Situational Analysis
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Situational Analysis Situational Analysis Team A1 Project Team A1 Project March 11, 2006 Kerrie Cox Adrienne P. Love Jeff Koda Garland Collier Jim Clifton
description
Situational Analysis. Team A1 Project. Kerrie Cox Adrienne P. Love Jeff Koda Garland Collier Jim Clifton. March 11, 2006. Company Overview. Founded in 1979 in Atlanta, GA by Bernie Marcus and Authur Blank Robert L. Nardelli- president/chairman/CEO Employees- 100,000 plus - PowerPoint PPT Presentation
Transcript of Situational Analysis
Situational AnalysisSituational AnalysisTeam A1 ProjectTeam A1 Project
March 11, 2006
Kerrie CoxAdrienne P. Love
Jeff KodaGarland Collier
Jim Clifton
Company OverviewCompany Overview
• Founded in 1979 in Atlanta, GA by Bernie Marcus and Authur Blank
• Robert L. Nardelli- president/chairman/CEO
• Employees- 100,000 plus• Over 2000 stores throughout US,
Canada, Mexico, Puerto Rico and St. Thomas– Approx. store size-108,000 sq ft,– 40,000+ SKUs
• 2005 Revenue- $81.5 billion
“World’s largest home improvement retailer”
Company CultureCompany Culture
• Very customer focused• 8 core values
– Taking Care of our People– Respect For all People– Doing the Right Thing– Strong Relationships– Giving Back– Excellent Customer Service– Shareholder Returns– Entrepreneurial Spirit
“Excellent Customer Service”
Company Company CultureCulture
• All businesses under corporate umbrella follow the same values– EXPO– Apex – Home Depot Landscape Supply
• Welcome Aboard broadcast from chairman• Extensive Community Relations Program
– Building and refurbishing playgrounds – Ensuring safe community spaces– Building affordable housing– Preparing communities for emergencies
• Hire Nice– 100,000+ employees hired annually
“Communicate Corporate Value Throughout”
Revenue PlanRevenue Plan
Revenue Plan
$53.60 $58.20$64.80
$73.10$81.00
$89.10$98.01
$107.81$118.59
9% 11% 13% 11% 10% 10% 10% 10% 10% 10%
$130.45
0
20
40
60
80
100
120
140
2001 2002 2004 2004 2005 2006 2007 2008 2009 2010
Bill
ions
• 9 to 12 percent sales growth guidance over the next 5 years• Open 175 new stores
www.yahoofinance.com www.homedepot.com
Operating MarginOperating Margin
Operating Margin Plan
$4.9 $5.8 $6.8 $7.9 $9.2$10.6
$12.3$14.3
$16.6$19.2
10% 10% 11% 12% 13% 13% 14% 15%9% 11%0
5
10
15
20
25
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bill
ions
• Focus on increased revenues and cost control
www.yahoofinance.com www.homedepot.com
EarningsEarnings
Earnings Plan
$3.70$3.00
$4.30
$5.00
$5.80
$6.84
$8.08$9.53
$11.24 $13.27
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bill
ions
• 10-14 percent earnings guidance
www.yahoofinance.com www.homedepot.com
ROA-ROEROA-ROE
ROA/ROE Forecast
11% 12% 13% 13% 13% 14% 14% 15% 15% 16%
17%19% 19% 21% 21%
23% 25% 26% 27%29%
0%
5%
10%
15%
20%
25%
30%
35%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ROAROE
• Efficient use of assets and equity for profitable returns
www.yahoofinance.com www.homedepot.com
ROICROIC
Return On Invested Capital
16% 16%18% 19% 19% 20% 20% 21% 21%
0%
5%
10%
15%
20%
25%
2002 2003 2004 2005 2006 2007 2008 2009 2010
Perc
ent R
etur
n
• Wise use of capital to grow the business
www.yahoofinance.com www.homedepot.com
Average SaleAverage Sale
Average Transaction
$49.43$51.29
$54.89$57.80
$59.53$61.32
$63.16$65.05
$67.01
40
45
50
55
60
65
70
2002 2003 2004 2005 2006 2007 2008 2009 2010
Dol
lars
• Focus on higher dollar products and transactions
www.yahoofinance.com www.homedepot.com
Main CompetitorsMain Competitors
www.hoovers.com
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
Home Depot Lowe's Menard1 True Value1
Annual Sales ($ mil.)EmployeesMarket Cap ($ mil.)
CustomersCustomers
•Contractors
•Do it yourselfers
•Handymen and Women
•Designers
• Retail Customers
www.homedepot.com
Company StrengthsCompany Strengths
• Size, diversity and continuous growth• Business Model
– Broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable, service-oriented personnel and strong marketing and co-op promotions
– Knowledgeable associates • Distinctive product range
– 40,000 SKUs including both national brand name and proprietary items
– Strategic alliances with certain suppliers to market products• New Capital Expenditures
– Yearly revenue growth – 9 Billion return to shareholders
“Continuous Growth”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Company WeaknessesCompany Weaknesses
• Weak new store productivity• Rising expenses
– 5 consecutive years – Expense ratio has increased at a
faster pace than competition• Lowe's expenses per foot 19% lower
• Store layout and appearance– Criticized for inconsistencies in
layout/appearance– Resulted in negative publicity and
customer dissatisfaction
“Rising Expenses”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Company OpportunitiesCompany Opportunities
• International Expansion• Acquisition• Additional Products and
Services• Vendor Strategic Alliances
“Global Expansion”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Company ThreatsCompany Threats
• Competitive Environment• Polictical and Regulatory
Issues• Entry to New Markets• Cost of Capital and Expenses
“Proceed with Caution”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Opportunity Threat MatrixOpportunity Threat Matrix
Probability of Occurrence (2011)
Level of Impact High Low
High 3 2
Low 1 4
1 Positioning Store Locations Against Competition
2 Regulatory/Political Issues
3 Real Estate Development Industry Bubble
4 Public Perception
References References
• www.homedepot.com
• www.mindbranch.com/listing/product/P313-8421.html - 9k
• www.yahoofinance.com
• www.mindbranch.com/listing/product/P313-8421.html - 9k
• Joint Center for Housing Studies by Harvard School 2005
Chart AppendixChart Appendix
