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External Environmental Analysis

In: Business and Management

Submitted By ksanchez629
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External Environment Analysis
Kristy Sanchez
September-Sunday 11, 2011
Jeannette Guignard

External Environment Analysis
This essay is written in regards to the Home Depot and the evaluation of their external environment. The Home Depot is a highly successful retail industry that has expanded globally. The Home Depot has a wide variety of supplies and materials for all home improvement projects. They even have tools, equipment, and trucks that can be rented out to assist with any larger home improvement needs. The Home Depot has made a continuity plan to assist with protection of the customers, associates, and the industry if a crisis or disaster occurs. A continuity plan is basically the instructional list or procedures for the company in the event that a crisis or natural disaster occurs and how they will handle that event. This essay will look at how the external environment affects that plan. This essay will also look at the affects of the environment in three other areas as well, including general, industry, and competitor. Finally, it will look into the business ethics and see how they play a role when gathering information for competitor intelligence.
The Home Depot has a continuity plan that they follow that can be found in their code of conduct and ethics manual. That continuity plan is as follows: “We are committed to taking all reasonable steps to minimize risks to our associates, customers, facilities, information assets and supply chains and maintaining the continuity of our business when a crisis occurs. A crisis can be natural or man-made and can take many different forms, including a hurricane, tornado, earthquake, terror or biological attack, hostage situation, chemical spill, structure collapse and any other incident which threatens the safety of our Associates and customers and the integrity of our business. The Home Depot will always strive to respond to crises promptly, professionally and compassionately.” (The Home Depot, 2011) The Home Depot takes their continuity plan very seriously and is well prepared for something to happen. Their associates are trained in how to handle that situation and how to remain calm and professional if anything were to happen. The external environment affects this plan because almost all the causes of having to put this plan into use are external factors. The natural disasters play a big part on casing a crisis for the Home Depot, as well as, terror or biological threats.
General Factors
The Home Depot has to deal with general factors from the external environments that affect their business activities. For example, the housing market is not good in this day in age for this type of business. This can bring both opportunities and threats. The opportunities for the Home Depot would be that there are people that may be trying to fix up houses that have to be sold, or that have been foreclosed and are now being fixed for new potential buyers. The threats that would come from the poor housing market include people not wanting to fix up their houses right now because of all of the cut backs and the job market having such a reduction in force. This can also include people just wanting to let their houses go due to the lack of income, therefore, not wanting to fix up their house.
Industrial Considerations
The industrial environment is a large external factor for the Home Depot. The Home Depot has to keep an eye out and see how the other home improvement stores are doing. There are many stores that are going out of business due to the poor economy right now. This can cause both opportunities and threats for the Home Depot. The opportunities can include gaining more customers and business due to the other home improvement stores losses. The more business they can gain from other sources the better. There are threats however. The threats in this area for the Home Depot include losing business just as the other home improvement businesses are due to the economy. The more business that the Home Depot has to face the more profits it will lose and this can cause cuts that have to be made internally for the business.
Competitor Consideration
The biggest external factor that the Home Depot may have to deal with is the competitors. The largest competitor for the Home Depot has is probably Lowes. Lowes is another large home improvement retailer. The Home Depot still has some opportunities and threats with considering the effect of Lowes. There are brands, services, and materials that can be found at the Home Depot that cannot be found at Lowes. This attracts more customers and some businesses even have contracts with the Home Depot because of this. The threats that the Home Depot faces with Lowes is it getting larger. Lowes has been successful as well and is still expanding. This can be bad for the Home Depot because the larger that Lowes becomes and the more successful that they become, they may be able to offer more services, products, and/or materials then the Home Depot can.
Competitor Intelligence
The Home Depot has a very strict policy within their code of ethics to protect their trademarks and secrets. The information that was found about this was as follows: “Inventions, discoveries, ideas, concepts, written material and trade secrets which are created by a Home Depot Associate using company time, resources or materials are the property of The Home Depot. Associates must cooperate in documenting ownership of such intellectual property.” (The Home Depot, 2011) The Home Depot comes up with ideas for their company as well as their visions and goals for their company and is very persistent at protecting them. It is easy for the Home Depot to see what their competitors may or may not be doing and this may help them in deciding their best business more. Watching from a distance at what other businesses may be trying and failing at may help the Home Depot decide what the next business more needs to be.
There are many external factors that the Home Depot has to deal with on a daily basis. These factors can affect areas of the Home Depot that include their continuity plan, the general industry, the industrial industry and the completion. Although there may be threats in all of these areas, there are ways for the Home Depot to still gain and change the threats into opportunities. The external environment plays a big part of the Home Depots business opportunities and how they make their decisions. With the right business plans and trade secrets that are followed the Home Depot can continue to be successful and continue expanding.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2009). Strategic Management: Competitiveness and Globalization, Concepts and Cases. Mason, OH: South Western Cengage Learning.
Myers, K. N. (2005). Business Continuity Strategies: Protecting Against Unplanned Disasters. Hoboken, NJ: John Wiley & Sons.
The Home Depot. (February 2011). Code of Conduct and Ethics. Retrieved from

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