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The Home Depot vs. Lowe’s Company Inc

24 Feb 2017

The Industry

The home improvement industry is a dynamic industry which has been experiencing exponential growth with the growth in the economy and its resultant effect son the disposable incomes and per capital savings and earning for the people living in America. The Home Depot and the Lowe’s Company Inc. are two of the main players in the home improvement industry. The main strengths and the success factors of the two companies are listed in the following section, however the main success factors that are required to be successful in the home improvement industry pertain to the relative price of products, the reputation and the brand image of the company, the senior management of the company, the technology being used and the distribution network as well as the financial resources that are available to the players in the industries.

Brief Introduction to the Home Depot

The Home Depot Company is amongst the largest companies’ active in the home improvement industry in the United States. The company sells a wide variety of products as well as packages to the customer which are specifically designed to match the requirements of the different targeted market segments for lawn, garden, indoors and ornaments. The company is based in Atlanta, Georgia and has been operating successfully since the 70s. “The company recorded revenues of $90,837 million, during the fiscal year ended January 2007, an increase of 11.4% over 2006. The operating profit of the company was $9,673 million during fiscal year 2007, an increase of 3.3% over 2006. The net profit was $5,761 million in fiscal year 2007, a decrease of 1.3% over 2006.” (‘Home Depot SWOT Analysis’, 2007)

Success Factors of the Home Depot

The main strengths of the company which have served as the success factors for it in terms of establishing in the position of the company in the market and adding to its total worth pertain to the high number of sales the company has. The business model of the company directly contributes to this as it is very unique in its inception. The proposition of products to DIY and BIY customers as well as the professional customers in a large open space similar to a warehouse holds appeal for the customers. This matched with the low prices model has been one of the most significant success factors for the company.

The other success factor pertains to the well known brand name of the company. Home Depot is a much uncomplicated name which is easy to remember. Moreover the company has been very appropriately positioned in the market as the place where the customers can find any kind of home improvement product or tool that they can imagine. Moreover the extensive variety pf products as well as services offered in one place has given the company a house hold reputation as a single source of materials for the DIY, BIY and professional workers. Aside form this the company also offers branded as well as unbranded products which can appeal to the budget and the tastes of a wide range of customers

The third success factor of the company is the senior management of the company. In survey conducted by the CCL in North Carolina, it was reported that 20 percent of the respondents mentuioned that the management was a main source of success for a company while 40 percent acceded to pointing out the CEO as being responsible. “About 20 percent of respondents indicated personal characteristics were a key success factor for midlevel management, while that figure rose to nearly 40 percent for CEOs. “Thinking like a host means truly listening to stakeholders, so that all feel comfortable and valued. CEOs who take the concept of host behavior to heart will make a much stronger positive impression than those who adopt defensive attitude. When Robert Nardelli took the helm at Home Depot Inc., he spent months visiting stakeholders, making sure all were comfortable with him as a host, before implementing his vision for the company's next stage of growth.” (Bird, 2005) The main characteristics that are required in the CEO and the senior management for it to be a success factor pertain to them acting and thinking like hoists, appreciating dissent, depicting integrity in their work and comprehending the difference between substance and show.

Brief Intro of Lowe’s Company

The company called Lowe’s Company is also one of the large players in the internationals well as in the US market for home improvement. The company is also based in Mooresville, North Carolina and provides a diverse product offering which pertains to decorations, repairs and maintenance well as improvement and remodeling products to its customers. The company is second only to the Home Depot in the market. “The company recorded revenues of $46,927 million during the fiscal year ended January 2007, an increase of 8.5% over 2006. The operating profit of the company was $5,152 million during fiscal year 2007, an increase of 10.7% over 2006. The net profit was $3,105 million in fiscal year 2007, an increase of 12.3% over 2006.” (‘Lowe's Companies, Inc. SWOT Analysis’, 2007)

The Least Success Factors of Lowe’s Company

One of them most important least successful factors for the company is its concentrated geographic presence. The company is currently only focused on the US, which limits its market to only a specific region. Operations in Canada opened in 2007 and in Mexico are due to open in 2009 but the limited scope of the market to N. America is restricting for the company. The heavy dependent on only one market has made the company dependent on the economy of US and this was depicted recently with the loss incurred by the company due to the ailing recession in the US market.

The company has almost no control on the quality of its products as the products are acquired through vendors worldwide, with no vendor contributing in more than 5 percent of the products, goods and services. As a result the recalls for the products by Lowe’s have been extensive, e.g. gas grills by Sagittarius Sporting Goods, of China, hammock stands by Shin Crest etc. This has considerably effected the brand image as well as the perception of the company in the minds if the consumers in the market.

Moreover the company has also been recording weak returns on its investments which are 3-5 percent lower than even the industry averages. This depict that the company has an inefficient management which is not handling the resources of the company properly. The long term effect of this problem can be the loss in the confidence amongst the stakeholders and the shareholders.

Conclusion

Recently in the last quarter of 2007, the company reported negative performance but in the first quarter of 2008 is showing considerable improvement. This indicated that the company has directed effected by the changes taking place in then housing industry in United States. “Lowe's continues to win a larger share of the home improvement market. And the chain's long-term strengths its fast growth and its reputation for good service and attractive stores won't be sacrificed for short-term savings.” (Steverman, 2008) Similarly the Home Depot company is also directly linked with the housing industry but the reputation, strong market position, its diverse range of products and target market as well as the its extensive financial might has aided the company in being the leader in the market in its industry.

References

  • ‘Home Depot SWOT Analysis’, Datamonitor, 2007, p1, 9p,
  • ‘Lowe's Companies, Inc. SWOT Analysis’, Datamonitor, 2007, p1, 10p, 
  • ‘Walking in the Customers' Shoes’, T+D, 2007, Vol. 61 Issue 10, p58-60, 3p, 1c, 
  • Bird, S., ‘Counseling for communication leadership’, Communication World, 2005, Vol. 22 Issue 5, p31-142, 4/5p, 
  • Steverman, B., ‘Lowe's: As Bad as it Gets’, Business Week Online, 2008, p13-13, 1p,
  • Tolunay, C., Wang, Y., Ma, M., Zhang , Z., ‘Home Depot vs. Lowe’s: Financial Analysis and Comparison’.

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