Theretail industry that deals in home improvement faces many challengescurrently and this is mainly due to the current recession affectingthe housing market (Doole & Lowe, 2012). The major competitorsthat Lowe’s has in this market include Home Depot and Builder’sfirst Source. This paper seeks to explore the different strategicmanagement mechanisms that are employed among the retailers in homeimprovement industry (Doole & Lowe, 2012). This analysis willentail the main decisions and actions that are taken in order tocreate a sustainable competitive advantage over the others. Some ofthe main strategic management attributes that will be explored willcover decisions in the long and short term, the overall goals andobjectives and the trade-offs between efficiency and effectiveness inthe operations of the company. Strategy analysed in this section isdeveloped at different levels and this include corporate, businessand functional level.
ShouldLowe’s expand to Canada or renew efforts to acquire Rona?
Lowe’scan consider expanding overseas though such expansion can only occurthrough acquisition which in essence proves to be very difficult. Given such then the company should then reconsider renewing itsefforts to acquire Rona (Lambert, Cooper & Pagh, 1998).Currently, Rona is not well-established and they are still working onimplementation and business plan to renew their offer hence this isthe best time for Lowe’s to renew its bid. Additionally, thefinancial results of Rona are bad and the shopping experience is notup to date. In bid to improve the service delivery to the customers,Lowe’s can consider acquiring Rona. Thus, Lowe’s should proceedto acquire Rona as a whole chain. The acquisition, Lowe’s can carryout through addition of big box stores as it expands to a number ofsmaller and proximate stores. I do believe that combination of Lowe’sand Rona can make a lot of sense in business and this would createvalue for stakeholders (Lambert, Cooper & Pagh, 1998).
AlthoughLowe’s is the second-largest home improvement retailer in theUnited States following Home Depot closely, it has a small presencein Canada. Out of the total 1,745 retail stores across North Americathere are only 31 stores in Canada. Its competitor, Home depot has180 stores in Canada hence a big disparity between the two (Lambert,Cooper & Pagh, 1998). Thus, for Lowe’s to compete favorablywith Home Depot, there is need to add more stores hence thecombination with Rona or acquisition of Rona is strongly advised.
Althoughthe acquisition of Rona is advisable, there are debts that Lowe’swould assume upon reaching such an agreement. The other reservationsare the manner in which Lowe’s would integrate hodgepodge storesizes of Rona and concepts into their system.
Wouldyou recommend Lowe`s enter the Australian market with 150 new storesto match Ace`s international presence?
Inorder to match the competition in the Australian market against Ace,Lowe’s does not need to enter the market with 150 more storesrather they need to be strategic enough in their competitive methods.I tend to think that for Lowe’s to match the presence of Ace, itneed to have a good product differentiation strategy that gives it arelative advantage to Ace in the Australian Market (Lambert, Cooper &Pagh, 1998). Such differentiation incorporates the use of differentcustomer service that fully caters for the need of the customers andaddresses each and every issue raised to ensure that they are fullyaddressed. Instead of increasing the number of stores, Lowe’s cantake advantage and build on the retail supply chain. They can havemore retailers on the ground in order to address the different needsof the customers (Lambert, Cooper & Pagh, 1998). This might leadthem to have a large share of the market. This is mainly because themarket in which it operates is highly fragmented and thus a goodstrategy can make Ace to consolidate their market in order for themto continue growing and move forward.
Additionally,the company can invest in technology so as to improve in theirindustry (Doole & Lowe, 2012). Their technology should be betterthan that used by Ace in the Australian market to enable them reachmore customers. Better technology translates to better services ascustomers are able to place more orders and the efficiency of theoperations becomes quite high. Through this, they will be able tomake special offers to customers. Through the use of web, the marketshare is able to increase. This can be asserted by the fact that thebargaining power of the supplier increases as competition increasegiven that supply channels of Lowe’s will be more (Lambert, Cooper& Pagh, 1998). This is a relatively better strategy that willensure that Lowe’s matches Ace in the industry rather than havingmore stores.
Iwould not advocate to have more stores rather Lowe’s should investin better and proper strategies that will give them an advantage overAce in the Australian market so that they compete internationally(Doole & Lowe, 2012). Further, the initial cost of setting up 150more stores might be too high and in the long run prove costlier torun and thus may not match Ace given the dynamic nature of themarket.
Lowe’sCurrently Operates two different size stores to better serve localmarket. However, both the stores Fronts are similar in size. Wouldyou recommend Lowe’s to reduce the size of stores to match homedepot and even smaller stores such as Ace and True Value
Lowe’sshould not reduce the size of their stores rather maintain the storesizes that they operate currently. The cost of running many smallstores might prove to be expensive as witnessed by Home depot(Lambert, Cooper & Pagh, 1998). Home depot has had several smallstores in their expansion plan and this resulted into a situationwhere their operating expenses matched their revenue. Hence, in thelong run, growth becomes an issue.
Strategiesfor Lowe to outperform Home Depot
Inorder for Lowe to outperform Home depot, it should strategizeproperly on its growth mechanism. In expanding and growing tointernational markets, Lowe’s should ensure that their operatingexpenses are below their revenues so as to realize some profitabilityat the end of the period. Thus, owes should fully capitalize oneconomies of scale in terms of their logistics and distribution thatare present to them through the market saturation strategy (Doole &Lowe, 2012).
Further,Lowes need to bank more on customers and ensure an increase incustomer loyalty. They should continue to improve their servicedelivery and customer care to ensure that ultimately they offer thebest product in the market and have a strong competition in theindustry. Thus, they should continue to offer customers with morechoices so that they are able to continually build recognizablebrands which ensure that there is thin line between them andconsumers.
Thoughthey are known to operate in good environment, they should continueinvesting in cleaner, smaller, brighter and even more customerfriendly environment (Lambert, Cooper & Pagh, 1998).Additionally, for Lowe’s to grow they need to ensure a formation inalliance and merge with global vendors so as to market their productseffectively. Home depot is known to lack a focus on local markethence Lowe’s should bank on this and focus more on the localmarket. This will enable them to have a trend that is focused on thelocals as well. This group of locals might prove to be their targetmarket.
Homedepot is known for weaker organizational framework, thus Lowe’sshould take advantage of this weakness and put in place properorganizational framework that will ensure better employer-employeerelationships (Doole & Lowe, 2012). Their kind of leadershipshould be tolerant and devolved as contrasting the leadership in Homedepot which was mainly centralized and more of military. Throughthis, Lowe’s will ensure better relationship with the employee andultimately minimize on cost of training the employees and hiring themtoo.
ForLowe’s to beat Home Depot, it needs to take up all itsopportunities for better growth and expansion. Lowe’s should ensurethat they have a solid presence in North America as it diversifies inother world markets (Lambert, Cooper & Pagh, 1998). The expansionis to serve as a way to ensure growth by the year 2020. Lowe’s hasan opportunity in global sourcing and under such should then takeadvantage. Such an advantage is primary as the company becomes globaland ultimately they might end up growing their gross margin (Doole &Lowe, 2012). Additionally, they should take advantage of IT projectsthat are able to make sure that they increase in efficiency and havereduced costs of operations as well as increase margins ultimately.Interestingly, Lowe’s should have its key competencies intact as itexpands in the new landscape division. Further, Lowe’s should takeadvantage of weaker marketing mechanism in Home Depot and put upbetter marketing research program relative to that of Home Depot.Better research program ensures that they are able to grasp theconsumer needs and in the long run ensure that they are fully abreastwith the market trends.
ForLowe’s to be better placed and compete against Home Depot, it needsto improve on its points of weaknesses. It should consider venturinginto big-box retails instead of clinging to the small-ton stores.Lowe’s has not effectively covered all the three geographical areasin the world and they need to take advantage of this so as to havediversified market (Doole & Lowe, 2012). Surprisingly, Lowe’shas no mission statement which begs the question whether they have afocus to achieve in the business. The European market has a largepotential and for Lowe’s to compete favorably with Home Depot itneeds to tap into this market. This market is likely to boost thegrowth strategy of Lowe’s so that ultimately matches that of HomeDepot.
Inconclusion, the paper has covered some of the main strategicdecisions that Lowe’s need to make in carrying out theiroperations. The study has explored whether Lowe’s should enter intothe Canadian market and acquire Rona with the study reporting mixedreactions. Whether, Lowe’s should enter the Australian market with150 more stores is out of question because Lowe’s need to employbetter strategies in order to compete with Ace in the Australianmarket. More stores might not necessarily translate to betterservices and more revenue but might in the end result into moreexpenses. The paper has effectively advanced the necessary strategicmanagement positions that ought to be taken by Lowe’s in order tocompete effectively.
Doole,I., & Lowe, R. (2012). International marketing strategy. CengageLearning.
Lambert,D. M., Cooper, M. C., & Pagh, J. D. (1998). Supply chainmanagement: implementation issues and research opportunities. Theinternational journal of logistics Management, 9(2), 1-20.