Home Depot SWOT Analysis & Recommendations

Home Depot SWOT analysis, strengths, weaknesses, opportunities, threats, internal and external factors, case study and analysis
Engineered wood products inside a Home Depot store. Home Depot’s SWOT analysis highlights the need for business diversification and global expansion. (Photo: Public Domain)

Home Depot faces issues identifiable in its SWOT analysis. The SWOT analysis framework shows the internal and external strategic factors that affect organizational development. Home Depot’s business practices are the results of the influences of these internal and external strategic factors. For instance, the company emphasizes high quality service to address competitive rivalry. Considering the increasing saturation of the home improvement retail market, Home Depot needs to develop innovative approaches and strategies to overcome weaknesses and take opportunities indicated in this SWOT analysis. With its current market leadership, Home Depot successfully does so, although the firm must keep evolving to withstand the threats in its business environment.

This SWOT analysis of Home Depot shows the company’s main strengths and weaknesses, as well as the primary opportunities and threats that the business must account for in its strategies for organizational development.

Home Depot’s Strengths (Internal Strategic Factors)

Home Depot’s strengths directly relate with the current success of the business. This aspect of the SWOT analysis framework deals with the organizational characteristics that make the business effective. In the case of Home Depot, the following are the main strengths:

  1. High quality service
  2. Strong brand image
  3. Close relationships with suppliers
  4. Market leadership

High quality service is one of Home Depot’s main strengths. The company uses excellent service to differentiate itself from competitors. For example, Home Depot stores have carpenters and plumbers who give expert advice to customers about their home improvement projects. Also, the firm’s market leadership and strong brand image are strengths because they help attract the biggest market share. In addition, Home Depot’s close relationships with suppliers ensure cost-effectiveness and economies of scale. This supply chain approach supports Home Depot’s cost minimization efforts based on its generic strategy. Thus, this SWOT analysis shows that Home Depot’s strengths supports competitive advantage.

Home Depot’s Weaknesses (Internal Strategic Factors)

Home Depot’s weaknesses are linked to its business nature, focus, and supply chain. This aspect of the SWOT analysis framework points to internal strategic factors that hinder or reduce business growth. In the case of Home Depot, the following are the main weaknesses:

  1. Limited supply chain
  2. Imitable business format
  3. Dependence on the U.S. market

Home Depot and competitors like Lowe’s have close relationships with suppliers. This condition discourages suppliers from doing business with competing firms. For example, Home Depot suppliers avoid doing business with Lowe’s because of fear of losing business with Home Depot. This limitation in the supply chain is a weakness because some brands are not available in the company’s stores. Another weakness of Home Depot is the relative ease of imitating its business. The company’s high quality human resources are the only factor that makes it difficult to completely copy. 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. In this regard, this SWOT analysis shows that Home Depot’s weaknesses are linked to its supply chain, business development, and market strategies.

Opportunities for Home Depot (External Strategic Factors)

Home Depot’s opportunities are mainly based on business expansion. This aspect of the SWOT analysis framework deals with industry or market characteristics that support business development. In the case of Home Depot, the following are the main opportunities:

  1. Global expansion
  2. Expansion of supply chain
  3. Diversification of business

Home Depot has the opportunity to globally expand its business and supply chain. This is a major concern, especially because the company currently has minimal presence in overseas markets. In addition, Home Depot has the opportunity to diversify its business, such as through additional acquisitions of firms in a new industry or market. Thus, this SWOT analysis shows that Home Depot’s opportunities emphasize global growth and expansion.

Threats Facing Home Depot (External Strategic Factors)

The threats to Home Depot’s business are related to the economy and other firms in the market. This aspect of the SWOT analysis framework points to external strategic factors in the industry or market that could reduce business capabilities. In the case of Home Depot, the following are the main threats:

  1. Competition
  2. Substitutes
  3. Economic slowdown

Competitors like Lowe’s are the main threat to Home Depot’s market dominance. In relation, the company faces the threat of substitutes, which include home improvement products available from general merchandise retailers like Walmart. Also, many online retailers now offer similar home improvement products. 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. In this regard, the threats identified in this SWOT analysis show that Home Depot must emphasize stronger competitive advantage and global expansion.

Home Depot’s SWOT Analysis – Recommendations

The issues identified in this SWOT analysis of Home Depot show that the company must focus on global growth and expansion. For example, the company can expand in other regions, especially high-growth markets in developing countries. Based on this SWOT analysis, Home Depot also needs to diversify its business to minimize risk exposure in the home improvement retail market. This diversification may come in the form of new businesses, subsidiaries or acquisitions to establish Home Depot’s presence in new industries or markets.

References
  • Hill, T., & Westbrook, R. (1997). SWOT analysis: it’s time for a product recall. Long Range Planning30(1), 46-52.
  • Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and organizational diversity: SWOT analysis and implications. Journal of Management29(6), 801-830.
  • Pickton, D. W., & Wright, S. (1998). What’s SWOT in strategic analysis? Strategic Change7(2), 101-109.
  • Piercy, N., & Giles, W. (1989). Making SWOT analysis work. Marketing Intelligence & Planning7(5/6), 5-7.
  • 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.
  • Valentin, E. K. (2001). SWOT analysis from a resource-based view. Journal of Marketing Theory and Practice, 54-69.
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