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Timothy Byrne

on 2 October 2013

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Home Depot in Chile
and IKEA

Presented By
Timothy Byrne 17463616
Peter Mystegniotis 17465494
Eric Francisco 17247290
Jonathan Tanudjaja 17309178

Question 1
1) Conduct secondary research and give an overview of this company’s ownership, nature of business, size, product range etc. Show in a geographical map the country locations of its stores. What strategy was Home Depot pursuing as it expanded into Chile—a localisation strategy, a global strategy or an international strategy? Justify your answer. .

Founded by Bernie Marcus and Arthur Blank in 1978 along with investment banker Ken Langone and merchandising guru Pat Farrah.

Home depot’s vision was to create a one-stop shopping experience for D.I.Y enthusiast.

The first store was opened in Atlanta, Georgia in 1979 that stocked large qualities of generic and diverse products to cater for any D.I.Y enthusiast.

The Home Depot vision

The strong emphasis on customer services has molded the reputations that have today

Providing demonstrations, advice and expert knowledge from once tradesmen.

Home Depot philosophy of customer services “whatever it takes”.

Going the extra mile for all customers.

Home depot has revolutionized the home improvement industry by bringing the know-how and the tool to the consumer by saving money.

“More saving, More doing”

Company nature

Home depot is the fastest growing retailer in U.S history.

Home depot is the world’s largest home improvement specialty retailer, with more than 2200 stores in the US, Canada, Mexico and China.

Home Depot offers a wide range of products and services with over 40,000 of different inventory consisting of building, appliance, landscape and home improvement suppliers to assist any D.I.Y job.

The first store opened up in Chile with 400 Chilean associates and a partnership with a prestigious local retailer Fallabella.

Company profile

Create value within the Chilean market by transferring their core competencies.

25% of the total home improvement market share belonged to three large home improvement retailers (Sodimac, Censosud and home depot).

Opportunity to expand and internationalizes seemed very profitable for home depot

Home depot’s International strategy

Home depot aim to increase profitability and profit by lowering global cost through economies of scale using their buying power and partnership knowledge for local product sourcing.

Home depot provided low priced products at competitive prices.

Due to poor sales of low priced products this resulted in a negative effect to economies of scale

Home depot’s global strategy

Home depots global presence has expanded internationally in Canada in 1994, Mexico in 2001, South America in 1998 and China in 2006.

Home Depot’s Global presence

Question 2
Question 3
Question 4
Conduct secondary research about Home Depot’s operation and performance in Mexico.

Analyse the potential effects of the cultural, political and economic environments of the host country (MEXICO) on the company’s performance in Mexico.

To which of these environmental elements would you attribute the superior performance of this company in Mexico? Justify.

Home Depots international operations represent 12.3% of its worldwide presence
Entered market, May 2001
2001, Acquisition of Total Home, a local home improvement chain
2002, acquired Del Norte
May 2001, acquired Home-Mart, second largest home improvement chain in Mexico

Conduct secondary research about Home Depot’s operation and performance in Mexico.

Operates 101 stores throughout Mexico
Employs more than 9000 locals in its stores
Annual growth rate of 10 percent
Annual sales of $1billion

Conduct secondary research about Home Depot’s operation and performance in Mexico.

Culture: Importance of Family, Hierarchy, Rank and personal relationships. Father as the figurehead. Respecting authority. The only way to know a person in Mexico is to know the family.

Politics: Stable due largely to the successful transition from a single party rule to multiparty elections. Mexico has signed several free trade agreements with Japan and the European Union.

Economy: Latin America's second largest economy is heavily dependent on oil and remittances from migrant workers in the US, but has seen a boom in foreign investment since the recession of 2008-9

Analyse the potential effects of the cultural, political and economic environments of the host country (MEXICO) on the company’s performance in Mexico.

Mexico’s economy has been on a steady rise over the past decades.

The Mexican Government planned to spur construction of 16 million houses by 2030, a goal which would nearly double the nation's current stock.

Mexico's housing market is as healthy as it is sick in the United States, as Traditional bank mortgages have also become much more affordable in recent years, with interest rates approaching U.S. levels.

To which of these environmental elements would you attribute the superior performance of this company in Mexico? Justify.

How and why Home Depot failed in Chile

Shifting from a globalisation strategy to a transnational strategy
Tapered integration plan. Home Depot supplies both to general consumers and small businesses such as the ferreterias.
Adapted and more friendly work policies and managerial practices allowing native workers to participate in meetings and decision making.
Should of taken advantage of falabella experience

For Home Depot to be successful in Chile

Improving their relationship with suppliers and competitors
Importance of personal relationships
Do as Chileans do
Getting to know them and their family as a majority of Chileans are a collective society
Develop Home Depot to be more attractive to females

For Home Depot to be successful in Chile

Using transnational strategy and rapid acquisition of their competitors
In contrast to Chile the native workers were allowed to share their knowledge adjusting their strategy for Mexicans
Using the reputation of their companies’ they acquired.

How and why Home Depot was so successful in Mexico?

Question 2
2. Describe and assess the performance of Home Depot in Chile. Analyse the potential effects of the cultural, political and economic environments of the host country on the company’s performance in Chile. To which of these environmental elements would you attribute the poor performance of this company? Justify.
No negative impact on Home Depot
Stable Democratic Government
Encourages foreign direct investment
Asian Financial Crisis of 1997
GDP per capita to drop around 10% for 1999
Question 1
Home Depot history
Question 3
In all 50 States of the U.S
Over 2,200 stores in U.S, Mexico and Canada
Mexico 2001
More than 60 Stores
Canada 1994
More than 180 stores
Chile 1998
Planned 40 stores in 3 years
China 2006
12 stores, failed in 2012
Question overview
Question 1: what strategy/ strategies did Home Depot use when expanding to Chile ?

Question 2: What were all the geographical locations of Home depot on a World map

Question Overview
Question 1: In 2013, Home Depot became Mexico's number one home improvement retailer. What year did Home Depot enter the Mexican market and how many stores do they have now in 2013?

Question 2: Mexico and the U.S share its land and sea borders. What trade agreement do they have and which countries are involved

Quiz Questions
1) Who were the founders of Home depot ?

2) What is the Home Depot Slogan ?

3) What were the countries Home depot went to ?

4) The DIY culture in Chile was not yet established as cheap laborers called ___________ were used for jobs

5) A popular Mexican saying related to business states _____________________________________________ ?

6) What was the name of Home depot Chilean partner

7) How many Home depot stores are there today worldwide ?

8) What were the names of the companies Home depot acquired in Mexico

QUIZ Answers

8) Total HOME, Del Norte and Home Mart
Business Culture
People working in the same industry should share information and have good relations with others in the same industry
Communication with people and businesses that you are working with is essential to a good work relationship
Social Culture
Women choose places to shop mostly on weekends
Jobs are mostly done through cheap labour known as Maestros
DIY culture and attitude still was growing and the knowledge and tools required were not prominent parts in Chilean culture
Review Question
1. Out of the environmental factors that I have just listed, what was the main factor that impacted on Home Depot's performance in Chile?
Home Depot didn't treat their suppliers with the business etiquette that was part of Chilean culture leading to irritated suppliers and some ceasing business operations with Home Depot
Stores didn't appeal to women and in doing so lost the business of lots of men in doing so
The DIY culture just wasn't big enough and Home Depot found they only had a very small market that was already taken by other competition
Review Questions
2. What other factors would associate with Home Depot's failure in the Chilean Market?
Other Factors
Competition was strong and they anticipated Home Depot's arrival and expanded leaving Home Depot with little to none of the market share.
Didn't use the local knowledge of their local partner
Tried to perform how they did in the US without adapting to Chilean culture
1) Bernie Marcus and Arthur Blank founded home depot in 1978 along with investment banker ken Langone and merchandising guru Pat Farrah
2) "More saving, More doing"
3) Canada, Mexico, China and Chile
4) Maestros
5) "North Americans live to work, but Mexicans work to live!"
6) Falabela
Over 2,200 stores in U.S, Mexico and Canada
Home Depot used a global strategy for their products and services in Chile
They failed to study their target markets and the social customs and trends in Chile
Long hours at work
Cheap labour

How and why Home Depot failed in Chile
Employees felt restricted even business partner falabela had little influence in decision making
Underestimating the competitors, maestro’s and ferreterias
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