Lowe’s
By
You
April 21st, 2014
University of Phoenix
ECO-365

Introduction
In the United States there are two major players in the home improvement industry. The biggest in The Home Depot. The other, while smaller having 502 less stores, is still a giant of the industry (Cramer, 2013). Through the recession Lowe’s stood while well The Home Depot fumbled. Lowe’s faces competition from opponents other than just The Home Depot as it expands beyond America. As Lowe’s seeks to enter the Canadian and Australian markets it will encounter more diversity than it has experiences so far. The complexities of doing business abroad and opening stores afar will become even more apparent as their international tactics change. Despite the challenges Lowe’s should expand further to become an even bigger player both nationally and globally.
Global Competition’s Impact on Lowes In 2009, Lowes had 1,710 stores found throughout Canada and United States, 16 of these found outside the United States, with three stores in Mexico that opened in 2010, allowing for their exposure to bring them to a new level of sales internationally. (“Lowes Companies”, 2012) After much research it is found five competitors could impact Lowes, the #2 home improvement dealer in the world (Racine, 2012), but on different levels. The first competition is the main competition of Lowes, Home Depot, #1 in the world since 2005, (“Lowes Companies”, 2012) is expanding its sales by bringing in more Hispanics to get the attraction they need from the Hispanic community. (Racine, 2012) Unlike, Lowes, Home Depot has 262 stores that are outside the United States, including locations in China, Canada, and Mexico. (“Lowes Companies”. 2012) The next two come from out of Australia, as of 2009, Lowes has decided to team up with one of Australia's largest retailers, Woolworth Ltd, in order to expand outside the U.S, in fiscal year 2011, also bringing up their shares by over 3%. Danks Holdings, Ltd, is the second-largest distributor of home improvement hardware in Australia, and Bunnings hardware (Westfarmers Ltd), the leading hardware chain in Australia. With Bunnings and Dunks Holdings, Ltd it gives Lowes competition within the Australia area. Unlike Lowes and Woolworths who have the appeal to women, Bunnings appeals to men. The competition with Lowes brought the shares for Westfarmers down by 10% as investors see the venture being introduced. (Sage & Paul, 2009) The last two that could impact Lowes, are Block & Quayle, or B&Q, and IBO GmbH & Co. Deutschland KG. B&O is a European competitor, and fourth largest home improvement store in the world, and the largest in China and United Kingdom. B&Q is number two in Europe when it comes to home improvement, and is a fast growing company that has gone through several acquisitions, mergers, and expansions. IBO is a home improvement competitor from Germany, but is an undisputed leader in its business. Both competitors are mainly do-it-yourself retailers, and do little to no business with businesses who do commercial building. (Racine, 2012) With B&O and IBO growing, it could eventually have an impact on how Lowes operates outside the U.S.
Domestic Competition’s Impact on Lowes
There are few major competitors who serve the same entire market as Lowe’s. Home Depot is clearly the largest competition for Lowe’s. The Home Depot is the biggest of the two, but without the same quality of products or guarantees set by Lowe’s. The trend seems to stay the same as time goes on, but the brands and quality are very close. There are many smaller stores that sell specific items such as, Sears who carries appliances and tools, but does not offer such products as lumber, plumbing, and lighting. Another company that carries items that can be matched Lowe’s, would be Tractor Supply, with lawn and garden items, but nothing more to compare prices. IKEA is an unusual comparison, but justified. Both IKEA and Lowe’s offer fixtures, countertop, rugs, lighting and cabinetry. The Swedish giant has far fewer locations which are limited to major cities while Lowe’s is in most small cities, along with the major ones. Because most more-direct competitors are small local options, Lowe’s can often beat them out on price but lags in personality and local flare. Overall there is small impact to Lowe’s when it comes to other companies coming into the market of home improvement.
Recommendation
After analyzing market conditions of Lowe’s, we assess that the organization should look to expand current operations in order to maximize profits. There are many aspects of the business Lowe’s should examine. The company should look to invest in new stores, equipment, technology, and better training for current and potential employees. Historically, Lowe’s suffered years of shortfalls and have recovered recently from the crashing of the housing market. In order for Lowe’s to keep up with its rival, Home Depot, they must look to expand more in international markets to increase customer base and revenue. However, a strategy must be implemented first. The following paragraphs depict the necessary steps for Lowe’s to expand its operations. Lowe’s is the second largest home improvement company in the world. Their market position is strong which allows Lowes to draw more customers that are new and in existing markets. Their biggest competitor is Home Depot, a company that takes the number one spot. Lowe’s market structure is defined as an oligopoly so competition is limited in the home improvement market. This allows Lowes to expand operations in places where there are many homes being built in residential areas, therefore attracting more clientele to various locations eventually increasing profit. In order to stay competitive with their prices Lowes offers a program that allows customers to save money by matching products and decreasing the price of the product by ten percent. Being able to expand its presence throughout the country and possibly internationally will generate new possibilities as the company looks forward to outpacing other competitors. In order for Lowe’s to sustain in mark in the home improvement industry, new technology must be incorporated to better serve employees and customers, would be a positive move for the company. In order for the company to expand, Lowe’s must invest in services and products to adapt to the change in technology. Obtaining the number one home improvement spot over Home Depot will be a task to overcome. New technology will also help serve customers faster and more efficiently that can turn into a unique customer experience. “Lowe's, the home improvement retailer, is undertaking a concerted effort to ally with innovative partners in a bid to enhance both its marketing and its grasp of new technologies (Juma, 2014)”. By offering new products, Lowes will give the customers more options and a broader view of different technologies that may work best for them. Lowe’s recently is attempting to acquire home automation products that will give the customer the ability to have everyday appliance connected to the Internet. This is an innovative move that will attract more customers to its stores by enabling customers to control appliances by using just an application on a device. A merger should be contemplated if Lowe’s desires to expand operations in different locations. Lowe’s main competitor Home Depot recently merged with U.S. Home Systems inc. which will allow them to receive bathroom and kitchen products and services. If Lowe’s were to merge with other companies or firms for diversification, it will likely lower overall business risk. Also, another reason to merge is to have the ability to cut cost by lowering the overhead and expense departments to increase revenue. “Mergers or acquisitions enables a firm to exploit competitive opportunities or neutralize threats, that merger or acquisition will enable the firm to reduce its costs or increase its revenues, and that strategy will be economically valuable."
Trials to Grow In 2011 one of the issues that Lowe’s faced was large layoff of employees. “Lowe’s wanted to restructure their operation model and cut 1,700 managerial jobs and add up to 10,000 part-time workers so the stores can be staffed better for the weekends” (Kavilanz, 2011). The goal was to cut the middle management out of three levels of management and only have two levels. This elimination of managers received backlash from employees as some of them were forced to either resign from their positions or apply to become a part-time employee. In addition to the layoffs, Lowe’s experienced some stores that were not performing well. The home-improvement chain closed 20 stores across the United States. The stores were being closed to increase profits and strengthen financial performance. The move left approximately 1,950 employees unemployed. Lastly, there was an issue dating back to 2001 which was resolved seven years later, when two employees filed a class action suit stating that they, as well as other employees, were not being paid for their overtime duties. The employees stated they were required to work off the clock, which was before and after their normal shifts, and were not compensated. Issues can arise at any organization at any time. Most issues can be resolved in a timely manner while others may take an extended amount of time due to legal issues. The bottom line is to solve any issues promptly to save the company from national embarrassment, which could degrade the company’s image.
The home improvement industry which Lowe’s competes in was dealt a blow during the burst of the 2008 housing bubble. Gavin Smith’s article about the home improvement industry sheds light on the industry since 2009 and where it is heading in the near future. The home improvement industry and Lowe’s fared the burst bubble far better than the construction industry. Despite this, the industry was negatively affected. Though the industry was hurting from 2009 to 2011, since 2009 it has been growing at a mean of 2.2%. The fewer homeowners during the recession hurt the market for home improvement. Some of the people who still owned homes had less disposable income and the unnecessary beautification of their homes was one of the areas where their personal budgets were cut (Smith, 2014).
Lowe’s is part of an oligopolistic market structure, but recently in order to better improve its position, Lowe’s has launched their new tag line which states, “Never stop improving”. This new tag line coincides with what will soon be My Lowe’s, which is an online tool that will help customers manage purchases for their homes and home improvement projects from start to finish. Lowe’s stated that “Never stop improving” is a promise to their customers that they will never stop improving and that it will always be constantly be innovating and improving in order to satisfy the changing needs of its customers. Market research has found Lowe’s’ new campaign better showcases the commitment to help the consumer find what works best when it comes to home improvement needs.
Another challenge that Lowe’s may have while expanding is the need to continue paying employees well to encourage people to join their company. Currently Lowe’s provides even their part-time employees benefits. Lowe’s provides childcare, paid and unpaid time off, on-site nurses, on-site pharmacies, tuition reimbursements, employee discounts, and on-site corporate amenities. 401k plans are offered to employees along with extra training to ensure that employees are skilled in their respective fields.
Government Regulations
In 2007 Lowe’s developed plans to open stores in Canada. With this expansion into Canada now has 37 stores in Canada (Lowe's, 2014)and plans to continue into Western Canada. When foreign businesses like Lowe’s decide to expand into Canada they have to work within the Investment in Canada Act. The Investment in Canada Act is designed to promote foreign business in Canadian borders while still protecting Canadian business. When a foreign business decides to move or expand into Canada they have to file a notification to the Minister or Director of Investments. If the Minister decides that the transaction is not in Canada’s best interest then the transaction could be denied. The Minister will look at the impact on Canadian business and how the business infrastructure will be affected (Investment Canada Act, 2013).
Lowe’s has been doing business in Australia since 2011, but only as business partners with Woolworths Limited (Sage & Paul, 2009). The company is called Masters Home Improvement and Lowe’s owns 1/3 of the company. The majority of the foreign businesses in Australia operate as partners with other companies owned by an Australian resident. Under the Corporations Act of 2001 any company doing business in Australia has to be registered with the Australian Securities & Investments Commission, ASIC (OCRA, 2014). Another stipulation for foreign companies in Australia is that if it is not a partnership with an Australian company then there has to an Australian resident as a director for the company. For foreign businesses in Australia, it is better to introduce the company alongside of an established Australian company, to be able to reduce red tape and bureaucracy.
For foreign businesses operating in other countries the biggest obstacle is to adhere to that countries policies and laws within their borders. Each country has different labor laws, taxation laws, etc. The Organization for Economic Co-operation and Development or OECD, is a multi-national organization that aims to promote economic and social well-being of people around the world. The OECD has been operating for over 50 years and aims to bridge gaps between businesses and the countries they operate within. Australia and Canada are both members of the OECD and require the companies that originate in their countries to comply with the guidelines set by the OECD in their home country and in any foreign country they move to. These policies are designed to allow the company to expand internationally while not hindering the national companies with the new competition (Organization for Economic Co-operation and Development, 2011).
Like most organizations out there these days, Lowe’s is affected by government regulations. Instead of being negatively affected, Lowe’s understands that the market that they are in requires regulations to be followed and maintained. Government regulations will always be a part of running an organization and this will never change. The types of regulations that the home improvement market may need to follow might change and Lowe’s will have to take those as they come. Lowe’s always makes sure that they follow regulations though and always will. The complexities of being a US-based company expanding into other international markets, which technically Canada is, are becoming clearer to Lowe’s corporate as they become more of an international brand.
Social Diversity Social diversity requires acceptance and patience. It requires understanding that not everyone is the same and not everyone will have the same beliefs. With Lowe’s expanding their business maybe even farther than the borders of the Unites States, social diversity will be a major factor in being able to expand successfully. Even with just expanding throughout the United States there are going to be areas that are socially diverse. From one small, suburban area to an upbeat, urban area, understanding that not every area is the same is going to be imperative. Lowe’s will need to review their social diversity policy and most likely update it as most other American companies are doing at this time. Daniel Rasmus’ says “Diversity is now a business necessity” rather than a business option, in his article Redefining Diversity for the New Global Workforce (Rasmus, 2012). Diversity affects every part of a business and Lowe’s would benefit greatly from integrating more social diversity with their expansion. Without thought of how to handle diversity within the workplace, the expansion might not go as smoothly as Lowe’s had thought it would.
Even considering only the boarders of the United States, they should realize that America is a melting pot. New ideas are being contemplated, new religions are being accepted, sexual orientation is being looked over, and races of all different backgrounds are being accepted on a daily basis. Creating a diverse environment within the culture of the company will help to maintain a healthy work environment for all members of the Lowe’s team. It will also help within the expansion of the company and make it a more enjoyable experience for all parties involved. Rasmus’ ideas of diversity are almost extreme in considering various attributes of a person’s diversity. He considers travel, reasoning basis, handedness and gender identification among other things to be part of somebody’s identity. To go beyond what the government protects as equal opportunity is a good, forward idea for Lowe’s to project within its employees (Rasmus, 2012).
Conclusion
Lowe’s has continued its success for decades since its incarnation. By expanding into Canada, Mexico and Australia it has enlarged the market in which it competes along with improving brand recognition. Although some shake up have rattle it a little bit, Lowe’s has remained strong and even grown while other companies were closing in or closing all together. With advances in their technological prowess to make their customer’s shopping experiences easier and faster will help them. Lowe’s has joined with other companies to help advance. Woolworth in Australia is one of these companies, which the team seems very excited about with plans to build 150 stores by 2015. Lowe’s has grown little in the recent years but has done minor restructuring to help itself. Hopefully their changes will prove fruitful and not frightful for their future growth.

Bibliography
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