Business Proposal - Home Depot - Part 2 - Economics Essay Example
Home Depot opened its first home improvement store in Atlanta Georgia in 1978 - Business Proposal - Home Depot introduction. The company developed a tactical product analysis providing an assortment of products and services to customers. The products Home Depot offers focus on contractors and the do-it-yourself customers, as well as free how to clinics and workshops for children allowing them to build an item onsite in the store.
Home Depot has grown into an internationally recognized specialty merchant that markets and delivers 40,000 different building materials, lawn and garden products, home improvement supplies, appliances, and more than 250,000 other products that can be especially ordered (Unknown, 2003-2012). Home Depot has over 2,200 locations throughout the United States. Stores average 105,000 square feet with approximately 23,000 additional square feet of outside garden area” (Unknown, 2003-2012). Pricing Information Home Depot needs to have a good understanding what the customer needs and wants are.
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Home Depot’s annual report shows the domestic outlook of expectations on procurement policies and procedures; Home Depot has changed its procurement policies and buying procedures. One service that Home Depot has eliminated as part of the changes is the design centers for kitchens and baths. These design centers were a service to the customer who used Home Depot products in the designs of the kitchen and bathroom projects, the service didn’t improve productivity at its stores as many customers had Home Depot’s design center create the layout of the kitchen or bathroom but would purchase the items, such as cabinets, sinks, lights, etc. rom other home centers or online.
Home Depot’s operating strategy was to close its EXPO design centers and other internal businesses such as HD Bath designs. This would allow the business to focus on maximizing the stores productivity of the existing store base instead of offering services like kitchen design and bath design (Unknown, 2013). Provided is a solution to increase demand for a service, by adding features to its service or making shipping faster or being more reliable, Home Depot can reduce production costs.
The procurement process of Home Depot outlines the company’s supplier information within the reference manual. The Supplier Reference Manual provides information to ensure successful partnerships and collaboration between Home Depot and its suppliers. Home Depot’s ordering cycle includes electronic data interchange requirements, distribution information, purchase order methods, store environment conditions, manufacturing excellence, customs compliance, and transportation constraints (see Appendix A).
Home Depot’s electronic data interchange (EDI) system provides a resource for repeat supplier collaboration. Suppliers are encouraged to use the EDI system on a weekly basis to ensure business and supply chain needs and expectations are met. The EDI includes mandatory transaction sets, a product catalogue, image requirements, and computer system access needs. Distribution information includes product flows, freight requirements as well as product and packaging characteristics.
Home Depot clearly defines its distribution requirements to eliminate any confusion regarding its products, and shipping details. The information designates where product deliveries should be depending on point of origin, product, and final dispersal. The final requirements of Home Depot supplier reference manual include customs compliance and transportation. The Home Depot outlines how suppliers need to handle international imports or exports, from having the appropriate documentation to sufficient packaging and security. Transportation conditions include a routing guide suppliers follow.
Pricing strategies involve movement along the Demand curve (McConnell, Brue & Flynn, 2011) In a market with high price elasticity of demand, such as a monopolistic competitive market, a small reduction in price will have a large effect on demand. Non-pricing strategies involve shifting the demand curve to the right, such as by a TV advertising campaign. This is a common strategy in markets with low price elasticity of demand, such as oligopolies. Marginal Factors When operating from a global perspective, it is important to understand what atterns arise from the local markets.
Being able to provide resources to these local markets is a critical part for a company like Home Depot to institute. From Home Depot’s store support center a global resource merchandise program will be maintained, this will provide customers access to source high-quality products directly from manufacturers around the world. Profit is maximized when Marginal Revenue equals Marginal Cost, to use it, a business needs to know how much it costs to produce one more unit of a service.
A business can also use total revenue – total cost method (McConnell, Brue & Flynn, 2011). Profit is maximized when the total revenue and total cost curves are farthest apart. Conclusion Home Depot demands the highest levels of product quality, innovation, availability, on-time delivery, safety in production and shipping, compliance with laws and codes of conduct, and sensitivity to brand reputation is a major influence to the customer service strategy and innovation to products, policies, and procedures.
The variety of products, analyzing, shipping, import details, contracts information and processes broaden potential business movement controlled by procurement decisions and influences of policies. The relationship with many state and federal laws restricts and offer different business treatment and regulations. Choosing a combination of strategies having the biggest effect on demand in the company’s industry may be best.