Master Case Assignment 9

Master Case Assignment 9 - CEG GSB 703 Master Case...

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CEG GSB 703 Master Case Assignment #9 Adam Ohanesian Email: Adam.Ohanesian@nichols.edu Table of Contents I. Viable strategy in the long run a. Industry analysis b. Competitive strategy analysis c. Evaluation of strategy II. Financial analysis 1983-1985 a. Ratio analysis b. Cash flow analysis c. Comparison of financial performance to Hechinger i. Financial ratios ii. Cash flow analysis III. Productivity 1983-1985 a. Sales per store b. Transaction per store c. Net earnings per store d. Employee productivity IV. Financing needed for expansion
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1. Evaluate Home Depot’s business strategy. Do you think it is a viable strategy in the long run? Business strategy analysis gives the picture of key profit drivers, business risks as well as profit potentials with qualitative judgments. Strategy analysis is generally comprised of industry, competitive strategy and corporate strategy analysis. Since The Home Depot has only one business, the corporate strategy analysis is not relevant for this analysis. Identifying key success factors and key risk through business strategy analysis helps the firm to find out key accounting policies. Industry Analysis: Though The Home Depot is the leader in the industry, its market share is negligible, only 0.9% in 1985. However, its sales grew by 62% in 1985 which is far above the industry average. The company has also been facing challenges by the existing firms and competition is heating up. The Home Depot does not have much challenge from new entrants, but it has possible threats from the suppliers since the rivals are expected to be stronger and stronger. As a result, it will also have high threat from the bargaining power of buyers. Competitive Strategy Analysis: There are two types of strategies in competitive positioning, cost leadership and differentiation. The Home Depot is the leader in the D-I-Y market and Hechinger’s is its immediate rival. However, their market shares are very low compared to the entire industry. The following is an analysis comparing Home Depot to Hechinger’s. Regarding competitive strategy, The Home Depot offers low and competitive prices, low margin and high turnover, and keeps costs low by low overhead. Hechinger’s is more of an upscale store with high margins and low turnover.
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I found four key success factors of The Home Depot. First, is giving a guarantee for both popular and less popular brands. Second, is excellent sales assistance by its employees with technical knowhow. Third, is the best quality products and quality of service. Fourth, is aggressive advertising and in store demonstrations. I also found two key risk factors of The Home Depot. First, is the dropping of net earnings and stock price made the financing difficult for expansion. Second, is they already attracted some chain stores in the industry that challenges its market dominant position. Evaluation of Strategy:
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Master Case Assignment 9 - CEG GSB 703 Master Case...

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