Home Depot's Strategy under Bob Nardelli
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Case Code: BSTR141 Case Length: 13 Pages Period: 1978-2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.400 Organization: Home Depot Industry: Retail Countries: USA Themes: Growth Strategies |
Abstract Case Intro 1 Case Intro 2 Excerpts
"What I'm known for is transferring best practices. That's particularly important in this economic environment, when you have to maximize revenues through existing assets."
- Bob Nardelli, CEO of Home Depot, in 2001.1
Introduction
In September 2004, The Home Depot Inc. (Home Depot), the biggest home improvement retailer in the world, opened a new store in New York's up-market Manhattan region. The store, spread over 105,000 square feet, employed over 300 'associates' and featured a range of home improvement products, specially geared to the needs of Manhattan's residents. Based on the findings of extensive consumer research, Home Depot incorporated a number of features in the new store that would appeal to an urban customer base. For instance, the store had a door attendant to hail cabs, and a help desk to offer information and schedule appointments with in-house designers. The products in the store were also more upscale than in the company's traditional stores, which stocked mainly cheap and functional items. "We've got nails. We've got electrical sockets. But we've also got $7,000 rugs," said Tom Taylor, the company's Eastern Division president, on the products on offer at the new store.
The company also planned to offer special 'how-to' clinics on themes like 'how to create a garden on a fire escape', 'how to make 500 square feet seem like 5000', etc. "Our new Manhattan location is a retail marvel and proof positive that The Home Depot continues to break the mold in how we approach new formats, new markets and new customers," said Bob Nardelli (Nardelli), the company's CEO.
The company also planned to open a second store in Manhattan by the end of 2004. Over the years, Home Depot had grown chiefly by opening stores in new locations. However, the Manhattan store was a departure from the norm in that it was the first store to be opened in a large metropolitan area as against the company's earlier strategy of concentrating on suburban areas and small towns. Analysts said that the reason for the changed approach was a saturation of markets in suburban localities, which was limiting Home Depot's growth and revenue. By targeting metropolitan locations, Home Depot aimed to offset the saturation setting in its traditional suburban outlets. Nardelli said that if the format worked in Manhattan, it would give the company access to other large metropolitan areas.
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