Lowes Companies Inc. Essays - Financial Ratios, Free Essays

Lowe's Companies Inc. Essays - Financial Ratios, Free Essays Lowe's Companies Inc. Home Renovation Retail Industry - Risks and Opportunities The home renovation retail industry is a vast industry with high competition to gain market share. This is industry also heavily relies on the economy when it comes to sales and customers. The crisis in 2008 led to a decline in industry sales for a connective two years but the sluggish economic growth recovery, led to a gradual increase in sales growth which averaged 3% in 2010-2011. (Case pg.2) This shows when the economy is down and the interest rates have lowered, home owners are more willing to invest into their property to raise its value. This case highlights that about 75 % of homeowners completed a renovation project on their property at least once a year, with the average cost of a single renovation being around $4,100. (Case pg.2) This poses a huge risk for this industry if the economy starts to steadily increase. The data shows that the amount of customers would decrease. This means if you don't capture enough market share before the economy increases you could face man y financial problems such as being liquid enough to meet financial obligations Other than the interest rates effecting this industry the weather also plays a big role in sales. During the first couple winter month's sales tend to decline or be much lower than the warmer season. (Case pg.2) This can be considered a huge risk especially if the economy rises. Winter months also provide a huge opportunity in this industry. If a company like Lowes can develop a strategy to attract customers and move the same amount of merchandise as they do in the other 3 seasons, have a huge potential to capture a large portion market share and develop brand loyalty. Lowe's Current Strategy Lowes current strategy is based on their core values which is currently states as to "offering quality home improvement products at the lowest prices, while delivering superior customer service." (Case pg.4). This shows Lowes has decided to focus on offering the lowest price. Lowes strategy is also broad because they offer over 40,000 different stock units which suite the needs of many demographics to obtain the most market share. (Case pg.3) Lowest obtained this strategy based on their relationship with their manufactures. Unlike many other companies in this industry at the time, Lowes bought their inventory directly from the manufacture instead of buying from distributors. This allowed them to offer lower prices than their competitor. These prices were also lower than average consumer of this industry was accustomed to. This method of strategy helped develop the company's name and reputation they currently holds. (Case pg.3) Competition The home hardware market is highly concentrated with as many as 23,000 stores in the US at the time of the case. Also at this time Lowes had three huge competitors in this market which together controlled 90% of the market revenue. (Case pg.2) currently in Canada Lowes, Home depot and RONA are the major players in the hardware/home improvement industry. Home Depot was currently the world largest home improvement retailer in the world. Their current vision is "vision to provide customers with the know how and tools to performs task while saving. (Case pg.3) This vision helped Home Depot obtain a huge portion of the market share and a strong position in this industry. Their second competitor RONA was founded in 1939 by a group of hardware store operators. They joined forces together to pool their orders for products to obtain an economy of scales to gain better prices on their merchandise. RONA was also crowned, largest retailer and distributor of home renovation in Canada in 2012. (Case pg.3) These competitors offering vary similar products and services offering the lowest prices and quality services are crucial to compete in this industry. Current initiatives Lowes current initiative is to change form a total home improvement retailer to a home improvement company. (Case pg.4) By changing from a retailer to a company Lowes plans on offer not only products but also motivation, inspiration and support to their customers in an on-demand manner. This new strategy Lowes plans to implement is to continue to obtain substantial gown and capture larger market