Home Depot Case Analysis Andrew Stovall MKTG 6301. 01 Dr. Rajaratnam September 27, 2012 Home Depot Case Analysis Summary The Home Depot Case takes place in 2007 during a time when the former chairman and CEO Robert Nardelli had recently announced his “mutually agreed” upon resignation from the company. Nardelli started at Home Depot in 2000 and produced rapid growth for the company because of his cost-cutting measures and centralized purchasing strategies.
However, even though the profits had more than doubled during Nardelli’s tenure the employees, managers, and customers criticized him for negatively affecting the quality of customer service and company identity. The current CEO, Frank Blake, is now left with deciding which of Nardelli’s strategies to keep, change, or get rid of in order to strengthen a culture of customer service at Home Depot. A. ) Marketing Challenge Nardelli introduced a number of changes that brought the company into the technological revolution and established many new and profitable business processes.
However, the previous CEO’s strategy of cost cutting and centralization had a negative effect on the level of customer service, which had previously been the company’s “prized centerpiece of Home Depot’s brand” (p. 11). Frank Blake must decide how to deal with this weakness and change current consumer’s perception of Home Depot’s lack of customer service. One dissatisfied customer from Florida commented that “Gross sales at Home Depot may be soaring, but the customer service is, well, just gross” (p. 20).
She elaborated by specifically commenting on the high amount of closed checkout lanes and the attempt to push customers into a self-checkout area. Problems like these are hurting the public perception of the company and should be addressed to avoid a loss in market share. The new CEO must decide how to address the issue and determine which alternative is most suitable for Home Depot. I will discuss two distinct alternatives to address the issue of poor customer service at Home Depot by identifying, describing, and analyzing some of the pros and cons for each. B. ) Analysis of Alternatives
Alternative 1: Implement a strategy focused on eliminating incompetent employees and hiring experienced home repair specialists, training them with an emphasis on customer service, and maintaining them as reasonably compensated full-time workers. Pros This type of strategy could have a positive impact on the company in a number of ways. For instance, having a smaller work force of reasonably paid full-time workers, rather than a large number of part-time workers, boosts employee morale and loyalty to the company. Laying-off incompetent employees would ensure that the staff is knowledgeable and experienced.
In addition, the extra time spent in the store would help the employees become experts on the specific products and services that Home Depot offers. Once the culture of service has improved, consumers will begin to notice and the marketing department can capitalize on advertising based on actual customer testimonials of the first rate service at Home Depot. Getting back to Home Depot’s roots as a store known for having friendly, knowledgeable, and experienced workers would be a significant positive change from the company’s current public perception. Cons
There are some downsides to implementing a strategy dedicated to this alternative as well. For instance, the company would need to dedicate more expenses toward providing benefits to the full-time employees that they did not previously receive as part-timers. Also, laying-off a large number of employees could be viewed negatively by investors and cause the stock price to drop. Additionally, the decrease in the number of employees will increase the amount of workload for the remaining staff and could effect service time. Clearly, there are some evident cons to this alternative the CEO must consider.
Alternative 2: Implement a strategy requiring all current and future employees to earn a “diploma” in ago series of classes and training sessions dedicated to customer service in a program named “Home Depot U” while keeping the majority of the workers as part-time. Pros This alternative would benefit the company through the use of education focused on all levels of customer service. Home Depot would continue to save the expense of additional benefits for full-time workers and compensate any lack of knowledge by properly training the current part-time staff through the “Home Depot U” program.
Improving the knowledge of all current employees will have a positive effect on customer service while not affecting their workload. Also, the marketing department could make “Home Depot U” a priority for the marketing plan and capitalize on the idea of workers receiving a “diploma” that prepares them for answering any question a customer may have. Making the university theme prominently displayed in stores and advertisements will inform consumers that Home Depot is committed to providing excellent customer service. Cons
There are some negative consequences from this alternative that should be mentioned. For example, the companywide implementation of a carefully planned training program like “Home Depot U” would require a great deal of resources. There would have to be excellent communication and collaboration between all departments for the program to be successful. Also, many of the workers may not want to spend the time and effort on a rigorous training program for a part-time job. The CEO should consider concerns like these in his decision process. C. Identify and Explain Decision When determining which alternative to choose it is important to consider variables such as the economy, demographics, and competition. Also, the decision should reflect Home Depot’s overall mission. Based on my evaluation of the marketing issue, I believe Home Depot should implement alternative 2 and commit to the “Home Depot U” training program. There are a number of reasons why I believe alternative 2 is the best decision for Home Depot, first I will discuss the quantitative analysis. QUALATATIVE D. ) Plan for Implementation