Abstract Case Intro 1 Case Intro 2 Excerpts
Abstract
The case discusses the entry of the US-based home improvement retailer Home Depot into China and its subsequent exit from the country. Home Depot entered China in 2002 by opening a sourcing office in the country. After studying the market, it decided to acquire the big-box stores of the fourth largest home improvement retailer in China, Home Way, in 2006. It acquired 12 stores of the company located in 6 cities. Home Depot remodeled and re-merchandized the Home Way stores and the rebranded stores were opened in August 2007.
Within a short span of time, Home Depot realized that its Do-it-yourself model was not acceptable to the Chinese, who preferred home improvement related work to be done by laborers and contractors. The Chinese lived in small houses, and could not store home improvement equipment like ladders etc. Also, instead of buying all the home improvement related things at one place, the Chinese preferred to visit several specialty stores before they finalized the products they would buy. Home Depot also found that retailers operated in a different way in China, and merely provided suppliers with a platform to sell the products; that suppliers had their own network, and even provided after sales services.
By then the Chinese economy had started to experience a slowdown, which impacted retail sales adversely. Despite its best efforts, Home Depot's stores could not generate the kind of returns that it expected. It closed five stores between 2009 and 2011, and decided to concentrate on the remaining stores.
Even by late 2012, its performance was not up to the mark. Home Depot then decided to exit the big-box retailing in the country. However, it continued to operate through two specialty stores, and planned to develop the e-commerce business in China.
The case discusses in detail Home Depot's pre-entry strategies, its entry into the market, the strategies it adopted in the Chinese market, and its subsequent decision to exit the big-box retail in China.
Issues
The case is structured to achieve the following teaching objectives:
- Understand the nature of problems faced by home improvement retailers like Home Depot in emerging markets like China
- Study and analyze Home Depot's pre-entry and entry strategies
- Examine the reasons that prompted Home Depot to exit the market
- Analyze the home improvement industry in China
Contents
Keywords
Home Depot, China, Home Improvement, Do-it-yourself, DIY, big-box retail, exit, cultural difference, home ownership, unorganized market, specialty stores, economic slowdown, housing reforms
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FAQs
Chinese consumers found Home Depot's prices too high and non-negotiable. The rising middle class in China prefers to shop around for the best deals and negotiate prices, a practice that Home Depot's pricing strategy did not accommodate.
What percentage of Home Depot products come from China? ›
A JP Morgan research note from May put Home Depot's total sourcing exposure to China at 16% — 11% on list three. “We know down to the SKU level the point of origin, the classification of the tariff, the potential impact.
Is Home Depot still in China? ›
Home Depot entered China in 2006 by acquiring 12 stores from a Chinese company, Home Way. However, by September 2012 all Home Depot stores in China had been closed. This article uses the Home Depot's operation in China as a case study to stress that “culture” determines business models for international retailers.
What could Home Depot have done to avoid its mistake in China? ›
Explanation: Home Depot could have avoided its mistake in China by finding a balance between centralization and decentralization. While centralization can bring cost savings and streamline operations, it is also essential to empower local managers to make decisions that are more culturally and market-appropriate.
Why US companies are leaving China? ›
A recent study found that the cost of labor in China has increased by 15% in the past year, while it has remained stable in other countries. This has led to a number of companies relocating their factories to countries such as Mexico, the US, and Canada. At the same time, these countries offer lower labor costs.
What big companies are moving out of China? ›
Intel, Microsoft, Nike, and Dell have all recently signaled their intention to move some of their manufacturing out of China to different shores.
How much of Walmart stuff comes from China? ›
How much of Walmart's inventory comes from China? You're question should have been How much of Walmart's inventory comes from the USA. About 80% of Walmart's inventory comes from China. Today, 94% of Walmart products are made in China.
Who owns the largest percent of Home Depot? ›
Home Depot is mainly owned by institutional investors, who own around 70% of shares. The largest shareholders in December 2023 were: The Vanguard Group (9.49%) BlackRock (7.15%)
What percentage of Amazon is from China? ›
More China-Based Sellers on Amazon: According to Marketplace Pulse data, the majority of new Amazon marketplace sellers, 75%, now originate from China, marking a substantial increase from the 47% reported in January 2020.
What company did Home Depot buy out? ›
The agreement to acquire SRS was announced on March 28, 2024. "SRS is an excellent fit for The Home Depot – it's both complementary and additive to our growth," said Ted Decker, chair, president and CEO.
Today, the company directly employs 96,800 people in China and operates 357 Chinese stores. Walmart's supply chain includes some 30,000 Chinese factories, which produce an estimated 70 percent of all of the goods it sells.
Where is the largest Home Depot in the country? ›
The largest Home Depot is located in Vauxhall, New Jersey.
Why is everything I buy made in China? ›
However, the availability of cheap labor is just one of many factors that have kept the "Made in China" label on so many products purchased by consumers around the world. It will take more than low labor costs for emerging economies to set up a business ecosystem that can compete with China's.
How can I stop buying stuff made in China? ›
Another way that you can avoid purchasing products from China is to check the labels on them. Most commonly on clothing, you will find that within the labels there are disclaimers such as “made in China” or “made in India”. These labels can be found on other products such as toys, furniture and pottery.
How was Home Depot breached? ›
The Home Depot confirmed it recently experienced a data breach when a vendor mistakenly exposed some personally identifiable employee data as part of systems testing.
Why investors are pulling out of China? ›
BEIJING -- Investment in China by companies based abroad has sunk to the lowest level in 30 years, according to official data released on Sunday, in a sign that foreign corporations are leaving China due to tougher crackdowns on spying and U.S. sanctions.
Why are tech companies pulling out of China? ›
In 2021, both LinkedIn and Yahoo announced their withdrawal from China, attributing their decisions to escalating compliance costs and an increasingly challenging operating environment. A major consequence of retreating private investors has been an opening for the state.
Why did Ikea fail in China? ›
One of the main problems for IKEA was that its prices, considered low in Europe and North America, were higher than the average in China. Prices of furniture made by local stores were lower as they had access to cheaper labour and raw materials, and because their design costs were usually nil.
Who did Home Depot buyout? ›
The agreement to acquire SRS was announced on March 28, 2024. "SRS is an excellent fit for The Home Depot – it's both complementary and additive to our growth," said Ted Decker, chair, president and CEO.
