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Environmental Analysis of Home Depot Research Paper

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Updated: Nov 12th, 2021

Home Depot is a leading US- based retail company specialized in home improvements and construction products for individual and corporate buyers. Home Depot is a giant retailer which has a crucial impact on national economy and consumer culture. In the USA, new opportunities to trade have a major impact upon the future structure of the home improvements industry. National retailers have been dramatically influenced by the rise of globalization and Home Depot is seeking to maximize its national strategy and strong market position (Home Depot Home Page 2009). External factors show overall success of Home Depot is on the national scale and help to identify the main external threats affected the company and industry in general. All factors were assessed using a ten-point scale

The key success factors of Home Depot involve successful market strategy and a unique ability to foreshadow and predict coming economic and demographic changes. External factors affected the Home Depot is accessed using PEST analysis. Political-legal forces acting upon the Home Depot allocate power and provide constraining and protect­ing laws and regulations. The company does not influenced greatly by political changes.

In the USA political and legal factors are favorable for Home Depot market activity. Privacy laws and internet security protection create a positive environment for sellers. Stable political situation attracts million consumers all over the world to do business with Home Depot. Also, Home Depot became a leader in protect­ing unique brand image and proposing customers low cost products (Conducting An Environmental Analysis 2003).

Legal changes had a greater impact on the company caused by changing international situation and increased competition, high taxes and corporate expenses the main changes took place at the end of the 1990s when European market altered parameters of international competition and enforced a period of reassessment. In spite of the fact that the Home Depot is a national company, these changes affected its sales and profitability (Hollensen 87).

In the USA economic situation is marked by stable growth and low inflation rates, exchange rate stability. This market gives Home Depot great opportunities with little risks. On the other hand, Home Depot operates on a national scale which creates such threats and financial problems. Socio-demographic situation in America suggests changes in the demand patterns and consumption. While in the USA unemployment rate is not high, and demographic situation did not a great influence on brewery market, in low developed countries this is the main factor which influenced the sales. More and more students study abroad which create a new demand for books and other materials.

Economic situation in America and Europe is marked by low inflation rates and high income per capita. For home repair company, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks of inflation, currency devaluation, and expropriation. All these create many additional uncertainties to those encountered in national marketing (Hughes 2009).

The social environment includes general forces that do not directly touch on the short-run activities of the organization but that can, and often does, influence its long-run decisions. Economic forces regulate the exchange of materials, money, energy, and information (Dongchul and Kaln 1997). This environment proposes great challenges for Home Depot influenced by customers’ loyalty and trust. Speaking about the nature competition it is possible to say that the Home Depot has a competitive advantage, but not a competition strategy. Competition strategy can take place on either a price or a non-price basis.

Price competition involves businesses trying to undercut each other’s prices; this will, in turn, be dependent upon their ability to reduce their costs of production (Drejer 98). The main weakness of the company is seasonality in purchases and the main threat is product substitution. Social-demographic factors suggest fast population growth and decreased mortality rates. Both in physical appearance and in most aspects of their culture-notably, their language, their traditional form of administration, and their religion.

While the population that can be addressed by conventional physical sales and marketing is constrained by geography, that of the Internet is constrained by the number of people who both have access to it and make active use of it (these not necessarily being the same thing). Estimates of the number of people who use the Internet and PCs vary widely, although a consensus seems to be emerging that currently tens of millions of people do indeed use the Interne (Market and Environmental Analysis 2009).

Technological factors are dominant in retail and home repair industry. Innovation in production technologies and computerized system of services is the main advantage of Home Depot. Environmental factors involve customer and market value. Home Depot creates added values for its customers and value long-term relations and interaction. Also, Home Depot creates a positive organizational culture and maintain strong morale which help to sustain market position and deliver high quality services to millions of customer. Technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability.

Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques has added greatly to the efficacy of planning activities. Such tools as critical paths, input-output analysis, payoff matrices, decision trees, linear programming, and simulations. The decision as to whether or not to enter this stage and pursue rapid growth may be influenced by the business leader wanting to make more money, desiring to lead a large business or perhaps for the status (Market and Environmental Analysis 2009).

Environmental changes suggest that the opening up of the market and the resultant increased competition has widened the perspective of the planning framework with profound implications. The threat was that the removal of physical barriers and the new-found freedom of movement around the European market have increased international expansion and in so doing raise the degree of European trade. Recent years, failure in investment activities at the end of 1990s led to declining of financial situa­tion and crisis (Dongchul and Kaln 1997).

For Home Deport, the impact of culture and diversity in business is crucial. As a national company, Home Deport has been exposed to different cul­tures as part of their normal day-to-day business practices are likely to have adopted a HR practices and managerial ethos which is distinct from other companies operating purely within a single nation state. Another strategy is to deal with people already in the organization, rather than getting people into the organization -managing rather than expanding diversity. It means selecting employees of both cultures in order to create a unique environment which helps people of both cultures to feel comfortable at work.

For the Home Deport manager, the key success factors are that ideas and techniques developed in one cultural or national environment may be transferred to another and used efficiently (Sanderson and Luffman 1988).

From a pessimist point of view, globalization distorts cultural identity of small nationality and states, and permits proliferation of American and European values into small communities. Media alliances and conglomerates produce low quality products sold on the global scale. In spite of benefits and opportunities proposed by integrated world, there are some weaknesses and threats of cultural globalization, as it leads to exploitation of cultural uniqueness in third world countries, it ruins national identity and promotes international (American) values and traditions.

Globalization prevents weak nations from development opportunities and allows developed nations to exploit their natural resources. A group of globalization skeptics highlights the central role of politics in unleashing the forces of globalization, especially through the successful mobilization of political power. Such media companies as Viacom occupy the international market and establish a monopolistic position for their products (PEST Analysis. Marketing Teacher 2000).

In sum, the key success factors of Home Depot are caused by effective use of resources, analysis of customer’s base and flexible marketing policies. The company delivers unique products but responds to new international innovations and cultural products. In their view, the rapid expansion of global cultural activity can be reduced neither to a natural law of the culture nor to the development of computer technology.

Developed nations assure the public that the elimination or reduction of trade barriers among nations will enhance trade and economic integration, increase wealth of developing nations and secure peaceful international relations. Cultural globalization reduces inequalities proposing low developed nations and regions an opportunity to innovate and adopt new technologies and innovative processes in all spheres of life.

Works Cited

Conducting An Environmental Analysis. BNET. 2003. Web.

Drejer, A. Strategic Management and Core Competencies: Theory and Application. Quorum Books, 2002.

Hollensen, S. Global Marketing: A Decision-Oriented Approach. Australian Scholarly Publishing, 2007.

Home Depot. Home Page 2009. Web.

Hughes, J. B. Environmental Analysis. 2009. Web.

Market and Environmental Analysis. 2009. Web.

Market and Environmental Analysis. 2009. Web.

PEST Analysis. Marketing Teacher. 2000. Web.

Sanderson, S.M., Luffman, G.A. Strategic Planning and Environmental Analysis. European Journal of Marketing. 1988, 22 (1), p. 14 – 27. Web.

Dongchul, H., Kaln, P. A comparative analysis of environmental effects on marketing activity in developing countries. Multinational Business Review. 1997. Web.

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