Home Depot’s Generic Strategy, Intensive Growth Strategies

Home Depot’s generic strategy, intensive growth strategies, Porter’s model, strategic objectives, case study and analysis
A Home Depot in Markham, Ontario, Canada. Home Depot’s generic strategy (based on Porter’s model) and intensive growth strategies are aligned to support success in the home improvement retail market. (Photo: Public Domain)

Home Depot’s generic strategy and intensive growth strategies are interrelated to ensure continued business growth. The company is the biggest player in the home improvement retail industry in the United States. Home Depot’s generic strategy guides the firm in terms of its overall approach to capturing the biggest market share. On the other hand, Home Depot’s intensive growth strategies specify the approaches used to sustain business growth in the international home improvement retail market. Home Depot’s leadership is linked to the successful implementation and combination of its generic strategy and intensive strategies for growth.

Home Depot’s generic strategy is supported through the company’s intensive strategies for growth. Strategic objectives based on this combination helps sustain Home Depot’s leading position in the home improvement retail market.

Home Depot’s Generic Strategy (Porter’s Model)

Home Depot’s current generic strategy (based on Porter’s model) is broad differentiation combined with cost leadership. The company’s initial generic strategy was cost leadership. For example, when the first Home Depot stores opened in 1979, the company’s cost leadership generic strategy emphasized Everyday Low Prices to attract customers. However, Home Depot now uses broad differentiation as its main generic strategy. Differentiation entails offering unique products or services to compete against other home improvement retailers, especially Lowe’s. At present, Home Depot uses broad differentiation as its primary generic strategy and cost leadership as its secondary generic strategy to maintain leadership in an increasingly tough competitive market.

Based on the broad differentiation generic strategy, Home Depot’s strategic objectives are to offer high quality service and to provide a wide array of products. Many employees in Home Depot warehouses/stores are field experts like carpenters and plumbers, who provide expert advice to customers. On the other hand, based on the cost leadership generic strategy, Home Depot’s financial objective is cost minimization. In addition, the strategic objective of developing close and exclusive relationships with suppliers helps the company achieve cost minimization.

Home Depot’s Intensive Strategies (Intensive Growth Strategies)

Market Development. Home Depot uses market development as its main intensive growth strategy. This intensive strategy supports business growth by establishing the firm’s presence in new markets or new market segments. In Home Depot’s case, market development is generally applied through acquisitions. For example, Home Depot acquired Interline Brands in July of 2015 to achieve successful entry in the market segment of non-industrial businesses. A strategic objective based on this intensive growth strategy is to continue acquiring more firms to establish a strong market presence. This intensive strategy for growth also supports Home Depot’s generic strategy of broad differentiation.

Product Development. Home Depot applies product development as its secondary intensive growth strategy. This intensive strategy contributes to business growth through new products to attract more customers. For example, Home Depot’s house brands like Husky, Glacier Bay, and Commercial Electric contribute to the firm’s competitiveness and growth. This intensive growth strategy is linked to the strategic objective of expanding the company’s product mix. Home Depot’s generic strategy of broad differentiation is supported through this intensive strategy for growth.

Market Penetration. Home Depot uses market penetration as its supporting or tertiary intensive strategy for growth. This intensive strategy supports business growth through more sales of the same products to customers in the same or current market. For example, Home Depot implements discount sales and special offers to get more customers from its current markets. Based on this intensive growth strategy, a strategic objective is to offer products at affordable prices. Home Depot’s cost leadership generic strategy supports this intensive growth strategy.

References
  • Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy Journal4(4), 292-309.
  • Miller, D. (1992). The generic strategy trap. Journal of Business Strategy13(1), 37-41.
  • Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research note. British Journal of Management8(2), 175-181.
  • The Home Depot (2015). Message from Supplier Diversity Leadership.
  • The Home Depot (2015). Stores, Products, and Services.
  • The Home Depot, Inc. Form 10-K 2015.
  • Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business Research10(4), 503-522.