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Home Depot in Chile

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Yang Cao

on 23 May 2014

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Transcript of Home Depot in Chile

Local competitors actively prepared for Home Depot's arrival in Chile

- Hiring new CEO
- Training the employees
- Opening more stores
- Improving logistics and services

- New store opening
- Existing store renovations

Home Depot
- Low volume purchases
- Bad purchasing conditions and prices

Buyers Power
- DIY market undeveloped in Chile
- Lack of time for home improvement chores
- Lack of information and tools
- Women are the main decision makers in Chile

Suppliers Power
- Bad relationships with suppliers

Threat of substitute
- Low cost of hiring a ‘maestro’

What strategy was Home Depot pursuing as it expanded into Chile - a multidomestic strategy, a global strategy or an international strategy? Explain.
Home Depot
Home Depot in Chile
An International Strategy
Lacked Knowledge of Local Competition
Home Depot does not understand their competitors.
Sodimac and Cencosud (competitors) had specific target market.
- Sodimac had two retail formats: Home Center/ Constructor
- Cencosud participated in a variety of retail businesses

Relationship with Falabella (partner)
Home Depot excluded Falabella from its operations and decision making process.
- Falabella had retail experience in Chile
- Falabella’ s executives had a strong network in Chile
Specialises in the sale of home and hardware products and services

Originated from the US with over 2000 locations, 340000 employees

Top 20 of Forbes Fortune 500 list
Firm Adaptation:

Low pressure for cost reduction
Low pressure for responsiveness*

Value created by:

- transferring skills/products to foreign market
- centralising product development

Entry into Canada was successful
- Less competition
- Similar cultural influences (individual vs family)

Acquisition based entry into Chile, did not listen to strategic decisions from local partners.
Management model
Home Depot’s executives did not have a strong network, and difficult integrate into Chilean society.

Although they were store managers in the United States and spoke Spanish.

Relationship with suppliers and competitors
Home Depot’s relationship with suppliers and competitors was not agreeable.

Prohibited employees and managers talking to competitors

Consumer Behaviour
Consumers in Chile are less willing to repair their houses by themselves

low cost of hire a ‘maestro’
long working hours left them little free time

Lack of a Target Market
Women are the main consumers in Chile, they prefer the novel products, and stores with aesthetic appeal.

On the contrary, Home Depot’s Stores are dull and uninteresting.

Strategy FAILED??


What could it have done to succeed in the Chilean market???
International Strategy Transnational Strategy

Tapered integration of Home Depot

Equal decision making with partners

Good relationship with partners, competitors, and suppliers

Build ‘Character based’ trust into company’s culture
Home Depot in Canada & Mexico & China
Acquisition as entry strategy
Acquisition of of Aikenhead home improvement centres in 1994

Acquisition of Total Home in 2001
Acquisition of Del Norte in 2002
Acquisition of Home Mart in 2004

Acquisition of Home Way in 2006

Why Mexico?
South America’s second largest economy

A large & fast growing & stable economy over the past decade

Mexican housing industry booming, government hopes to double housing supply by 2030

Mexican government has promoted home loans ——mostly for low cost housing through lending from public agencies as a way to stimulate the housing industry

Why Home Depot become the largest home improvement chain in Mexico with just few years?
Acquisition of similar & well-established company in Mexican market

Understanding culture & unique features

Well-established consumer relationship

Good relationship with suppliers customers

More than $1 billion in annual revenue

Acquisition strategy & Localisation strategy
Acquisitions Strategy:
Quick and already established
Market presence
Lower risk

Localization strategy:
Home depot moved away from its global strategy when entering the Mexican market
The Mexican subsidiaries took a local entrepreneur role within the company structure
Local employees and knowledge was utilized to maximize market presence and opportunities

Home Depot in Australia?
In your groups, access your given factor for the home improvement industry in Australia and how it will affect Home Depot's entry into the market
sourced from BUS301 Week 8 slides
What could it have done to succeed in Chilean Market?
Competition & Rivalry
Why do you think Home Depot's strategy failed?
Alexander N, Quinn B. International retail divestment. International Journal of Retail & Distribution Management 2002; 30(2):112-125.

Bianchi, C. C., & Ostale, E 2006, Lessons learned from unsuccessful internationalization attempts: Examples of multinational retailers in Chile, Journal of Business Research, vol. 59, pp. 140-47, viewed 19 May 2014, Science Direct.

Bianchi, C. C., & Arnold, S. J. 2004. An institutional perspective on retail internationalization success: Home Depot in Chile. The International Review of Retail, Distribution and Consumer Research, 14(2), 149-169.

Carpenter, M., Sanders, G., Rice, J. & Martin. N 2010 Strategic Management: A Dynamic Perspective. Australia: Pearson

Deresky, H, 2012, International Management: Managing Cultural Diversity. 2nd ed. Australia : Pearson

Dukcevich, D. 2002, “Home depot finds the world a small place”. Forbes

Kandogan, Y . 2010, Determinants of individuals’ preference for cross-cultural literacy: Role of international trade potential. Journal of World Business. Vol 46

Porter, ME 2008, The five competitive forces that shape strategy, Harvard Business Review, vol. 86, no. 1, pp. 78-93, viewed 20 May 2014.

The Home Depot Youtube Channel 2013. Let's Do This - The Project Bucket List Youtube. viewed 21 May 2014.

The Home Depot Mexico Youtube Channel 2014 Comercial Futbol Tigres Youtube. viewed 20 May 2014

Jiyu Gao 42898331
Lily Yuan Yuan Gu 42317819
Harrison Cao 43034578

What elements of the host environment affected the performance of Home Depot in Chile?
Competition & Rivalry

- Fragmented home improvement industry

- Three large home improvement retailers

- Ferreterias
Genius? or just Cocky?
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