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Presented by Edmund Davis Mary Ann Horton Narender Mendiratta Shamsuddin Pattharwala

Do-it-yourself. Do-it-for-me. Presented by Edmund Davis Mary Ann Horton Narender Mendiratta Shamsuddin Pattharwala. HBI : Case Analysis. Research methodology Recommendations Drivers behind the concept Outlook of Home Furnishing industry Customer identification and market positioning

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Presented by Edmund Davis Mary Ann Horton Narender Mendiratta Shamsuddin Pattharwala

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  1. Do-it-yourself Do-it-for-me Presented by Edmund Davis Mary Ann Horton Narender Mendiratta Shamsuddin Pattharwala

  2. HBI : Case Analysis • Research methodology • Recommendations • Drivers behind the concept • Outlook of Home Furnishing industry • Customer identification and market positioning • How should HBI proceed

  3. Research Methodology • The HomeBase case • Library databases, periodicals, articles and analyst opinions • HomeBase, Home Depot, House2Home store visits • Web sites of HBI and competitors

  4. Recommendations for HBI • Proceed with House2Home concept • Create a leading brand name • Build strong customer relationships • Establish a strong e-commerce presence

  5. Home Improvement Industry • $165 billion industry • Cyclical and sensitive in nature • Industry S&P index in 2001 fell by 30.8% vs. 8 % decline in overall S&P 500 index • S &P industry survey predicts sluggish sales

  6. HOMEBASE Product differentiation Uncompetitive prices High cost of sales, low SGA expenses State of the art MIS HOME DEPOT Customer satisfaction Competitive prices Low cost of sales, high SGA expenses $200 million investment in IT per year HBI vs. HD

  7. HomeBase Current Scenario Market leaders? NO Market challengers? NO Niche marketers? NO What should HomeBase do?

  8. HBI’s options • Improve market position in current industry • Sell and close down- retire • Exit and shift industry

  9. Identified Industry Home Furnishing Industry “DO IT FOR ME”

  10. Home Furnishing Industry Overview • $125 billion industry • Highly fragmented • Less cyclical • 7% growth rate since 1970 • S & P’s industry survey predictions: 10% growth rate, more than that of retail industry due to concentration of upper-income professionals

  11. Porter 5 Forces: Home Furnishings 1. Barriers to entry: high- capital intensive 2. Bargaining power of suppliers: high 3. Bargaining power of buyers: high 4. Substitutes: many in fragmented industries 5. Industry rivalry: competitive

  12. House2Home SWOT • Weaknesses • Poor brand image of HBI • Inexperience in new market • Poor bond rating • Threats • Large retailers diversifying product offerings • Turndown in economy

  13. House2Home SWOT • Strengths • Extensive retail supply chain • Experience in the retail industry • Management commitment to the new strategy • Opportunities • Fragmented nature of home furnishing industry • Home furnishing market projected growth(10%) more than overall retail growth • High product margin in home furnishing(40%)

  14. The Winning Strategy Utilize experience in retail in the highly fragmented home furnishing industry

  15. Who is the customer? • Female shoppers, 35-54, middle to upper-middle income level • Like to decorate their homes • Like to make purchasing decisions but prefer to leave installation to professionals • Part of dual income families • Avid Internet users

  16. What does the customer value? • Time • Convenience • Family • Home

  17. Home Furnishings Positioning Map High Quality Products and Services  HD Expo  House2Home  Ikea  Pier 1  Target High Price  Bed, Bath & Beyond  Linens n’ Things SearsJC Penney  Wal-Mart  K-Mart

  18. Product • 4 categories: Outdoor living, indoor living, home décor, and seasonal goods • Offer deep and wide selection • Provide more value added services on the line of custom installation, silk flower and balloon arrangements • Additional product offerings based on customer demand( wish list)

  19. Price • Both designer label and value brands at different price levels • Core products priced significantly lower to drive repeat traffic • More pricing schemes similar to gift registry services

  20. Place • Conversions of HomeBase stores only in appropriate western markets • Expand in mild climates with mean household income $50,000 + • Potential Markets: Northern Virginia, Atlanta, Georgia and Austin, Texas • E-commerce: delivery and pick-up, customer service, advice

  21. Promotion • Creating a “buzz” about unique concept • Magazines: Martha Stewart Living, O – The Oprah Magazine, Regional lifestyle • Radio: Morning and Evening rush hours • Web: Oxygen sites, Food Network, Better Homes and Gardens • TV: Lifetime, other family and educational programming

  22. How HBI Should Proceed • Convert HomeBase stores only in those markets with appropriate demographics • Invest in the e-commerce infrastructure to maintain a strong Internet presence • Open additional stores in western market • Expand in new markets

  23. Conclusion HBI can become a leader in market share with the House2Home concept by positioning as value and quality leader in terms of product offerings and price positioning in high margin industry

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