Homedepot

Synopsis
After incurring a natural disaster; such as Hurricane Andrew in 1992, The Home Depot found it necessary to plan and organize command post for natural disasters and soon learned that same way they were preparing themselves for unseen crisis they needed a plan of action when it came to costumer relations.
1. Describe Home Depot policy of cost-plus-freight pricing. How did it increase their profit?    
When Hurricane Andrew strikes in 1992, suppliers of home repair materials increase their prices because of high demand with limited supplies available. They, including retailers want to take advantage of the situation and make abnormal profit to the detriment of the vulnerable customers. Home Depot decides to act otherwise by only changing its policy of price freeze, where certain supplies prices are tag fixed, and introduces cost-plus-freight pricing. This consist of a process where only the suppliers cost increase are added to the regular price without any upward adjustment of profit margins, so prices go up by only the suppliers difference in price increases. It’s like transferring cost to suppliers without increase in income. In order to satisfy all customers, management of Home Depot cut off middlemen, and contractors to personal volumes on certain important supplies like plywood, roof shingles, and sheeting, and urges its associates to use their discretion for other items like chainsaws and electrical generator, so that most of the supplies will not go into the hands of a few group of customers but will cover all customers who visit Home Depot stores.   Home Depot profits jump to 44% to reach a new record for the company due to the management’s introduction of cost-plus-freight pricing. This strategy gives Home Depot an edge over its competitors in terms of lower prices. What happens is that, while competitors focus on higher profit by adding higher margins on top of suppliers’ price increases in order to make abnormal profit in the midst of...