THE HOME DEPOT, INC.

The Home Depot, Inc.

Table of Contents

Case Synopsis4

Stages of Development7

Executive Succession8

Executive Leadership10

Strategic Direction and Core Competencies11

Corporate Governance12

Strategic Alternatives14

External Environment (EFAS see appendix EXHIBIT 1)15

Internal Environment (IFAS see appendix EXHIBIT 2)16

Analysis of Strategic Factors20

TOWS Analysis20

SPACE Matrix Analysis21

BCG Matrix22

Recommendation23

Financial Analysis24

Ratio Analysis25

References26

Appendix27

Case Synopsis

The Home Depot, Inc. was a success story of three men creating a new business that redefined the industry. By 2000, the company had reached $40 billion in revenues faster than had any retailer in U.S. history. The founders then left the management of the company in the hands of Robert Nardelli, who it was hoped would continue the company's success.

Founded in Atlanta, Georgia, in 1978, Home Depot was the world's largest home improvement retailer and the second largest retailer (after Wal-Mart) in the United States based on net sales for the 2005 fiscal year ended January 29, 2006. The Home Depot stores sold a wide assortment of building materials, home improvement and lawn and garden products, and provided a number of services such as design and installation. In addition to the Home Depot stores, the company had a store format that sold products and services primarily for home decorating and remodeling projects called EXPO Design Center and two store formats focused on professional customers called Home Depot Supply and The Home Depot Landscaping Supply. As of August 29, 2006, the company operated 1,832 Home Depot stores in all 50 states and the District of Columbia, Puerto Rico, and the Virgin Islands, plus 143 stores in Canada and 57 in Mexico. It also operated 34 EXPO Design Center locations in the U.S., 900 Home Depot Supply locations (including 11 Contractor's Warehouse locations) in 44 states and Canada, and eleven Home Depot Landscape Supply stores in the Atlanta and Dallas-Fort Worth areas. The company also had two Home Depot Floor Stores in Texas and Florida that primarily sold flooring products.

The case begins with Robert Nardelli summarizing the company's performance during the five year period (2001 - 2005) since he joined Home Depot as its Chief Executive Officer. On most measures, the company was clearly an outstanding success. Sales and earnings per share had doubled since 2000. The number of stores had increased by more than 900 and the operating margin had increased from 9.2% to 11.5%. The company had expanded its installation services business. Growing through acquisitions, the company had successfully increased its sales to the professional builder market.

The case then raises two questions that set the stage for the rest of the case:

(1) With such positive accomplishments, why had Home Depot's common stock fallen 30 percent since Nardelli had taken charge of the company?

(2) Why were the shareholders so upset about CEO Nardelli's compensation?

The case then summarizes information regarding Home Depot's current strategic posture, including its current strategy and its proposed performance objectives for 2010. The corporate culture is discussed in terms of the entrepreneurial and informal culture developed by its founder-managers, Bernard Marcus and Arthur Blank, contrasted with the more military, command-style culture introduced by Bob ...