The Home Depot

The Home Depot company mission is to offer a “one-stop shopping for do-it-yourself” to its customers (Ton & Ross, 2009). This would provide a wide home improvement stores and a broad products and tools selection with staff clear focus on the customers which is evidenced by the philosophy of “whatever it takes to develop and” maintain customer relationships (Ton & Ross, 2009). On the basis of Porter’s Competitive Strategies, the Home Depot operated in an industry that is highly competitive, with threats of new entrants seen to have informed the adoption of various strategies by the firm’s management under Nardelli and flake. This is clearly indicated by the number of smaller competitors in this industry as shown the presence of various hardware stores like Ace Hardware and Value Hardware and other independent stores that maintained corporative among themselves. Though the Home Depot Company was the leader in his market, it faced stiff competition among the various competitors especially Lowe’s and Wal-Mart that had the capability to influence on pricing and the marketing strategies to adopted.

 Large suppliers have the ability to influence on the pricing, customer services and quality with an aim keeping value o themselves (Daft & Armstrong, 2015). The availability of other influential suppliers in the home improvement industry means that there was threat of substitutes but due to its sheer competitiveness, size and marketing strategy, the firm is able to shed off the stiff competition and, therefore, wields a lot of power. Wal-Mart, the leader in the US market and Lowe’s are powerful competitive forces to Home Depot, which makes the rivalry among them to be very tough informed by the customer base with access to a variety of substitutes in the market.

 

 

Prior to the arrival of Nardelli, the firm’s major strategy was based on decentralization which aimed at giving as much autonomy as possible to the stores managers in carrying out the operations in their own stores. Autonomy was the main operating goal of the company which offered more time to the stores managers in interacting with customers at the sales floor. The aim was to have the managers consider the items being offered to the customers and whether they would meet customers’ needs. This way the needs and preferences of the local market would be met through an organizational design whose intention was to encourage responsiveness and innovation across the stores (Ton & Ross, 2009). Decentralized organizational structure also meant that there was limitation on the communication among the store managers which limited their ability to negotiate deals.

 Employee’s development was a responsibility placed on the individual’s stores managers who would determine their salaries and depended on knowledgeable full-time personnel. Upon the arrival of Nardelli, the firm strategy shift to centralization, this shifted the focus of the firm to enhancing the core. The firm’s strategic design was marked by the introduction of changes in merchandizing more so the modernization of the technological structure, IT systems and the inclusion of a new inventory management system.  The strategy changed the manner in which the firm interacted with its environment and its customers, and clarified on the goals of the firm. The strategic goal shifted to improve everything we touch which touched on the fundamentals of retail functions including vendor management, merchandizing and the operations of the stores (Ton & Ross, 2009).  Selecting a strategy and design helps in keeping people focused towards the mission and operative goals set in the organization (Daft & Armstrong, 2015).

 

 

 

 

Before Nardelli

• Many departmental -stores
• Decentralized decision making
• Relaxed Hierarchical structure
• Horizontal communication

 

 

 

 

 

 

 

 

 

 

Post Nardelli                                                              

Dorminant vertical structure

Complete hierarchical structure

Vertical communication

Centralized decision making

 

 

The external environment refers to those elements existing outside the organizational boundaries and can potentially influence on part or the entire firm. It comprises of territory staked out by the firm for it in regard to products, services and the market it usually serves or more specifically the external sectors the firm has interact with in order to accomplish the goals it has set (Daft & Armstrong, 2015). The Home Depots external environmental factors which affect its operations and achievement of set goals include the competitive, technological, and economic and market factors. The competitive environment is represented by a highly fragmented industry which has sales divided among the various players such as the lawn and garden, hardware, paint and wallpaper stores and also the home center stores (Ton & Ross, 2009). The effects of this environment on the firm is indicated by the fact that independent stores were losing market share to the growing big box stores which means that Home Depot was prone to the  expansion of such stores.  

The competitive environment is also characterized by major competitors of the firm who include Lowe’s and Wal-Mart firms (Ton & Ross, 2009). The technological factors comprises of a highly active media coupled with a rapid change in environment. The media, indicated by the televised program by ABC which popularized the DIY-ing into the new millennium across the industry indicates how the technological environment can influence the market. Technological environment is also indicated by the adoption of technology by the rival firms such as Wal-Mart in their operations ahead of Home Depot. The economic environment of the firm is shown to be very inconsistent. After the housing boom that saw home improvement outperform many of U.S retail sectors, there was a deteriorating housing market which negatively affected the retail market for home improvement products.

 

 

The stakeholders of Home Depots mostly comprises of the various stores that are majorly autonomous in their operations but cannot survive without the appropriate relationship with the other stores and the mother Home Depot. This relationship needed can be termed as both collaborative and institutionalism. The autonomy among the firms is witnessed in the way the stores carry out their operations differently without having to consult the senior management of Home Depot in strategy or decision making. For instant, the regional purchasing offices entered into negotiations separately with suppliers which saw the agreements varying from one region to the other. Furthermore, individual stores managers decided on mechanizing, promotions and displays and in the determination of employees’ wages (Ton & Ross, 2009).

The merchandizing function for every station depended on how the manager viewed the local market given that the local needs of customers were better understood by them. The lack of a shared relationship in administration has prevented the firm from utilizing an opportunity to reduce on costs and thereby improve on gross margins. The collaborative networks are built through the joining of the stores in the utilization of similar distribution strategy so that to reach out to the customers.  There is a need to have a common agreement with all the suppliers so that even if costs are not kept at a similar level, it is maintained at a considerable point.  Institutionalism provides legitimacy to a stakeholder which implies that better performance is achieved (Daft & Armstrong, 2015). The interrelationship would provide consistent working environment especially for employees since wages would be harmonized across the stores hence reducing operation costs.

 

 

Core competences refer to the company’s functions or work processes that are directly relate its mission and goals (Hamel & Prahalad, 1990). These competences build competitive advantage to the firm and allow managers to work effectively across the boundaries of an organization and direct the resources of the firm towards the exploitation of opportunities. It also refers to the technological aspect of the firm which offers it a competitive advantage over its rivals in a highly competitive market. Home Depots’ core competences before the Nardelli’s arrival were mostly related to the decentralization organization design  which placed more emphasizes on service to customers as a way of retaining competitiveness over its rivals. Such enabled the stores managers to use their intuition in determining local customer needs and serving them appropriately.

The technological changes introduced by the new leadership shifted the focus of core competences to making the existing operations sound and profitable. The focus was not on enhancing the core a part of the strategy aimed at improving existing operations. The heavy investment in technology ensured there were improvement in labour productivity, and a clear focus in precision, measurement and quantitative analysis to have better results in operational processes efficiency. The End Accuracy and Service Transformation which ensured touch screens were present at point-of –sales terminals and the installation of various technologies such as self check registers enhanced the firm’s capability in providing customized products (Ton & Ross, 2009). In adoption of the new technological infrastructure, IT systems that comprises of new inventory management system , the firm was able to translate the core competences into competent products and services that is indicated in the increased sales and profit margins.

 

 

The changes in leadership to bring in Nardelli as the new top executive meant the need to resolve a crisis in Home Depot which places the organization in the collective development stage. This is a stage which is marked by changes in leadership and the establishment of departments along a hierarchy of authority, the assignment of job responsibilities and a start in division of labor (Daft & Armstrong, 2015). Nardelli designed the organization hierarchy where stores managers have to report to the top executive and thereby creating hierarchical system of leadership. The changes in the other levels of management are indicated in the personnel changes at both the store and corporate levels (Ton & Ross, 2009). The replacement of the fired managers was dome through the recruitment of individuals with military experience. In addition, the leadership under Nardelli aimed at having all the management levels of the organization are pulling towards a common focus, hence the introduction of the centralized strategy in the firm.

 The program adopted in the implementation of these changes was aimed at selecting participants carefully and ensuring new comers are trained on the culture, practices and analytics methodologies of Home Depot (Ton & Ross, 2009). This shows a firm that is in the process of overhauling the whole leadership by bringing in people who are capable of delivering results, acting strategically and driving excellence throughout the organizational systems. It appears the aim was to eliminate any crises existing in the management. The autonomy which had been enjoyed by the managers of the stores is now diluted by the introduction of a hierarchical leadership which requires accountability to the top executive. At this development cycle, there is an occurrence of autonomy crises characterized by the requirement by top managers that all sections of the organization are coordinated with an aim of pulling together. 

 

 

The organizational culture or the Home Depot can be attributed majorly to the leadership methodology both before and after the hiring of Nardelli as the new top executive of the firm. Previously, the ethical behavior in the organization depended on personal responsibility, which was depicted by the autonomy guaranteed by the stores managers. The freedom to make decision at the local level, including recruitment of employees in accordance with the requirements of the individual store, meant that they had the capability to influence on the culture of the overall firm. Upon his arrival, Nardelli introduced an organization design that demanded more responsibility and discipline in carrying out the operations of the firm. The need for centralization introduced a cultural requirement that was not welcome to all the employees who deemed such a system as interfering with effective decision making process. The results was the a resistant or a reaction change to the cultural change from one that required, minimal corporate discipline to the demand for higher discipline in terms of productivity and efficiency.

The cultural change was aimed at enhancing coordination across the firm so as that efforts are directed towards a single focus in provision of products and services. Organizational culture has to reinforce the needed strategy and structure in order to succeed in its environment. Where there is a wide spread consensus on the importance of certain values, the culture of an organization is strong and quite cohesive. However, this seems to be absent in Home Depot results of which is high criticism both internal and externally driven by poor performance of the share prices. The culture of an organization is determined by the existing structures which in turn determine the decision making process (Daft & Armstrong, 2015).

The changes introduced by under the leadership of Nardelli impacted on the culture and the structure of the organization. There are various types of changes that are bound to impact on the organization and comprises of products and services, technology, culture and strategy and culture. These changes can provide a competitive advantage to the organization and re normally quite inevitable (Daft & Armstrong, 2015). Nardelli instituted various technologies to ease in the operations processes and aimed at changing the technological infrastructure, IT systems and a modern inventory management system. The structural changes informed the introduction of new culture and comprised of personal changes, improvement of labour scheduling and a centralized management style. The changes in the structure and strategy involved a top- down approach to management which reduced the autonomy of the stores managers so that they could report to the top management. These were real changes introduced by Nardelli, although some of the bordered on innovation. The introduction of new metrics for performance measurement can be said to be leadership innovation aimed at influencing the achievement of the firm’s set goals.

 Changes are normally resisted and the fact that the introduction of new rules and procedures serves to indicate that. This is because of existing barriers to change which comprises of too much focus on fear of loss and the failure to focus on the benefits that arise from the changes (Daft & Armstrong, 2015).   To an extent, I agree with the new changes introduced by the new leadership under Nardelli, given that discipline in performance was lacking in the entire management system. The introduction of performance metric led to increased sales and margins. The only shortcoming that needed improvement was the lack of focus in customer service.

 

References

Ton Z., Ross, C.,(2009).The Home Depot,Inc.

Daft L.D., Armstrong, A. (2015). Organization Theory & Design

Hamel, G., Prahalad, C. (1990).The Core Competence of the Corporation. Retrieved from: http://globex.coe.pku.edu.cn/file/upload/201606/27/1756365219.pdf