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12/03/2009: "The Home Depot example update Chapter 1"
One problem with textbooks is that the examples in them become outdated, given the fast moving nature of the marketplace. Therefore, starting with this blog entry, I am going to update examples in the textbook. This will help you add greater value to your students by giving them up-to-date information.
In Chapter 1 I wrote about sound strategy and its flawless execution as the keys to an organization's success. I profiled The Home Depot's rise under the its founders and its fall under CEO Bob Nardelli (page 4). The example ended with the appointment of Frank Blake as the new CEO and the line, "Only time will tell whether Home Depot can return to its roots".
Well, there are sure signs of improvement at The Home Depot under Frank Blake, who faced a tough road -- the stock had fallen by 40%, to around 25, when he took over, and as documented in the textbook, customer and employee dissatisfaction was rampant.
Frank Blake's strategy has been to radically cut costs, reorganize Home Depot's supply chain and merchandising systems, improve customer service and boost employee morale. In other words, he has gone back to what made The Home Depot popular among consumers in the first place -- excellent customer service.
Blake's efforts appear to have paid off. For the first time since 2000, Home Depot's 2,200-plus outlets had better same-store sales than Lowe's for two consecutive quarters. And, as of Oct. 31, 2009, the company had 20.5% of the home-improvement market, up by 0.95 of a percentage point over the preceding 12 months. The stock market has taken notice: Home Depot shares now are up about 15%.
"This company is fixing the problems it had under Nardelli and is becoming a real retailer again," says analyst Gary Balter with Credit Suisse in New York.
Source: Neil A. Martin, 30 November 2009, Barron's
I always look forward to your comments and suggestions. You can email me at asirsi@schulich.yorku.ca
