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Lowe's Case Study

Essay by   •  December 21, 2010  •  2,869 Words (12 Pages)  •  1,431 Views

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Executive Summary

This general case study on Lowe's will convey the conclusions drawn by our team along with our recommendations on how this company should proceed. As discussed in the introduction (1 A/B) there is one key problem with Lowe's and that is the fact that they are not number one. The introduction further outlines some areas of improvement within the Lowe's company such as maintaining and improving current success, increasing market share, boosting sales growth and offsetting increasing administrative expenses. Emphasis is placed on the importance that Lowe's choose strategies that will meet its objectives of increasing market share and revenues (Lowe's corporate home page, 2004).

Beginning in section 2A, it is noted that the marketing mix utilized by Lowe's is similar to that of its primary opposition, Home Depot. Dissimilar to Home Depot, Lowe's maintains an interesting technique in the promotion of products. This may be Lowe's saving grace when it comes to battling for market share against Home Depot and other competitors. Lowe's has a pleasing atmosphere and has increased their likelihood for growth. Competitors in the Lowe's market are up against a strong front as Lowe's continues to demonstrate increasing profits. Market saturation, although a threat, is not a prevailing concern ("How Lowe's Hammers," 2004).

When reviewing section 2B it is important to highlight that Lowe's traditional target market (blue collar American families) has been shifting towards the upper-middle class families (MacAyeal, 2004). Likewise the increasing Hispanic population has shown excellent market potential, so much so that Lowe's has taken measures to improve communication and shopping for this market segment (Lowe's President Upbeat on Growth, 2004). External macroeconomic factors, driving the home improvement market, such as a strong housing market, housing turnover, increases in disposable income, improving equity markets and low mortgage rates are part of a trend leading to record levels of home ownership (Global Home Improvement, Retail, 2004). Noteworthy, is the fact that Lowe's is looking for new and developing markets and is combating the leading company in the market, Home Depot (Lowe's Companies, Inc., 2004). This brings forth the superb recommendation that Lowe's continue its expansion of larger stores into key markets in order to maintain its competitive advantage over other companies.

An important section of Lowe's: A Case Study is the SWOT Analysis (2 C). Strengths, weaknesses, opportunities and threats were identified and have been appropriately addressed throughout the Case Study. Section 2 D lists, major strategic options accompanied by the pros and cons of each. This is yet another worthwhile section to review.

The recommendations section (Section 3) outlines a plan of action emphasizing four key measures. They are as follows:

1. Continue sales expansion through restructuring of distribution infrastructure

2. Raise profitability through marketing small 94,000 square feet size shops

3. Develop the uniqueness in the market through further market segmentation

4. Improve financial status through reducing long-term debt

Steps to carry out these measures are fully explained and supported. Lastly, Lowe's positives cash flow and stable net earnings of $1.8 billion in 2003 support these realistic plans and will allow for their execution (Lowe's 2003 annual report).

1A/B

What possible problems could a company that is the second largest US home improvement chain in the United States possibly have? Simply put, they are not number one. Lowe's is a company with immense strength. For example, Lowe's 975 stores (located throughout 45 states) generated $1.88 billion in earning during the 2003 fiscal year. With over 40,000 products stocked in various stores one would think that Lowe's has a strong formula for success (Lowe's corporate home page, 2004). Why then is Lowe's not number one? This we shall soon see.

There are some areas of improvement within the Lowe's company and it is imperative that Lowe's choose strategies that meet its objectives of increasing market share as well as revenues. In order to maintain and improve upon current success by increase market share, boosting sales growth and counteracting the increasing selling and administrative expenses Lowe's has set forth some aggressive measures. Case in point, according to Lowe's website, the company has opened 130 stores in the 2003 fiscal year alone and has plans to open up 140 and 150 new stores in the 2004 and 2005 fiscal years, respectively (http://www.lowes.com).

According to a company profile produced by Datamonitor, Lowe's is second in the market to Home Depot, has less sales per square foot than Home Depot, is not considered a to be a low-cost producer when compared to other stores in its class and risks saturating the market (Lowe's Companies, Inc., 2004). In order to combat these underlying causes of Lowe's problems, Lowe's will be focusing on various demographic trends (generational considerations), maintaining the quality of current store locations, opening up new stores, focusing on untapped markets and on expanding popular yet profitable product lines (Lowe's Companies, Inc., 2004).

To further discuss Lowe's, an analysis of the internal capabilities and an evaluation of the strengths and weaknesses of Lowe's has been conducted. In addition, an analysis of the external environment has been taken into consideration along with a SWOT analysis. Major strategic options accompanied by the pros and cons of each have been identified and we have listed our recommendations and determined their viability.

2A

When it comes to Lowe's marketing mix, the product, price, and place are becoming more and more similar with its number one competitor. They carry the same products, their prices are very similar on many items, and they are located in the same areas, if not on the same street. The main difference that brings strength to Lowe's is the promotion.

According to one article ("How Lowe's Hammers," 2004), Lowe's research within the industry has shown them an interesting technique of promoting its products. "Thanks to its extensive customer research, Lowe's concluded several years ago that 80% of home-improvement decisions were initiated not my

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