1.1 Background Of The Company:
Home Depot is a construction and home improvement services and products retailer in the USA. Originated by Arthur Blank, Bernie Marcus, Pat Farrah, and Ken Langone in 1978, the company had a vision of opening the one-stop-shopping home improvement superstore. In 1979 the first two stores were established in Atlanta, Georgia. After going public in 1981, the company grew, and expansion continued throughout the decade. In 1994, The company expanded to Canada by acquiring Aikenhead. The company went to Mexico by earning an entire home in 2001. In 2006, Home Depot, through the acquisition of a 12 store chain, namely “the home way,” expanded its reach to China (Home Depot, 2015a).
The company started its operation with the first two stores in Atlanta, Georgia, in 1979 and currently has more than 2200 stores throughout the United States, Canada, Mexico, and China. By the end of 2015 (first quarter), the Home depot company will have 293 international operations that collectively represent 12.9% of the total store base of Home Depot. In Canada, the company has around 182 stores in 10 provinces of Canada. Additionally, the local number of associates in Canada will reach about 28,000 at the same time. In Mexico, Home depot has about 111 stores, while the quantity of associates in Canada exceeds by 9,000. Both locations have retail facilities spread across from 60,000 to 150,000 sq feet (Corporate Homedepot, 2015a).
Home depot is one of the leading players in the sector of home improvement. Home Depot with 58 percent rake of annual revenue in the United States and going to expand in Mexico (Malkin, 2014). It earns more than 95 percent of its receipt; international sales represent 11 percent of the sales of Home Depot (Soni, 2015a). The operations are spread across 2200 stores throughout the United States, Canada, Mexico, and China. The actions of the company include selling wider hodgepodge or mixture of home improvement products, building material, and garden and lawn products; Company offers several services to its customers. The operations of Home Depot targets three sorts of customers. Professional customers, do-it-yourself customers, and do-it-for-me customers are the target customer around which the activities of the company revolve (Soni, 2015b). In addition to the above three markets, the company’s sourcing for quality and creative products and services is extended to India (Corporate Homedepot, 2015b).
1.4 Interest / Important:
By 2019, the global industry of home improvement retail stores is expected to arrive at $ 2291.6 billion as a result of increased disposable income, increasing a real estate sale, renovation, and remodeling of houses and increase in middle-class residents, etc. (Lucintel, 2014). With the growth of the industry attracting interesting, the Home depot company has a major stake in the industry (Malkin, 2014). Therefore, this study has been performed to elaborate on how companies can gain a competitive advantage at a global level through cross-cultural management and taking advantage of opportunities. It is also agreed upon the fact that employees and adaptability to new markets are considerably important in bringing success to the organization (Schaap, 2012, (Moran et al., 2011 and Unger et al., 2011). Therefore, the study will assess the factors mentioned above in the context of Home Depot (Cramer, 2014).
Competitive Analysis of Company’s Competitive Position at Global Level: The objective of this chapter is to define the competitive position of the company at a global level through the application of theories that include Porter’s Five Forces Porter. Generic Strategies, and Bowman’s Strategy Clock.
2.1 Porte’s Generic Strategies
Porter proposed three competitive generic strategies for organizations through which they can gain a competitive advantage over their competitors. To analyze the competitive position of the Home Depot at a global level, porter’s proposed generic strategies have been taken into consideration. These three strategies include cost leadership, differentiation, and focus.
2.1.1 Cost Leadership:
This strategy proposes that pricing has a significant impact on the success and failure of the organization (Hosford-Dunn, Roeser, and Valente, 2008). It is the strategy that acquires the phenomenon of the lowest cost producer of products and services. Through this strategy, the organizations gain a more extensive section of the market that is influenced by price. The focus is on lowering the cost of products and services to offer lower prices than allow being in a stronger position and the competitive rivalry increases. Home Depot entered the industry with a cost leadership strategy. In due course, Home Depot is succeeding at the global level with this strategy by offering 10 percent less price as compared to competitors (The Home Depot, 2015b and Colvin, 2009).
2.1.2 Differentiation Strategy:
Organization pursues this strategy produce services or products in such manners that customers perceive them different from the offering of the competitors. Through this strategy, organizations try to differentiate their selves from competitors by offering a unique value proposition and secure their stronger position in the market (Ireland, Hoskisson, and Hitt, 2008). Ordinarily, such companies target customers that have no or less price sensitivity. But in the case of Home Depot, the scenario is different. Unlike its competitors, the company has acquired a more significant amount of stores that are big as well. The company sells more than 4000 items, including flooring, garden products, paint, appliances, lumber, tools, and plumbing services. Even the company offers installation services for cabinetry, carpeting, and other products (Hoover, 2015b).
2.1.3 Focus Strategy:
Companies with focus strategy serve particular segments and have a focus on satisfying the needs of specifically targeted segments (Mclovr, 2005). After specifying, the segments companies can choose to go for either cost focus strategy or differentiation focus strategy. Cost focused strategy: Although the company targets the masses but some individual segments are tailored more particularly, such as professionals, do-by-yourself, and do-for-me. The example of the cost focus strategy of Home Depot is its move towards the expansion of the contractor supply business (Ferrell and Hartline, 2012). As the company does not offer frill products and services to the do-by-yourself segment, therefore, it cannot be said that the company is acquiring a focused approach solely. However, to some extent, the company is doing so. Focus differentiation strategy: Home Depot has a focused approach in terms of differentiation strategy because firms who pursue a “focus differentiation strategy” produce or formulate highly differentiated services and products. The expo design center stores are the example of Home Depot’s focused approach that the company acquired to differentiate itself from competitors. These stores have a focus on interior designing services and products such as lighting fixtures, window treatments, flooring, cabinetry, appliance, and several different installation services (Plunkett, 2009).
2.2 Porter’s Five Forces Strategy:
Porter’s five forces model is a tool that is used to analyze the competitive position of the organization in an industry. By defining the competition, this model helps in examining the attractiveness of the sector (Hill, Jones, and Schilling, 2014). This framework has been selected to explore the operations and competitiveness of Home Depot in the global market (Henry, 2011).
2.2.1. The threat of New Entrant:
According to the research report of IBIS World (2015), the annual growth of the home improvement industry is 4.1 percent. In the United States, the industry has moderate barriers to new entrants due to high start-up costs and relative labor availability because the industry is labor-intensive. Low regulations’ level in the retail sector also plays a significant role in keeping the barrier at a moderate level. Home Depot is a dominant player in the United States. Therefore, the threat of new entrants is not high for the company (IBIS World, 2015). The company can deal with the competition with its more significant presence, high availability of products, and services (Spencer, 2013). A similar situation is present in Canada and Mexico. The company poses barriers to new entrants by having substantial control over the market. Also, the reason for authority is the vast target audience from landscaper to electrician (Carlo, 2007; Floor Daily, 2015; Williams, Champions and Hall, 2011).
The threat of new entrants is high in China for Home Depot because China allows all foreign countries to open their businesses in China at feasible conditions (Feng, 2014).
2.2.2 Threat of Substitute:
Hill and Jones (2011) described the threat of substitute projects or services as the service or product of different industries or companies that can satisfy the similar needs of customers. This is a potent source that can make a significant impact on the company’s profit. Home Depot’s substitutes come from different segments of the market, whereas it is providing all under one roof. Several businesses in the market that offer customers with construction equipment, tools, services, and raw material, but they do not serve customers with the experience of “one-stop-shop.” Therefore, the threat of substitutes is lower for Home Depot not only in the US but around the globe as well. More alternatives to Home Depot can be the new homes and choice of the customer to perform installation services of the product by themselves. But, currently, most of the customer prefers to take products from the market that limits the threat of substitute (DeFoe, 2013). In the case of China, the risk of alternatives is high for Home Depot because double-digit growth new home market has been witnessed in China (Feng, 2014).
2.2.3 Bargaining Power of Suppliers:
The bargaining power of suppliers is moderate for Home Depot in the USA, Canada, and Mexico. It is so because an individual can serve suppliers with an enormous profit. Still, Home Depot as big retailers and can make a considerable investment that encourages suppliers to help Home Depot. Home Depot’s large-scale power to purchase material and availability of online sellers such as e-bay and Amazon does not let the suppliers at the dominant condition. However, in China, the case is opposite the bargaining power of suppliers is high because of multiple big-box retailers. Unlike foreign suppliers, Chinese suppliers have self-sufficiency to manage their products; they prefer to bear the cost of inventory storage rather than have late payments from retailers (Feng, 2014).
2.2.4 Bargaining Power of Buyers:
There are numerous buyers in the industry. However, considering the financial strength, then only a few buyers exit. Buyers demand high-quality products within lowers possible prices. This demand for buyers is driving down the profit of the industry. Home Depot offers unique services to its customers and operating its operations successfully in America, Mexico, and Canada. Therefore, the bargaining power of buyers is low, except for China. In China, the bargaining power of buyers is high because the Chinese home improvement industry includes several individual players that provide customers with different choices.
2.2.5 Rivalry of Existing Competitors:
Rivalry refers to the struggle that companies make to grasp the market share. The existing rivalry for Home Depot in the global market is intense due to the fragmented market, but for Home Depot, the only close competitor of Home Depot in the US is Lowe’s Companies. Other global competitors include RONA Inc, TRUE VALUE Company, MENARD Inc, and Home Hardware Store Limited (Hoovers, 2015a; Hoovers, 2015b). In China, the rivalry is intense for Home Depot because the government supports its player against foreign players. This leads to a higher number of competitors that have outperformed Home Depot in China (Feng, 2014; Hub Pages, 2013).
Hence, common the situation is moderate in the industry, and the Home Depot enjoys a strong position due to its location. It is also essential to understand the situation in China is different as compared to other cases.
2.3 Bowman’s Strategy Clock
Bowman’s strategy is a tool that is used to examine the competitive position of the organization and its offerings as compared to competitors. It is done by considering its cost and competitive differentiation advantage (Brown, 2002). Bowman and Faulkner (1996) made an expansion in Porte’s five forces model based on perceived value and price. As a result of development, they extended five dimensions into eight. The eight strategies include low pay and low-value approach, low price strategy, hybrid strategy, differentiation, focused differentiation, increased rate, and standard product, high price and low value, low value, and standard price (West, Ford, and Ibrahim, 2010). It is determined that the most suitable competitive strategy at the global level is the combination of low cost and differentiation strategy. In line with the fact and having done the detailed analysis of the strategy of Home Depot, it has been realized that Home Depot uses a hybrid approach without any discrimination in terms of countries.
Home Depot, instead of acquiring any particular strategy, has a focus on hybrid strategy. It does so because a hybrid approach allows companies to lower the price as compared to rivals, and offer enhances perceived value. Through the adaptation of hybrid strategy, Home Depot simultaneously achieves lower price and differentiation as compared to other industry players and separates its position from them. The company understands that there is no trade-off between cost and differentiation and, therefore, offers its customers with high-quality products and services at a low price (Palepu and Healy, 2007). This strategy is not for any particular state or country. Instead, the company deploys the same approach in the United States, Mexico, China, and Canada. Home Depot achieved cost leadership advantage through economies of scale. It differentiated itself through robust marketing techniques, store size, and operations and through providing a more extensive range of products and services. The company offers more than 4000 items. Company target do-it-yourself customers. This implies that customer builds their product and transport it as well that in result, allows Home Depot to reduce the prices through saving transportation and customer service cost. According to Miller (1992), a combination of two strategies leads companies to optimistic results; however, halfway position ends up with negative consequences (Campbell-Hunt, 2000). The hybrid strategy led Home Depot towards success in different markets because this strategy is appropriate for different scenarios (Utrilla et al., 2012). The company came with the concept of everyday low cost and differentiated itself in multiple ways from competitors. Differentiation was introduced in terms of services, and a broader product range and its large size of stores are the significant examples of hybrid strategy.
3 Trading Across Borders
3.2 Company’s Dealing with Diverse Cultures Using Hofstede’s Dimensions:
When companies go global, they have to deal with different cultures because each country has a different culture. Hofstede presented cultural dimension through which states can be differentiated that include:
3.2.1 Individualism (IDV):
Individualism refers to how people perceive themselves. High individualism represents individual initiatives. Working in high individualistic culture, Home Depot has to give people the freedom to express ideas. Instead, value cooperation should encourage competition; speak the truth instead of saving employees from embarrassments such as the United States and Canada, Netherlands, Australia, and Great Britain. Low individualistic culture demands opposite behavior, and countries with low individualism include China, Mexico, Thailand, Pakistan, Taiwan, and Peru (Walker, 2014). In a low individualistic culture, Home Depot needs to acquire a transformational leadership style (Jung, Bass, and Sosik, 1995).
3.2.2 Power Distance Index (PDI):
This is the way to examine the inequalities among people. In high power distance countries, Home Depot needs to implement the autocratic leadership style, and leaders must have control over employees and supervision (Elenkov, 1998). In contrast, in low power distance culture, Home Depot should give access to employees to reach managers, and a teamwork environment with a subordinate’s consultation should be provided (Falkenreck, 2009). In Canada and the USA, the power distance culture is low, and in Mexico and China is high (ITIM International, 2015). This represents the need for a participative leadership style, so allowing all to have a higher level of realization that their words and efforts are valued, instead of creating more power distance (Elenkov, 1998).
3.2.3 Uncertainty Avoidance Index (UAI):
It shows the tolerance level of uncertainty. Countries with high uncertainty avoidance prefer to avoid risk due to established rules, regulations, and laws. In such a culture, people avoid taking the initiative to try new things. In such cultures, Home Depot needs to follow the transactional leadership style. In contrast, with low UAI, Home Depot will have a chance to take advantage of people who seeks opportunities and ready to take the risk. All countries in which Home Depot is operation have low uncertainty avoidance except Mexico (ITIM International, 2015). They are comfortable with ambiguity, open to change, and do not rely on rules (O’Connell, 2013). Therefore, transformational leadership will be acceptable for people in such countries (Jung, Bass, and Sosik, 1995). It is similar to the Internal Direction Versus Outer Direction aspect Trompenaar’s Seven Dimensions (Mind Tools, 2015)
3.2.4 Masculinity (MAS):
In high masculinity cultures, Home Depot has to follow the religion of high stress and encourage internal competition through a transformational leadership style. Due to inequality in genders, the company will not have the opportunity to take advantage of diversity. In such a culture, the workforce is highly motivated and career-oriented, so Home Depot can motivate them by providing career opportunities and incentives. However, in low masculinity culture due to equality in genders company has the best option to take advantage of diversity (Ohlsson and Ondelj, 2007). In such cultures, Home Depot should give preference to a participative leadership style (Austen, n.d). China and Mexico have high gender differentiation as compared to Canada and the United States (ITIM International, 2015).
3.2.5 Long-Term Orientation (LTO):
Cultures with high long-term orientations refer to quality products, and people prefer to take quality products regardless of price (Hofstede, Jonker and Verwaart, 2008). In high LTO culture, servant leadership behavior will be valued (Sokoll, 2011). Unlike other countries, Home Depot had to face high long-term orientation culture in China (ITIM International, 2015). Home Depot, while having operations in such countries, must avoid low-quality products. However, in low LTO culture, Home Depot can take advantage of short contracts. People of the organization can be motivated through rewards and incentives that are short term based.
3.3 Company’s Approaches to Internationalize with Trompenaar’s Seven Dimensions:
Home Depot needs to have a clear understanding of cultures before expanding business at the global level. For this reason, Trompenaar’s cultural dimension has been discussed to separate cultures in this section. The section only identifies the aspects that are not addressed in the Hofstede’s based on assessment.
3.3.1 The First Dimension is Universalism Versus Particularism:
Expanding in countries having universalistic culture, Home Depot has to follow the rules, must keep its words to create trust, and the contract will be readily available. In such cultures, like the USA and Canada, Home Depot leaders have to be organized and must cater to defined rules and code of conduct. In contrast, countries having particularistic culture companies will have the opportunity to modify contracts. The relations building for the business transaction is essential and has the chance to bring change with mutuality (Trompennars and Hampden-Turner, 1997). In a particularistic culture like China, Home Depot needs to be situational (Kippenberger, 2002 and Mindtool, 2015).
3.3.2 Second Dimension is Neutral Versus Emotional:
Countries with neutral culture include France, Germany, Finland, and the Netherlands. People in neutral culture keep emotions in control, understand, and interpret emotions carefully (Trompenaars and Voerman, 2009). This does let the emotions interfere in professional life that boosts diversity and, in return, innovation. In neutral culture, People in Canada, China, and the USA are less emotional; therefore, to inspire the preferred leadership style should be charismatic (Lumpe, 2012).
3.3.3 Third Dimension is Specific Versus Diffuse:
People in countries with particular cultures keep personal and professional life separate, communication is well clear, and personal relations are not mandatory to have business transactions (Trompenaars and Voerman, 2009). This, in turn, will help Home Depot in having success. For example, the USA has a specific culture and is less influenced by relationships. However, Chinese believe in the impact of the relationship on business so has a diffuse culture (Mindtool, 2015)
3.3.4 Fourth Dimension is Synchronous Time Versus Sequential Time-Oriented:
Home Depot, while expanding business in countries like the USA, having subsequent time orientation, has to give high value to time. The importance of timely planning, scheduling, and punctuality is high in such cultures. From specific to diffuse characteristics, it can be presumed that Chinese people would be inclined towards the time-synchronous. Also, the people of Mexico are synchronous (Mindtools, 2015).
3.4. Cultural Approaches of Company with Hall Theory:
To make negotiations, manage employees, and agreement specific, and it is essential to understand cultures. Edward T. Hall was an anthropologist who presented the high context and low context cultural theories.
3.4.1 High Context Culture:
Countries that are having a high context culture include China, Japan, most of the Asian and Middle East parts). These countries are contemplative, intuitive, and collective (Elvin and Garnijanto, 2013). In such lands to be a successful company, it has to develop trust for business transactions (Hooker, 2008). Countries with high context have values relations. Therefore, motivating employees in such a culture can be done by the organizational environment should be comfortable with them. Hence, Home Depot to take work from employees and to motivate them will have to build a team-oriented culture. In high context culture, Home Depot’s leaders have to be more formal and indirect to employees. Elaboration of apologies flowery language and humility are typical, and rules in such countries are not strict (College of Marin, n.d). In this situation, Home Depot should adopt a situational and participative leadership style.
3.4.2 Low Context Culture:
People in low-context cultures are action-oriented, individualistic, logical, and linear. Such culture includes countries like Canada, Australia, and the United States, much of European countries, the UK, Germany, and the Netherlands (College of Marin, n.d). Home Depot, to motivate employees, has to give individual recognition; for being successful, they have to promote facts. Problem-solving will not be based on institutions employees are rationale. While promoting products and services to customers, Home Depot will have to be efficient in telling features, concise and straightforward. In such countries, legal documentation is required, and the law is strict (Kleindle, 2006). In such cultures, leaders need to be more direct and informal.
Based on the above analysis of culture, it can be concluded that Home Depot has to review the details of the country’s culture. All the nations of Home Depot share some cultural factors and have a difference in some aspects. Therefore, there cannot be one size of the culture and leadership that fits fall. Hence, collectively situational and participatory leadership is essential for the Home Depot. The former will allow the business to change its direction as and when required. While on the whole latter option will provide employees with an opportunity to effectively and efficiently contribute to the company’s performance and growth.
3.4 Product Technique Company Uses and Advantages and Disadvantages of Approach:
Companies, when going global, have two options for the production of their products. Either they can choose to produce through adaptation technique or can utilize the standardized procedure. According to the standardized approach, companies provide the same products and services for all countries. Through adaptation techniques, companies adapt features that are required or in demand to provide the product (Vrontis and Thrassou, 2007). Home Depot uses standardize the approach, the advantage of this approach to Home Depot include lower marketing communication cost to elaborate the differentiated or adapted features to each country. Standardization allows Home Depot to gain the advantage of economies of scale through the purchasing of larger quantities similar to products. Consequently, it will enable the company to offer lower prices as compared to competitors in different markets with high quality (Katz, 2015). standardization also enhances the manufacturing experience and leads to enhanced quality. Moreover, standardization improves the speed of Home Depot to market (Gillespie and Hennessey, 2010).
Each approach has some advantages and disadvantages so as standardization-standardization. Despite several advantages, this approach has some problems as well. Standardization does not consider the differences in demand and culture of countries (Madar and Neacsu, 2010). Companies due to standardization lose their uniqueness; responsiveness is lowered, and customers may not find any value; same as happened in China, a company had to shut its stores (Christ, 2012). Therefore, when companies go global, they must have to examine the demands of the country before the implementation of standardization.
3.6 Fail In China:
China is an essential market for leading companies and cannot be ignored because of the significance of the number of consumers. The growth of spending shows significant growth for companies in China. Home Depot took the initiative in China through acquiring “the home way.” The Home Way is a giant retailer with a presence in six cities of China with 12 stores in 2006 (PR NewsWire, 2006). Home Depot failed to maintain its competitive position in China, unlike other countries, and could not create dominance. Among many reasons, the prominent one reason due to which company failed in China was the standardization approach of Home Depot to product and services. The company considered China as any other market and could not realize the unique needs of the country or could not give the country deserved attention. The company used the same techniques as it was used to apply in other markets and the USA. A Chinese market that was different from other countries due to high competition, product differentiation, and low-cost offers. Therefore, China requires special attention to be successful in the market, and companies have to adopt the techniques accordingly (Christ, 2012). Another factor that made the Home Depot failure in China was the wrong target segment. The company deployed a do-it-yourself strategy to target the market, but Chinese culture is based on do-for-me psychology, unlike the USA. The company misjudges the culture of China as the spokesperson said, “the market trend says this is more of a do-it-for-me culture” (Cullen and Parboteeah, 2013). Another cultural issue that occurred in China was that Home Depot sales persons used to wear an orange apron that is considered the signal of the knowledge and expertise market. However, the use of orange culture in China gives impression lack of authority that discouraged Chinese to ask for advice from people with less power (Feng, 2014). Lack of understanding of culture failed in China.
4 Enhancing Business Through the Utilization of Theories
4.1 Expanding Business Through Incremental Internationalization Theory:
May Home Depot consider expanding its business to strengthen its market share. The success and failure experience have also given home depot an idea that it must keep abreast itself with local factors in winning the market. Therefore, the company, before expanding business, must have a thought that what expansion strategy will be best for it.
In this section, some expansion theories have been explored. It has been determined that there are several ways through which organizations can expand internationally and domestically (Kim and Mauborgne, 2015). Scandinavian has presented a model for global business expansion recognized as incremental internationalization. According to the model, there are some stages through which a business can expand internationally. The author sought exports as an entry mode to the international market (Buckley and Ghauri, 1999). According to this model, Home Depot has an opportunity to expand its business by making exports in other countries. Later, based on the response, the company can identify changes that are required in its way of doing business in the respective market. Home Depot can also choose an independent agent for the establishment of a sale subsidiary and then for the formulation of manufacturing and production plant in that specific country (Morrison, 2008). Attainment of knowledge is an essential factor that plays an immense role in the failure or success of the company in foreign markets (Musteen, Datta, and Butts, 2014). This approach will allow Home Depot to gain knowledge and experience related to the international market. As the knowledge and expertise of the organization increases, it can enhance its business in the foreign exchange. The advantage of this approach to Home Depot will be that it will not have to face maximum risk (Morrison, 2008).
4.2 Expansion Of Business With Eclectic International Model:
Dunning proposed the eclectic model of internationalization. According to this model, foreign direct investment is the way to expand the business internationally. According to this theory organization’s tendency to be involved in international expansion enhances; if it has ownership, location, and internationalization advantage (Rubaeva 2010). Moreover, according to this theory organization having technological expertise, more significant resources, higher ability to innovate, excellent employees with experience, and have good organization, management, and marketing system as compared to organizations already working in the foreign market has an opportunity to expand the business internationally. They must have economies of scale and mixed supply sources. Home Depot has these qualities and ahs an ability to grow the business globally. Home Depot also expands the business by realizing the location advantage. For example, the host country has the power of foreign direct investment due to the economic gap. Home Depot can take advantage of internationalization (Danciu, 2012).
4.3 Expansion Of Business with Uppsala Theory of Internationalization:
Uppsala is another model of internationalization through which home depot can expand its business activities at the international level. The reliance on this model is to knowledge and learning. According to the theory of Uppsala, firm-having lack of knowledge cannot be successful in international markets. Home depot to be successful in global markets, have to gain experience of more international activities so that the obstacles can be reduced (Lakomaa, 2009). Home depot, due to its lack of understanding of cross-cultural activities, has been failed in China. Therefore, it has become essential that the company considers the international operational activities before making an expansion. The Uppsala model is also recognized as progressive modes, and by following it, the home depot has an opportunity to enter the foreign market regularly.
Source: Danciu (2012)
The Uppsala model presents four stages from which first is sporadic export. Home Depot can start expanding its business in the close psychic market; through this technique, the company can gain knowledge and can get experience, and when it has control over both, then it can expand into a more distant market. The second approach is export modes, Home Depot after having basic knowledge can choose to go international through direct exports by selecting agent; the lower the risk, the higher the commitment of the company to expand in the market. The third stage is a foreign sale subsidiary; once a company has full knowledge and has an idea that the company will grow, then home depot can establishment its international sales subsidiary. The last stage is the establishment of an international sales subsidiary and production or manufacturing subsidiary. Once a company has the expertise, reliable distribution channels in the international market, assurance of success, then the company can establish its production plant to show its presence (Danciu, 2012; Digi Pro, 2012).
Irrespective of the model to be employed, one factor that is prominent in almost all models is the impact of the knowledge that a business must have about the market. For instance, based on the failure of the company in China, it has been well understood by the management that one size does not fit for all. Therefore, the business has to strike the right balance between standardization and customization or adaption while maintaining its economies of scale advantage.
This paper has aimed to prepare the report on Global performance and cross-cultural management of Home Depot. To gain the scientific paper has been distributed into four segments. In the first segment, it has been determined that home depot is a successful company and dominating the home improvement industry. The company operates 2200 stores all over, Canada, Mexico, China, and the United States and targets Professional customers, do-it-for-me customers, and do-it-yourself customers. Theories that have been used in this paper include porter’s generic strategies, porter’s five forces, bowman’s strategy clock, and cultural management theories. Business expansion theories include Uppsala’s internationalization theory, various internationalization theory. Moreover, cross-cultural methods include Hofstede’s aesthetic theory, Trompenaar’s Seven Dimensions, and the hall’s cultural theory.
The second chapter is comprised of comparative analysis of home depot, and to analyze the competitive position of home depot, three subsections have been presented in section two. The first sub-section examines the competitive location of home depot through Porter’s generic strategies, and it has been observed that pricing has a significant role in home depot’s success. Home Depot acquires cost leadership strategy intending to offer everyday low prices and differentiate itself by having a more substantial amount of stores that are big as well. The company sells more than 4000 items, including garden products, appliances, flooring, lumber, tools, paint, and plumbing services. Even home depot offers installation services for carpeting, cabinetry, and other products. The company has a focus on cost and differentiation strategies. Moreover, the company used the standardization process in all countries, that is the weakness of the company because internationalization demands the adaptation of processes and products, according to the needs of countries.
It has been determined through the implication of porter’s five forces that the home improvement industry is growing at a 4.1 percent rate; the threat of new entrants is moderate in the USA but high in China. The risk of substitutes is high in China due to the double-digit growth new home market and low in the USA, Canada, and Mexico. The bargaining power is moderate for home depot in Canada, Mexico, and the USA except for China, because Chinese suppliers are self-sufficient, prefer to keep inventory rather than take late payments. Same as with bargaining power high in China, unlike other operating countries of home depot. The rivalry is intense at the international level for home depot. It has been determined that home depot is acquiring a hybrid strategy. The hybrid strategy led Home Depot towards success in different markets, but that will limit the competitiveness of the organization in the future due to dispersed focus. Therefore, the company must have a focus on one thing either on low cost or differentiation. Amongst many, this one factor made the company fail in China.
The third chapter discusses the cross-cultural dimensions by the application of Hofstede’s, Trompenaar’s, and Hall’s cultural theories. Home Depot had experience in working with high individualistic cultures, and China had a low individualistic culture. It has been examined that, unlike other countries, China has high power distance, high gender differentiation, and high long-term orientation. These differences tell that a lack of understanding of Chinese culture was another fact that led home depot to exist from the Chinese market. Therefore it has been suggested that to be successful at an international level, the company must have a complete understanding of cultural dimensions. Also, the company must have the expertise of situational leadership so the organization can mold itself in different situations.
The fourth section is an elaboration of the international expansion of the business. Theorists regarding international increases have discussed several theories, but only three suggestions have been made for home depot in this report. Organizations can choose to expand their business either through eclectic internationalization through Uppsala internationalization theory or by deploying the concept of incremental internationalization theory. The most appropriate method is the Uppsala theory of internationalization because it also covers the stages of progressive opinion.
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