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1、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 mov
2、e 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 opportuniti
3、es 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
4、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 o
5、f 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 ac
6、celerating 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
7、 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 w
8、ith 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 diffe
9、rences 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 S
10、pecial 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 protec
11、t 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 an
12、d 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 lo
13、cations - 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 tailor
14、ed 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
15、labor - requires more workers to meet service level expectations and win customer trustBargaining consumer mentalityShareholders may resist supporting the controversial Chinese regimeOf particular importance to Home Depot Asia are the private housing market conditions (outlined below) that emerged a
16、fter 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 evolv
