Comparing Home Depot And Ford Motor Company's Adaptation To External Factors

The Home Depot and Ford Motor Company's Adaptation to External Factors

An organization must always look within and outside of themselves to assess their internal strengths and weaknesses and realize which external factors pose a threat or an opportunity for them. These factors have direct impact on how the organization operates, allowing them to mitigate their threats and maximize their opening to create new and diverse products as the demands of the people grow and technology advances (Rothaermel, 2013). The desire to have greener options in the products people use has forced The Home Depot and Ford Motor Company to respond. However, these two companies not only enforce the environmental concerns of the people with the products they offer to the public, but also in how their plants and stores are ran under sustainable energy. This will

provide a preview into how external factors have affected the two organizations as well as an in-depth look on how The Home Depot’s ecologically sound stance has helped them to generate a profit.

When using the PESTEL model to identify external factors that affect how The Home Depot and Ford Motor Company do business, it is realized that while they differ in some ways, they are similar in others. Economical barriers such as a weak housing market in the US can have detrimental effects on the home improvement industry. For Ford Motor Company, foreign currency and exchange rates can pose an unfair trade in the automobile industry. Despite the fact that President Trump claims he wants to improve trade with Japan, David Schoch, president of Ford’s Asia Pacific operations, sees no beneficial future in reentering the Japanese market. After years of losing money, and selling less than one-10th of a percent of Japan’s five million vehicle domestic market, in 2015, Ford Motor Company decided to end ties there and use their resources elsewhere (Greimel, 2017). Failing to protect their customers best interests had posed an unforeseeable legal

threat to The Home Depot. In September 2014, the personal and financial data of millions of The Home Depot’s customers were hacked, and customers took legal action against the company (PR Newswire, 2014). Meanwhile, Ford Motor Company has exceeded Mexico’s legally mandated regulations and has gone completely zero waste-to-landfill in 2015, redirecting their waste to being composted or recycled. At that time, they joined 27 other Ford facilities worldwide to decrease their “global environmental footprint while maintaining world-class manufacturing systems” (Ford Motor Company, 2015, p. 1). Adhering to the laws imposed by United States Environmental Protection Agency can have an effect on operations involving air, water, land, and hazardous waste. Even though in August 2017, President Trump reversed former President Obama’s federal government's regulations to cut down on carbon dioxide emissions, The Home Depot and Ford Motor Company are still glued to their own organizational commitments to reduce their carbon footprint on Earth (Sharpe, 2017).
Awareness of the social demands of the people to have greener options has forced the two companies to respond in different ways. What could have been a threat to Ford Motor Company turned into an opportunity to expand their resources and capabilities. Strengthening their research and development allowed them to create new technologies to offer more fuel-efficient and electric vehicles to their consumers. While The Home Depot has offered green products for a long time, a strict standard and identification was set into effect on Earth Day of 2007. In order to be labeled as an “Eco Option,” the product has to be ecologically sound in five ways: Sustainable Forestry, Clean Air, Water Conservation, Energy Efficient, and Healthy House. This level of exclusivity required some of The Home Depot’s suppliers to act accordingly and develop new technologies to hold the name of an “Eco Option” for consumers to be aware of the eco-friendliness the product offers (Rothaermel, 2013).
To claim that The Home Depot is “catching the green wave” or even suggest that they are engaging in “greenwashing” would be an unfair statement. The Home Depot has been committed to protecting the environment since the 1990s. In fact, they began their environmental efforts on April 22, 1990, the 20th anniversary of Earth Day. In 1991, they published their Environmental Principles which was later adopted by the National Hardware Association and the Home Center Institute, which represent over 46,000 United States retail hardware stores and home center (The Home Depot, n.d.). The Home Depot may have launched Eco Options in the US on Earth Day 2007, but they had the product label running in Canada for three years prior (Jana, 2007). Today, a good portion of their website is dedicated towards their efforts to improve the environment with what they offer to customers and their in-store experiences. The website gives visitors a display of their commitments, results, and milestones achieved, stating they recognize their environmental impact and are “committed to offering products that are safer for the environment.” While serving as annual members of the Green Chemistry & Commerce Council and in its Retail Leadership Council sector, The Home Depot and their suppliers also partner with third-party certified organizations and environmental non-profits that direct the home improvement industry to safer chemical ingredient use. Being ethically sound, they claim customers do not pay more for green products. Aside from offering greener appliances, The Home Depot understands that the chemical ingredients in products affect indoor and outdoor air quality. For that reason, their Chemical Strategy offers ingredient transparency in their paints, paint remover, flooring, insulation, cleaning and gardening products sold (Chemical strategy, n.d.). Not only is The Home Depot committed to providing green products for their customers, but they are also committed to improving their in-store efficiency. Since 2010, they have decreased their electricity usage by 21.5% in their US stores, converted over 1,900 signs to use LED technology and have installed more efficient HVAC units in hundreds of their stores. Having their Responsibility Report online for anyone to see holds them accountable to their standards and goals that they have set for themselves (The Home Depot, n.d.).
“Green label products” can be eye-catching to consumers that wish to be environmentally conscious. Green labels market a company’s eco-friendliness and communicate their social responsibility. However, to charge a premium price on a green product for simply slapping a sticker onto it to advertise it as green is unethical and utterly absurd. If a product was green before and after the label, what else has changed to make the buyer want to pay more for it? Companies should just have the responsibility of letting consumers know what is in their products that make it “so green” in addition to the ingredients that are “not-so-green.” Consumers can use sites like ewg.org which test products and give them a grade based on their eco-friendliness. While the labels may grab consumers’ attention, a consistent and transparent philosophy is what keeps consumers loyal to a brand (Jana, 2007).
Knowing that the Eco Options label garnered an 85% price premium for The Home Depot answers a lot of about the advantageous effects the label had (Rothaermel, 2013). The Eco Options label generating a profit shows that a great amount of economic value was created, captured, and that the returns on shareholder’s risk capital as well as the return on revenue were worth it. As assessed by the balanced scorecard, Eco Option labels have proven to create value for The Home Depot and their shareholders, as supported by the consumer and profits. The Home Depot honed in on their sustainable strategy by combining their social and ecological concerns to their economic goals which translated to an outstanding financial performance. However, not to be too far outdone, Lowe’s, a major competitor in the home improvement industry, also brought awareness to the green products that they have to offer. This just goes to show that if a strategy can be imitated, competitive advantage cannot be sustained for a long time (Rothaermel, 2013).
Neither The Home Depot nor Ford Motor Company should get too comfortable in their respective stances, especially that of towards the environment. As the external factors around them change, they should be open and willing to adapt because it is certain that their major competitors are. Constant evaluation of internal and external factors would give each company a better understanding of themselves, their competitors, and how to adhere to the demands of the PESTEL factors to work towards profits translating into a competitive advantage.
References
Chemical strategy. (n.d.). Retrieved from www.homedepot.com
Ford Motor Company. (2015). Ford paves the way for the future; 2014-15 sustainability report highlights environmental goals, mobility initiatives. Retrieved from www.businesswire.com
Greimel, H. (2017, April 24). Detroit sees no help in Trump’s Japan talk. Automotive News, 91(6774), 28. Retrieved from www.autonews.com
Jana, R. (2007, May 3). Reading the new eco labels. BusinessWeek Online, 24. Retrieved from www.bloomberg.com/businessweek
PR Newswire. (2014). Class action suit filed against Home Depot for consumer data security breach. Retrieved from www.prnewswire.com
Rothaermel, F. T. (2013). Strategic management: concepts & cases (1st ed.). New York, NY: McGraw-Hill/Irwin.
Sharpe, M. (2017, September 1). The science and politics of global warming. Challenge, 60, 490-492. https://doi.org/10.1080/05775132.2017.1369626
The Home Depot. (n.d.). www.homedepot.com