He covers consumer goods companies for The Motley Fool. Investopedia requires writers to use primary sources to support their work. How the leadership at Home Depot intended to use its organizational talent to gain a competitive advantage in the Do It Yourself industry: Home Depot has a large work force and it has developed strategies that aim at giving the company competitive advantage. For most of its history, Home Depot has had the reputation of lagging behind its main rival in terms of supply-chain efficiency, relying primarily on a decentralized supply chain in which suppliers shipped products directly to Home Depot stores. Home Depot and Lowe's are both giants of the home improvement sector. Accessed March 22, 2020. Goldsmith, M., & Carter L. (2010). Forward integration is a business strategy that involves expanding a company's activities to include control of the direct distribution of its products. Today, their share-price performance looks pretty much the same year-to-date. Discuss the critical programs used by Home Depot to keep talent in their pipeline. Ninety percent of store leadership started their careers as hourly associates, validating a business model that empowers employees and provides ample opportunities for career growth. Growing profits and free cash flow over the long haul requires staying power -- and exceptional customer delivered by happy employees can help. Employees are equipped with handheld devices that can order products for customers while they're shopping in the store, for example. "Lowe’s Realigns Leadership Structure To Drive Operational Excellence." Best practices in talent management: How the worldâ? Oftentimes, the strongest competitive advantages we see in the world of business are built from intangible assets. This diversification may come in the form of new businesses, subsidiaries or acquisitions to establish Home Depot’s presence in new industries or markets. Lowe’s has the reputation of being less intimidating for first-time home improvement customers. Other factors I'd add to the list would be its valuable brand, its huge scale, and its financial fortitude. Yes, it aims to provide the lowest possible prices. But together they help explain why the company is outperforming rivals both inside and outside of the home improvement industry. "Form 10-K 2019." "Supply Chain Unveils First Flatbed Distribution Center (FDC)." Returns as of 11/25/2020. "History." Despite their distinctive brands, Home Depot and Lowe’s regard themselves as competing for the same customers. @themotleyfool #stocks $HD $LOW, Here's How Home Depot Boosted Shopper Satisfaction in Q3, Home Depot (HD) Q3 2020 Earnings Call Transcript, Home Depot Reports Sales Continue to Surge, Copyright, Trademark and Patent Information. Distributed Applications (DApps) are software applications that are stored mostly on cloud computing platforms and that run on multiple systems simultaneously. Lowe's. Rather than building up a stand-alone web presence and shopping app to complement its stores, Home Depot is actively driving traffic from its physical locations to its online options. Or, in the case of a professional customer, they may identify a product in-store and arrange to have it shipped to their worksite. Accessed March 21, 2020. Rivals like Target and Costco, meanwhile, are bumping along at closer to 3% of revenue. As the world’s first and second-largest home improvement retailers, Home Depot and Lowe’s share many similarities. Sales to DIY customers have been growing faster for Home Depot and Lowe’s compared with professionals such as general contractors and renovators, providing a larger sales uplift to Lowe’s, which focuses more on that kind of customer. Although earnings fell 10.7% compared to the first quarter of 2019, this was due to $850 million spent on actions taken to support employees. Home Depot goes above and beyond when it comes to taking care of its employees, and this, in turn, affects customers. I urge long-term investors to focus on just how critical this winning culture is to the prosperity of not only this business, but to that of other high-quality companies as well. Accessed March 21, 2020. We also reference original research from other reputable publishers where appropriate. Home Depot’s opportunities are mainly based on business expansion. However, in 2007 Home Depot began a modernization program, including a transition to a centralized network of distribution centers., In Jan. 2020, Home Depot announced an ambitious $1.2 billion investment to improve its distribution management by building massive distribution centers across the U.S. SWOT analysis from a resource-based view. In addition, any slowdown of the U.S. economy is a major threat because the vast majority of Home Depot’s revenues are generated in the American market. See you at the top! Home Depot. As e-commerce soaks up a growing percentage of the retailing industry, it's not enough to just win business at your bricks and mortar stores. Each operates more than 2,000 stores, with more than 100,000 square … (LOW)." For customers who are also trade professionals, they're seeing expanded next-day delivery, even of bulk items like concrete. Home Depot’s weaknesses are linked to its business nature, focus, and supply chain. Supervisor assistant manager and store manager positions are filled with competent individuals since they interact with company associates and customers (Silzer & Dowell, 2010). In 2020, the company opened an 800,000-square-foot FDC in Dallas and expects to open 40 more FDCs in its 40 largest markets in the coming years. , While Lowe’s has also enjoyed a spectacular history of growth, the company has faced challenges keeping pace with Home Depot, resulting in the company closing down underperforming stores. As of Feb. 1, 2020, Lowe’s operated 2,002 stores in the U.S. and Canada. That's down from the 2,155 stores it operated in 2018. In 2016, the company announced it would no longer continue its joint venture with Woolworths Limited to operate home improvement stores in Australia., In November 2018, Lowe's reported the company would close 51 stores in the U.S. and Canada. This followed the company's announcement earlier in the year that it would shut down its 99 Orchard Supply Hardware stores and distribution center. In 2019, Lowe's shuttered all 13 stores it operated in Mexico, just ten years after it entered the Mexican marketplace. , Management cited missteps in inventory control resulting in low same-store sales as the reason for the need to close stores and restructure its business model. Home Depot is also weak because it is largely dependent on the U.S. market, thereby making the company vulnerable to downturns of the American economy. U.S. Securities and Exchange Commission. Associates need to feel like they are valued and being taken care of, especially at a time when safety and well-being are priorities. Cumulative Growth of a $10,000 Investment in Stock Advisor, What Is Home Depot Inc's Competitive Advantage? See you at the top! Practices at the Home Depot. So if you want to succeed in this economy, if you want to gain competitive advantage and watch your revenues rise, then take a look at market leader Home Depot, and realize that no matter your size or your market position the only path to profitability, in this economy, is … Accessed March 21, 2020. That will result in same-day and … Home Depot recognizes the importance of human capital in corporate success thus ensuring that its human resource is effective in promoting organizational success. "Form 10-K For the fiscal year ended February 1, 2019 Lowe's Companies, Inc." Accessed March 21, 2020. As of 2020, the average Home Depot store has about 105,000 square feet of enclosed space and about 24,000 square feet of outdoor space for garden products. Lowe’s stores are even larger, with an average enclosed space of about 112,000 square feet and about 32,000 square feet of garden space., In 2019, Home Depot operated 18 mechanized distribution centers in the U.S. and one in Canada. By comparison, Lowe’s operates 15 mechanized regional distribution centers in the U.S. and 7 in Canada. When Home Depot launched its modernization program in 2007, almost all of Lowe’s mechanized distribution centers were already in place, giving credence to the perception that Lowe’s had enjoyed a logistical advantage over its rival for many years., Despite being larger by market capitalization, The Home Depot, Inc. is the newer market entrant. Lowe's was founded in 1946 and Home Depot in 1978. As of March. Here’s Why, China Launches Its First Mission to Bring Back Moon Samples, How Coronavirus Bailouts Could Help Spur Greener Air Travel, WSJ Opinion: A Thanksgiving Heap of Coronavirus Hypocrisy, News Corp is a network of leading companies in the worlds of diversified media, news, education, and information services.