Home Depot's Strategy under Bob Nardelli


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Case Details:

Case Code : BSTR141
Case Length : 13 Pages
Period : 1978-2004
Organization : Home Depot
Pub Date : 2004
Teaching Note : Available
Countries : U.S.A
Industry : Retail

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EXCERPTS

Changes Under Nardelli

When Nardelli became the CEO of Home Depot in late 2000, there was widespread interest in industrial circles. Home Depot had thus far been managed only by its founders (Marcus until 1997 and then Blank till 2000). Marcus had an iconic status at Home Depot, and analysts often compared his position in the company to that of Wal-Mart's Sam Walton. Although Blank's personality was distinct from that of Marcus, there were no significant changes in the company"s operations or its culture under him. "If you like the package of the last 19 years, you can count on more of the same," Blank said when he succeeded Marcus. Analysts expected that when Blank retired, the board would choose someone from within the company to succeed him, even though there was no heir apparent in the company...

The Challenges

It was not easy for Nardelli to initiate changes at Home Depot.

While most people acknowledged that significant changes in Home Depot's strategy of the 1990s were required, Nardelli faced a large amount of criticism from various quarters for the changes he made at Home Depot. Firstly, critics said that Nardelli was moving too fast and that the changes that he was making were too drastic. Analysts said that this rate of transformation could upset old timers at Home Depot, who would not take revolutionary changes kindly. "There's the fear that Home Depot is changing too much, too fast," said UBS Warburg analyst Aram Rubinson.

But Nardelli pointed out that speed was required to bring in positive results faster...

Home Depot vs. Lowe in the Early 2000s

In the early 2000s, Lowe became a major competitor to Home Depot. Lowe, which was initially set up as a regional operator in North Carolina, was the top home improvement retailer in the US in the 1980s, but was overtaken by Home Depot's rapid expansion in the 1990s. Lowe changed its strategy in the 1990s, opening more stores in metropolitan areas, and consequently, grew rapidly in the 1990s and early 2000s...

Exhibits

Exhibit I: Home Depot-Annual Financials (2002-04)
Exhibit II: Home Depot's Product Categories
Exhibit III: Home Depot's Specialized Ventures
Exhibit IV: Stock Price Movement

 

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