. (2021). Home Depot punished staff for BLM activism, the U.S. labor board alleges. www.latimes.com. Retrieved 2 April 2022, from https://www.latimes.com/business/story/2021-08-16/home-depot-punished-staff-for-blm-activism.
Kelly, B. (2021). Northern Tool + Equipment doubles down on brick-and-mortar. /www.bizjournals.com. Retrieved 2 April 2022, from https://www.bizjournals.com/twincities/news/2021/11/18/northern-tool-equipment-profile.html.
