(战略管理 外部环境分析案例模版)Home Depot Asia.doc

1. Conduct a complete study of Home Depot Asias external environment and identify the critical strategic factors in each of the following areas: a. The General Environmentb. The Industry Environmentc. The Competitor EnvironmentBased on your analysis, do you agree with The Home Depots decision to move into China?The case content provides a great deal of information about the external environment for Home Depot Asia, specifically homeownership conditions in China and the home improvement market in which the company plans to participate. These environmental conditions present relevant opportunities and threats that will impact the success of company expansion efforts.The General Environment. Assessing the general environment focuses on a companys future and the forces that will influence its growth and performance. The table below outlines segment conditions and the potential opportunities and threats that they present. Opportunities ThreatsEconomic Segment*See regional differences in table belowFastest growing economy in the worldSecond largest economy in the worldPer capita GDP $1,703 (varies by region)Increasing productivityVillage enterprises being set up in rural areasPromotion of self-managed state-owned enterprisesIncreased competition in marketplace10% growth rate in agricultural and industrial output Doubling of per capita incomeMajor industrial gains, especially in coastal areasInflux of foreign capital driving up industrial output of domestic and export goodsPrices accelerating Increased trade2008 Olympics - huge investments State bank lending readily available to home buyersProperty speculation moving westward from east-coastal regionAgricultural output steadily declining since 19851998-1999 Asian Financial Crisis: growth fell to 7.1% in 1999, inflation dropped sharply 1995 to 1999, tighter monetary policy of central banks, stronger measures to control food pricesLarge economic disparities between rural and urban regionsUnemployed rural farmersIncreasing mortgage and consumer credit liabilities (from 0 to 11.6% GDP)Risky property bubble - incomes rising with property prices, making them affordable beyond valueOpportunities ThreatsDemographic Segment Income and purchasing power increasingPopulation 1.3 billionOver 100 cities populated with over 100 million peopleGrowing middle classRegional income variationsPolitical/Legal Segment *See regional differences in table below1998 Housing Reforms - encouraged home ownership/ housing subsidies to make purchasesShift from centrally-planned economy to market-oriented economy Agricultural Reforms (decollectivization and return to household farming)Increased living standardsDismantled commune system2000 Special Economic ZonesJoined the World Trade Organization in 2001 - reducing tariffs, import quotas, and subsidiesOpen policies attracting foreign companies Rural Land Reform - written land-use contracts issued to peasants as legal basis for transfer of propertyNew breed of property lawyers to protect owner rights from the stateHousing prices regulated to favor construction of more affordable housing for lower-income levels 2005 City governments ordered by state to contain rising housing prices - interference with market - primarily in Shanghai - 15-20% price reductionUncertainty of policies and government actionsState-controlled economy with price fixing can impact performance - margins are already lower than in other national markets Sales tax imposition, a disadvantage for foreign retailersConnections required for zoning and licensing approvalsConnections required for securing prime locations - land allocation for retailers, foreign firms get less prioritySociocultural Segment Rapid urbanizationGreater decision-making powers for peasant farmersDesire for clean environment around homes - increase in Green ActivismCommunity expectations beyond the need for shelter and toward tailored pleasantriesDisposable income of $1,000+ per year for home improvements in 40 million households (and increasing rapidly)Home ownership increasing 30% per yr.Looking for Westernized products/brandsUpwardly mobile consumersRural social unrestMass migrations to cities searching for jobsLow quality labor - requires more workers to meet service level expectations and win customer trustBargaining consumer mentalityShareholders may resist supporting the controversial Chinese regimeGeography:*Regional ConsiderationsPolicy and ImpactEastern Coastal61% GDP - inflow of foreign direct investment - rise of industrial joint venturesUrban-biased industrial development strategy over agricultural developmentCentral27% GDPWestern12% GDP - unemployed rural farmersMigration to cities, social unrestOf particular importance to Home Depot Asia are the private housing market conditions (outlined below) that emerged after the housing reforms of the late 1990s. Rapid growth - home ownership encouraged, financing provided, incomes rising. Property investments on the rise. Real estate investments 8.65% GDP, 9.3% expected in 2006. Property under construction 28% GDP - growing 33% per year. Homeownership skyrocketing (from 0 to 70% in ten years). Property market has become a source of urban wealth (investment vehicle where stock market fails to create returns). Expectations evolving from shelter to pleasant, tailored homes. Increases in commercial housing, completed construction, sales volume, and housing purchases. Increasing real estate prices. Growing private wealth. New construction without finished interiors developed. Estimated 200 million sq. meters residential housing to be built 2010 (70 million homes in next ten years). Twenty-two percent of urban dwellers hope to purchase new home within next five years - to be financed mainly by savings (cash business). Relaxed banking restrictions on home loans. The country is undergoing rapid urbanization, which has led to a steep rise in urban real estate prices and a need for home interior decoration and improvement services. After purchasing a home, Chinese consumers must:1. Select a contractor for design, decoration and finishing services.2. Develop a home design plan in conjunction with the contractor.3. Select and purchase construction materials, either through the contractor or in consultation with the contractor or by the homeowner himself.4. Agree to the finishing schedule and pricing.5. Allow time (on average two to three months) for the work to be completed.6. Conduct the final check of the whole project when finished.Those consumers who buy a home where the finishing work has already been completed still need access to innovative home-related merchandise and services at attractive prices.The Industry Environment. Analyzing the industry environment highlights the factors and conditions that will impact a firms profitability within its industry. The home improvement market on Chinas mainland is presently the most promising in the world, with $50 billion in sales in 2005 and growing at 12% a year. Some of the resulting opportunities and existing threats are outlined in the table below. Opportunities ThreatsRapid growth - projected continuation of growth of 10-20% each year - estimated at $50 billion/yearNew construction finished by homeowners rather than contractorsInstallation services - offer complete package to entry-level homeowners (about $6,000 for 900 sq. ft. apartment)Domestic retailing is over-specialized - DIY model save customers time and energy for home finishingHighly fragmented with independent retailers offering niche products (small local players) - Few budding domestic one-stop shops (big-box stores make up only about 4% of the home improvement business in China - the rest consists of smaller independent vendors who specialize)Consumer trusts foreign retailers, guarantees provide credibilityQuality demonstrated by workshopsSales of DIY products rising - 50% growth in business volume for interior renovation and decoratingCommon for consumers to buy building materials and hire contractors or tradesmen to carry out the work Growth of household repair and decorating tools and products 60% urban homes improved20,000 RMB spent per household Demand exceeds supply (only 70% of demand met in 1999)Market valued at $5.2 billion 2000Driven by strong and growing home ownership market - living standards Possibility of decorating becoming a popular past-time or hobby - Create It Yourself (CIY) training to involve customers in the process of decoratingGrowing demand for quality products and materialsPopulation has money, intention, and desire to improve homesLabor - low cost and plentiful - the single cheapest element in home improvementPotential customer base - interior designers and construction contractorsStrong presence already established by foreign home improvement retailers alongside domestics - offering installation with trained top-choice employees Market not easy to navigateInexpensive labor discourages Do-It-YourselfFierce competition among domestic and foreign retailersDIY may not take off - Chinese homeowners dont like to do complicated home improvement workDifficult management of supply chain - efficiencies are key to success in low-margin retailing - (B&Q margins are of its other international operations) - Lower Margins Heavy traffic in major Chinese cities - huge impact on important parts of the business, such as the supply chain and the delivery of goods. Enormous regional variations make national infrastructure or brand difficult to implement - dependenc