Home Depot Business Analysis

It is no mystery as to why many successful big box companies, have decided to pack their bags and expand into a global market. From a pure business perspective it may seem like a gold mine of opportunity, an untapped well of potential, with millions - even billions of customers. However, simply implanting a culturally entrenched business model into a foreign market, without any modification, has proven difficult - even impossible for companies looking to expand eastward. Culture has proven to be a demanding, but invaluable concept to learn time and time again, and can mean the difference between bust and boom in a foreign country.
In 2006, The Home Depot, Inc tried its hand in the global scene by plunging head first into one of the world’s

Since 2015, the company operates nearly 2,000 stores just within the U.S making up 87% of their locations in the world, with the remaining 13% split between Canada and Mexico (post 2012 China pull-out) (MarketLine, 2016). Most of their products are catered to DIY or Do-It-Yourself customers, who favor high customization and individuality when designing home projects (Gao, 2013). A SWOT analysis performed by Market Line shows just how these characteristics, as well as domestic and foreign environments, mold their overall strategy. The pertinent information from this report reveals the reasoning for Home Depot’s success in the U.S., such as the external opportunities: a growing home improvement market, and a rising immigrant population (MarketLine, 2016). It also reveals, the associated weakness: an overdependence on the U.S market, which explains why in the late 2000s Home Depot began expanding outside of North America (MarketLine, 2016). While the expansion into China was an advantageous decision in regards to long-term growth, the weaknesses of an implanted business model in China, as well as threats from rival entities were not fully taken into

For centuries, the Chinese have maintained the idea that manual labor is disdainful, and it has a low social status attached to it (Gao, 2013). Many Chinese consumers prefer to pay someone else to design and build home improvements for them, and since labor costs are low, it is also economically viable (Gao, 2013). The underlying cultural dimension is, of course, the idea of power distance. In the U.S. where the power distance is 40, individuals are not as afraid of the idea of designing and building something themselves as there is less of a social hierarchy preventing them from engaging in certain behaviors (Hofstede Insights, 2018). In China, where the power distance is 80, they are more willing to accept the idea of inequality/hierarchy and typically avoid actions that are deemed to be low class (Hofstede Insights, 2018). So for the middle-class Chinese (a segment that Home Depot uniquely targets and depends on), Home Depot was perceived as a place for poor people (MarketLine,