Five Forces

1. How has the bargaining power between home improvement retailers (Home Depot, Lowes, Menards) and their suppliers changed?

Case 2: Home Depot Bernard Marcus and Arthur Blank founded Home Depot stores in Louisiana and Arizona, with total sales exceed- after losing their jobs in the home-improvement indus- ing $250 million. try in 1978. Their vision was to focus on the needs of Home Depot expanded into California in 1985, and by the do-it-yourself (DIY) market, specializing in building the following year, it had amassed a total of 60 stores and materials and lawn and garden equipment. Aided by in- sales of $1 billion. Home Depot continued to grow and vestment banker Ken Lagone and merchandising expert entered the northeastern United States and Canada in sub- Pat Farrah, Marcus and Blank launched three stores in sequent years, reaching 500 stores by 1997. Home Depot the Atlanta area in 1979 and four more in South Flor- added a direct-mail interest by acquiring mail-order firm ida in 1981. The firm posted sales of $50 million that National Blind & Wallpaper Factory and direct marketer year and went public. By 1983, Home Depot had opened Maintenance Warehouse. Chapter 2 Industry Competition 41 Home Depot launched Villager's Hardware stores in 40,000 products stocked in a 130,000-square-foot facility. New Jersey in 1999, 40,000-square-foot outlets designed Home Depot also promotes a community focus through to compete with traditional hardware stores. The firm the Home Depot Foundation. also began to add large appliances to many of its stores. In 2000, Marcus and Blank became co-chairs, and former Case Challenges General Electric executive Robert Nardelli was named 1. Is it necessary for Home Depot to emphasize both the president and chief executive officer (CEO). DIY and contractor segments of the market to build and Aggressive expansion continued in 2001 when Home maintain economies of scale? Is one segment tied more Depot added another 200 stores and acquired Total Home, closely to the general state of the economy than the other? a small home-improvement chain in Mexico. Marcus and Explain. Blank stepped down as co-chairmen, and Nardelli assumed 2. Has competitive pressure from Lowe's caused Home Depot the role in addition to his CEO responsibilities. to modify its business strategy? If so, how? Having abandoned its Villager's Hardware concept 3. Do international opportunities exist for Home Depot in the previous year, Home Depot opened its first small beyond North America? store about 60,000 square feet in New York City in 2002. The firm continued its expansion into Mexico, ac- Suggested Sources quiring Del Norte, a small chain in Juarez. Home Depot BGI Retail, Inc., "Home Depot Retail Is Detail operates over 100 stores in Canada and has opened a busi- Merchandising Experts Team (MET)." YouTube, 10 August ness development office in China. 2015, https://www.youtube.com/watch?v=Fa081.46VOQE. Competitive pressure from Lowe's prompted Home A. Cardenal, Home Depot: Top Quality for the Long Term." Depot to upgrade its stores but contributed to CEO Robert Seeking Alpha, 11 October 2019, https://seekingalpha.com/ Nardelli's ouster in 2007 when he was replaced by Frank article/4296180-home-depot-top-quality-long-term Blake. Sales peaked in 2008 amid the housing crisis, P. Goodfellow. "Lowe's Fails to Man Up Againsi Home stagnated, and then rose again throughout the 2010s. Depot, Underestimates Menards," Forbes, 26 May 2015, http://www.forbes.com/sites/forbesinsights/2015/05/26/ Today, Home Depot is the world's largest home- improvement chain and the second-largest retailer af- lowes-fails-to-man-up-against-home-depot-underestimates- menards/. ter Walmart, amassing S108 billion in annual revenues Home Depot Foundation, http://homedepotfoundation.org. and operating almost 2,300 stores and employing over L. Lorenzetti, "Why Buy Online, Pickup in Store' Isn't 400,000 workers throughout the Americas. Home Depot Working for Retailers," Forbes, 5 November 2015. http:// continues to focus on the DIY customer, with more than fortune.com/2015/11/05/online-store-pickup/