In a world of highly competitive retail, Home Depot has grown to a mammoth size by following multi-faceted concept that would advance it beyond just the normal hardware store or lumber yard. It combined these two types of home improvement as well as nursery, utility furniture, paint stores, and plumbing and electrical needs. All of this was combined under one roof to a mega home improvement center. Due to its size, variety and volume of products, the company could offer very reasonable prices to the average consumer. They could sell at significantly lower prices that most of their competitors and still show a strong profit.
In a sound business movement of employing strong management and trades people as well as well trained, service oriented sales personnel, Home Depot sought and accomplished the feat to make shopping in their stores a friendly and satisfactory experience. This created customer satisfaction which generated customer loyalty and customer return. Also, by an impressive advertising program, they got their name out and people aware of what they offered. Good customer service, fair prices, and customer satisfaction is not a unique policy but one that falls often short in retail, especially in larger firms like Home Depot.
The fact that the company has maintained those standards since their beginning is unique. Growth and expansion often sacrifices those very standards by the lack of personal treatment or consideration of the customer complaints and the retail giants lose their edge. Home Depot has invested considerable time and money into seeing that this policy was not lost. Their best asset remains in the fact that they bring home repair and improvement into layman’s terms and present the average homeowner the ability to do the work they need themselves while forgoing the expense cost of having repairmen or industry contractors to do the jobs.
Home Depot’s route for expansion was a plausible concept but if handled wrong could have proved to be a costly one. The idea was to build more stores and closer together. The priorities were simple; more stores developed more convenience for the customer and also more stores meant less over massed volume on one location so the personnel were able to give more detailed attention to each customer. It worked very well and the company continued to grow and sought out new territory for further expansion.
They bought in any area that seemed to be capable of producing the need for their service and in doing so; they began to slowly squeeze the competition out. Within the last fifteen years, Home Depot has expanded from the northeast into almost every state in the country. They have quickly either overtaken or eliminated their strongest competitors in many areas. Home Depot became a conglomerate that everyone knew of. Their expansion seems to know no limits but is only as wide open as the territory will allow and support.
Certain already large competitors such as Lowe’s have managed to survive but had to revamp their own facilities, almost in copying the procedure that has brought Home Depot great success. The company has since begun offering discounts to small contracting companies, therefore adding to their clientele. What has been Home Depot’s financing policy in recent years? Since the company’s inception in 1978, Home Depot has gone through several finance restructuring, not from the risk of bankruptcy, though the mid eighties did show some severe loss of profit, but the restructuring was used due to the company’s rapid growth.
It was at first accomplished from inside financing and stock sales but due to the constant building of new locations and increase of growth in products, it became necessary to acquire outside financing in the last few years. A credit line of 300 million in the early nineties was not used but the company relied on its modest but strong profit return. The creation of more stock to sell that brought a higher dividend. The higher management projected that a larger amount would be necessary if Home Depot continued at its growth rate and constant change of remodeling its stores to warehousing and also improving its lines of products.
A figure of 1. 45 billion was agreed to be needed from outside financing by the middle of the 1990’s. By acquiring this outside financing, the company could decrease the amount of EPS (earnings per share) and allow more profit to be returned to the company’s coiffures. Home Depot has accomplished what many companies have failed to do, to maintain good customer service and also to grow significantly in somewhat depressed economic times. (Reference: The Home Depot, Inc. )