The aim of this strategic profile paper is to analyze the current market position and strategy of Lowe’s, and the several internal and external factors that are affecting the company both positively and negatively. After the current situation is explained thoroughly, this paper will suggest and substantiate strategic alternatives that would positively impact Lowe’s and increase its strategic fit. This paper will answer the strategic question: Lowe’s is the second largest home improvement retailer and the eighth largest retailer in the United States evidenced by the past five years of Lowe’s Companies’ margin expanding, due to an 8.56% average growth in net income exceeding the average revenue growth of 5.15% . What strategy should LOWE’S implement …show more content…
to develop their sustainable competitive advantage against its competitions and increase their revenue? 1.1 Company Overview Lowe’s first started in 1946 as a small-town hardware store in North Carolina.
Currently they operate in the United States, Canada and Mexico. According to their News Release, they operated 2,152 home improvement and hardware stores representing 214.9 million square feet of retail selling space overall as of February 2, 2018 . Lowe’s is the second largest hardware chain in the United States and is ranked number 50 on the Fortune 500 list . They sell a variety of home improvement products, tools and décor such as flooring, paint, wood, lighting, kitchen sinks, and much more. They have helpful staff members in their physical stores and from the online stores the customers are able to order certain products or have them delivered. On March 26, 2018 Lowe’s announced that Robert A. Niblock will retire from his position as chairman, president and CEO after 25 years of working with Lowe’s …show more content…
. 1.2 Reason of Interest The researcher chose to write about this company because during her life in the United States, she went into Lowe’s several times and experienced the shopping process in real-life. She is also interested in the internal and external factors of retail business and about all the business partners involved. She was satisfied with the high customer service and product selection of Lowe’s but found out that even though they are a huge profiting retail store they are constantly one step behind The Home Depot. This caused the interest to analyze the company and dig deeper to figure out the reason why. 2. Current Strategy and Porters 5 Tests of Strategy The current strategy of Lowe’s is to enhance customer experience by their omni-channel retail strategy. This means Lowe’s is trying to provide a seamless shopping experience in both their physical stores and online stores by putting effort into their websites so the customers can receive the same amount of customer service just as inside the actual store. This includes increasing their e-commerce, improving their loyalty program, and adding services to support customers through their online buying process. Lowe’s offers mostly all their products in e-commerce, and they partner with United States Postal Service, United Parcel Service, or FedEx to ship the parcel products smoothly to the customers home or work location. When the customer chooses Special Orders, Lowe’s will ship the product to your house for a fee. As long as there is stock of that product, the customer has the options of in store pick up, parcel shipping or Lowe’s truck delivery. The parcel shipping is free when the customer is registered to MyLowe’s. The registration for MyLowe’s is free, and this is an easier way for customers to track their purchases online, receive coupons, receive a MyLowe’s card to track in store purchases, and save their shopping lists for Lowe’s . This is personalizing their online experience to make purchases easier, quicker and memorable. Lowe’s is putting an effort into enhancing customer experience in their physical stores by opening their stores in accessible locations and providing products in reachable distances for Do-It-Yourself customers rather than setting them in warehouse-style, which is only understandable for professional service customers. They also have workers with specialized knowledge to answer questions and help the buying decisions for the customers. Distinctive value preposition Lowe’s offers a distinctive value preposition compared to several other home improvement retail stores, but not enough if they want to differentiate themselves against Home Depot. They offer their customers cost and risk reduction, by offering special deals and coupons and assuring the quality of the products at the same time. They also have a vast inventory of products that are easily accessible and they provide personal specialist assistance both online and instore to add value to the customers. Tailored value chain Lowe’s has a tailored value chain where activities fit together to deliver distinctive value to their customers.
The key activities of Lowe’s such as their effective supply chain management, value added customer experience, selective HR management, seamless omni-channel approach, and sales and marketing all lead towards their current success. These activities allow Lowe’s to perform tailored activities differently from most retail home improvement stores.
Trade-offs different from rivals
Lowe’s deliberately chooses a different set of activities from rivals to create trade-offs that sustain their competitive advantage against other home improvement stores and straddlers . Instead of setting up their store as warehouse style, Lowe’s sets up their products displayed in the store for customers to see while walking through. They are giving up store space, to target and serve their DIY- retail customer segments better rather than the professional service customers . Lowe’s has made the trade-off to frequently restock their stores to serve this type of customer experience and product variety. It is a costly decision, but this creates a risk for straddlers when trying to threaten the competitive advantage of
Lowe’s. Fit across the value chain Lowe’s creates fit across the value chain by interlocking the main and sub activities to enhance their value or lower the costs of one another, which raises sustainability and competitive advantage. It makes the strategy more sustainable by creating a strong barrier for imitators. The HR management and value-added customer experience is strongly interlocked. The sub-activity of HR management is to recruit and hire qualified employees with specialized knowledge, and a sub-activity of value-added customer experience is to book specialist advice online. Lowe’s is able to add value to the customer’s experience by hiring qualified employees with specialized knowledge to support their shopping process. Additionally, Lowe’s offers low prices, a vast inventory, and specialized assistant to customers which all complement and reinforce one another, which causes real synergy . Continuity Lowe’s has been continuously successful with focusing on their core value proposition and saturating their brand image into the daily life of customers, to become a small-town hardware store to the second-largest home improvement retailer in the world. Lowe’s is now a to-go place for home improvement after Home Depot and gained great sustainability in the market. Lowe’s reinforces the company identity, reputation and customer relationships through their strategy to preserve and enhance their customer-focused culture to become the first stop for home improvement projects .
Established as the older company of the two, Lowe’s ranks forty-second as a Fortune 500 company. Established in 1946 as a small hardware business, Lowe’s has grown into a 40,000 product, global market enterprise that consist of 1,710 stores nationwide expanding into the countries of Canada, Mexico and Australia (Lowe's Internal, 2010) Home Depot, founded in 1978, is the fastest growing retailer in the United States. Ranked twenty-ninth as a Fortune 500 company, Home Depot continues to remain the number one do-it-yourself retail store in America. These two companies may sell products of the same nature, but comparing their Code of Ethics is their way of setting themselves apart. (Home Depot Internal, 2009)
Per Kalogeropoulos (2016), the company is better able to ensure product availability while managing their costs because of their latest logistics initiative. They have recently created a network of deployment centers that reduces the time between when the product leaves a supplier to when it hits the shelf at the Home Depot store which drives profits higher. Parnell (2014), relays that companies who use low-cost strategy seek distribution channels that minimize cost. Home Depot’s new logistics initiative provides the company with economies of scale and a market advantage because it adds to their low-cost
Opening its doors for the first time in 1946, Lowe’s is now the second largest home improvement chain in the world, operating over 1,800 stores in the United States, generating $56.2 billion in sales and $2.6 billion in net income for 2014 (Lowes Newsroom, 2015). Employing around 265,000 personal making them one of the top employers in the nation, there is no question that Lowe’s must be doing something right. According to Lowes Newsroom, “Lowe’s professional customers represent approximately 30 percent of total sales, approximately 16 million retail and professional customers are served each week. (2015, para 3) “Never Stop Improving”, is Lowe’s slogan; encouraging employees and customers to work together to maximize their in store
In the early 2000’s Lowe’s was rapidly intensifying its presence nationwide. The company carried a varied assortment of home improvement products and catered to the needs of retail as well as commercial business customers. Lowe’s expanded their reach by acquiring a 41-store chain, Eagle Hardware and Garden, and engaging in a strategic alliance with HGTV to obtain a more profound existence in their market (Rouse, 2005). By 2004, Lowe’s operated almost 1,000 stores with plans to continue expansion across the nation (Rouse, 2005). The company has a core competency in helping customers meet their home improvement needs at a low price. In order to use this core competency to gain a competitive advantage, the company has focused on key functional strategies. To continue their success, Lowe’s must specifically focus on marketing, logistics, and human resource management strategies.
Lowe’s employs more than 260,000 people in more than 1830 stores; these employees are trained to provide exceptional customer service as well as receiving up-to-date product knowledge to assist customers with their improvement needs. In addition, Lowe’s has upgraded store information technology infrastructure to assist employees in accessing product data faster and easier. This is accomplished by providing the sales team with computers that have Internet access, and Ipad’s and Iphone’s loaded with specialized apps (Lowes, 2014).
Big Box Tool Kit. “Five Myths About Big-Box Retail.” Institute for Local Self Reliance. 2009.
There are a number of smaller players but lack the public existence and retail footprint of their larger counterparts. With such high levels of market absorption, both HD and LOW enjoy high bargaining power with suppliers of goods. The two companies vary significantly in terms of the strategies they employ to compel consumer traffic. Home Depot centre of attention is customer service, while Lowe’s offers discounts to improve sales. Home Depot has determined on customer service as a driver to grow customer traffic and sales, Lowe has battled mainly on the basis of lower prices. Home Depot has a status for lesser prices and more pro-friendly impression where Lowe’s is trying to capture the traditional do-it-yourself customer by trying to appeal the female customer, who the company declares, is responsible for eighty percent of home improvement
Lowe’s is leading the way by example. Lowe’s believes that creating long-term partnerships is a win-win situation for both sides of the deal. Lowe’s is the second largest home appliance retailer in the country, by working hand in hand for twenty-six years with Whirlpool, the largest marketer and manufacturer of home appliances. Whirlpool and Lowe’s have worked together to become unmatched in bringing their customers a high quality product and a very low competitive price. Through a tremendous logistical effort Whirlpool and Lowe’s have created a one of a kind Innovation Tour. A semi-trailer transforms itself into a functioning kitchen to show customers cutting edge appliances that will be available at Lowe’s in the future from Whirlpool and Kitchen Aid. As Lowe’s motto states, Lowe’s truly is “Improving Home Improvement”. (http://www.businesswire.com/)
Working in a Store Support Center, rather than a corporate headquarters, their leadership team knows that the most important people in the fabric of the company are the store associates and store leadership teams. Frank Blake was appointed as the Chief Executive Officer of Home Depot in January 2007 (Sellers, P.). He joined Home Depot in 2002 as executive vice president of Business Development and Corporate Operations and was responsible for real estate, store construction, credit services, strategic business development, growth initiatives, call centers and the Home Services business.
J.P. Leggett and C.B. Platt a local entrepreneur from Carthage Missouri started a business partnership in 1883. Leggett was an inventor and Platt was an expert on establishing a manufacturing setup and both patented in 1885 a spiral steel coal beds (Leggett & Platt®,2011). In 1942, Leggett & Platt opens a plant in Kentucky. Harry M. Cornell Jr. became President and started an expansion effort in 1960 and in 1970 Leggett & Platt partners with Armco Steel Corp to construct a wire mill in Carthage. In 1999, the company net earnings reached to 290.5 million by May 2002 Leggett & Platt had evolve from a small regional company into an international Fortune 500 company and establish a contract with Sears (Leggett & Platt®,2011). Roebuck and Co.
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The Home Depot began changing consumer’s perspectives about how they could care for and improve their homes, by creating a “do-it-yourself’ concept. According to the founders, the customer has a bill of rights at the Home Depot. The bill of rights entitles the customer to the right assortment, quantities and price (of tools and home improvement supplies) along with trained associates on the sales floor. Home Depot describes their business strategy as a three legged stool, which stands for customer service, product knowledge and availability and disciplined capital allocation. (Moskowitz,
The Lowe’s organization has long been successful in reaching its broad based customers through national television, radio announcements, newspapers, magazines, direct mail, emails, and the internet.The organization is seeking to gain more consumers through Multicultural marketing outlets to reach even more customers. Their ads are designed to promise a broad product selection and tout their pricing strategy. Lowe's tag line is "everyday low price (EDLP)" which is their pricing strategy that promises customers everyday low pricing without the need to wait for sale price events or comparison shopping. EDLP to a pricing strategy in which a retailer offers its customers consistently low prices on every product, without running sales or price promotions. The store sets prices fairly and then maintains them for a long time,
CEOs Quinlan and Greenburg did more to try diversify the product line by purchasing other chains and introducing new items instead of placing the emphasis on making sure the fundamental elements of service, speed, and quality of its primary product line. Quinlan made matters worse by stopping the practice of inspecting the stores to ensure they met the required standards of speed, quality, and cleanl...
When analyzing an organization’s target market, the first step is to understand the business and what they hope to achieve through their marketing strategies. Targeting and positioning strategies consist of analyzing and identifying segments within a given product-market, choosing which segment or segments to target, and developing and implementing a positioning strategy for each targeted segment (Cravens & Piercy, 2009). The company’s target market determines what customer group or groups the company wants to serve (Cravens & Piercy, 2009). Analyzing IKEA’s target market allows the company to determine if their marketing strategies have successfully targeted their intended customer group or groups. Discussing the company’s positioning strategy helps determine if the strategy is effective or if the company must make improvements strengthen their positioning strategy. The company must determine if their targeting and positioning strategies may be lacking. If the company’s targeting and positioning strategies are lacking, the company must determine what they must do to strengthen their targeting and positioning strategies.