Implementation Plan: Part 1
Please take a look at the case studies located in your textbook. There
are multiple corporations that provide a large array of services and
products. Please select an organization that interests you.
For Part 1, describe the company that you selected, the
products/services they offer, and the history of the company. Next,
analyze the company’s strategy, mission, and organizational
structure. In your analysis, include the following:
o
• What does the strategy, mission, and organizational structure
say about the company?
o
• What are the positive aspects of the strategy, mission, and
organizational structure?
o
• What are the company’s short-term and long-term goals?
o
• What are ways to improve the strategy, mission, and
organizational structure?
Much of the information you will need to complete this segment
can be found in the case study in the textbook. However, you
are welcome to conduct further outside research as needed.
Some details, such as the short-term and long-term goals, may
not be explicitly stated. Please use your best judgement and
analytical skills to determine that information.
Your project must be a minimum of two full pages in
length, not including the title and reference pages. Include
an introduction paragraph. APA Formatting required.
The company I chose is Lowes. This is what the text has on
them and all parts of this assignment should be able to come
from the following or simple internet research. Please keep in
mind that this assignment is only for instructions listed in
Part 1. I included the following from the textbook just to
provide as much information as I could from the text. That
is why it is so long.
Lowe’s Companies, Inc., 2013
www.lowes.com , LOW
Headquartered in Mooresville, North Carolina, Lowe’s is among
Fortune’s top 50 companies and is the second-largest home
improvement store in the world, trailing only Atlanta, Georgiabased
Home Depot. Lowe’s operates 1,745 stores totaling 197 million square
feet of retail selling space with all Lowe’s stores being located in the
USA, Canada, and Mexico. Lowe’s has an agreement, as a one-third
owner, with Australian Woolworths Limited to develop a Lowe’sthemed
store in Australia.
Lowe’s in late 2013 acquired Orchard Supply Hardware for
approximately $205 million in cash, plus the assumption of payables
owed to nearly all of Orchard’s suppliers. The acquisition gave Lowe’s a
new customer base in California. Lowe’s plans to have Orchard operate
as a separate, standalone business, retaining its brand under the
leadership of Orchard’s current management team. Based in San Jose,
California, and with fiscal 2012 annual revenue of $657 million, Orchard
operates 91 neighborhood hardware and garden stores primarily
located in densely populated markets in California. Under the terms of
the transaction, Lowe’s acquired at least 60 of these stores. On
average, Orchard stores have about 36,000 square feet of selling space,
compared to 113,000 square feet for an average Lowe’s home
improvement store. Lowe’s currently operates 110 stores in California.
Lowe’s stores offer appliances, lawn and garden, lumber, plumbing,
electrical, power tools, flooring, and much more for home repair and
construction. Lowe’s principle goal is “to execute better than our
competitors, and make the process of home improvement as seamless
and simple as possible for customers.” Lowe’s customers are primarily
homeowners, renters, homebuilders, and commercial construction
firms. Lowe’s has 160,000 full-time employees and 85,000 part-time
employees, all of whom are led by CEO Robert Niblock. Lowe’s has a
chief rival, Home Depot, which reported a profit of $ 4.5 billion in 2012
on sales of $74.75 billion.
Lowe’s fiscal 2012 sales increased 0.6 percent to $50.5 billion, while
earnings increased 6.5 percent to $2.0 billion. But Lowe’s total
customer transactions in 2012 declined to 804 million from 810 million
the prior year. Lowe’s fiscal year 2012 ended January 31, 2013.
Copyright by Fred David Books LLC. (Written by Forest R. David)
History
The first Lowe’s was opened in North Wilkesboro, North Carolina, in
1921 by Lucius Lowe as “Lowe’s North Wilkesboro Hardware.”
However, from the start, in addition to hardware, the store also offered
produce, groceries, tobacco products, and dry goods. Lowe died in 1940
and his daughter Ruth Buchan inherited the business and sold it the
same year to her brother Jim Lowe. In 1946, Lowe’s was officially
founded. Jim Lowe hired Ruth’s husband, Carl Buchan, after World War
II and the two men ran the store together until 1952 when they split,
with Buchan taking control of the hardware business and Jim Lowe
opening up Lowes Foods in 1954, which is still operational today.
After the split, Buchan began expanding Lowe’s throughout the 1950s
opening stores in several North Carolina markets. However, Buchan
died from a heart attack in 1960 at age 44, and Lowe’s five-man
executive team took the company public in 1961. The following year,
Lowe’s totaled 21 stores and had annual revenues of over $32 million.
During the 1960s and 1970s, the U.S. housing market expanded rapidly
with professional builders becoming Lowe’s primary customer. In 1982,
Lowe’s reported its first billion-dollar revenue year with a record profit
of $25 million. Starting in the 1980s, however, Lowe’s, in addition to
builders, started focusing on the home do-it-yourself (DIY), whose aim
was for weekend projects to add value to their homes.
In 1994, the “modern” Lowe’s began with all new store expansion,
having stores greater than 85,000 square feet of retail space. As of
2012, Lowe’s opens two styles of stores: 117,000-square foot stores in
large markets and relatively smaller 94,000-square foot stores in
smaller markets. In 2007, Lowe’s opened its first stores in Canada,
where it currently operates
20 stores and in 2010 the first store opened in Mexico. Lowe’s plans to
open 150 stores in Australia in the next five years.
Internal Issues
Vision and Mission
The Lowe’s mission statement is:
Lowe’s Promise: We are committed to delivering better
customer experiences across the entire home improvement
spectrum, by pulling together the best combination of
possibilities, support and value for customers wherever and
whenever they choose to engage.
Lowe’s vision statement is as follows:
We will provide customer-valued solutions with the best
prices, products and services to make Lowe’s the first choice for
home improvement.
Lowe’s focuses its employees on the following core values:
• Customer Focused
• Teamwork
• Ownership
• Passion for Execution
• Respect
• Integrity
Lowe’s markets the slogan:
Never stop improving.
Organizational Structure
As illustrated in Exhibit 1, Lowe’s operates from a divisional-by-region
organizational structure. Some analysts suggest that Lowe’s may have
too many top executives.
Lowe’s Locations
Exhibit 2 reveals where all the Lowe’s stores are located. The company
plans to open 10 new stores in 2013.
Supply Chain
Lowe’s receives products from more than 7,000 venders with the
largest single vender only supplying around 7 percent of total
purchases. To facilitate product movement, Lowe’s operates 14 highly
automated regional distribution centers in the USA with each
distribution center serving around 120 stores. In addition, Lowe’s
operates 15 flatbed distribution centers for items such as vinyl siding,
ladders, lumber, and other products that require special handing.
Lowe’s considers its supply chain finance (SCF) to be one of its top
means for gaining competitive advantage over rival firms such as Home
Depot, Ace, and True Value. Because most rival firms offer the same or
similar products, maximizing SCF efficiencies can be critically important.
Lowe’s considers three key areas of its SCF strategy to be (1)
standardization of payment terms, (2) incentives for buying
organization, and (3) break even for the suppliers.
Sustainability
Lowe’s emphasizes sustainability and in 2012 was awarded
the ENERGY STAR Sustained Excellence Award for the third
straight year and also was awarded the WaterSense award
from the EPA for the fourth straight year. The awards can be
attributed to Lowe’s overall mission to protect the natural
environment by continually expanding product offerings
that are Energy Star and WaterSense qualified as well as
offering numerous solar-powered alternatives.
Segments
Lowe’s provides an excellent breakdown of revenues by product
category. Exhibit 3 provides the most recent two years of available
data. Note that no single category accounts for more than 11 percent of
revenues and there have been consistent revenues across all categories
over the two most recent years.
Within the wide product categories, Lowe’s offers both national brandname and private-brand products. Many customers shop for brand
name they know and trust to be the same regardless of the store they
are sold. Private brands however do provide product differentiation
from competitors in innovations, design, and are often cheaper as well.
Lowe’s private brands include tools, paint, plumbing, flooring, lumber,
and much more. Virtually all product categories are offered in both
national brand and private-branded options. Lowe’s also offers a much
larger selection of home improvement products than Home Depot,
even offering designer towels, towel racks, and many more upscale
home-decorating options.
Lowes also offers credit financing to customers through its consumer
credit card with GE Money Bank. The card allows qualified customers to
receive 5 percent off all purchases, and with purchases over $299,
customers can select to receive no interest financing or 5 percent off
the purchase price. In addition, Lowe’s offers a commercial account for
small- to medium-size businesses with minimal monthly payments and
the company also provides accounts receivables for commercial
customers that pay in full each month.
Lowe’s does not provide a breakdown of revenues or profits by
geographic region.
Strategies
Lowe’s initial strategy was focusing on builders but with the housing
boom in the 1960s, Lowe’s added the DIY home improvement market.
Lowe’s has always engaged in both market development and market
penetration, adding stores across the USA and now in Canada, Mexico,
and
Australia. Having two store sizes is an advantage because
Lowe’s tailors the respective store size market to particular
markets. Lowe’s does, however, experiment with various
layouts at various locations; nevertheless, having the same
principle layout at most stores provides customers familiar
in their shopping experience. Also, Lowe’s has slightly larger
stores than rival Home Depot with an average store size of
113,000 to 105,000 square feet. Both Lowe’s and Home
Depot have on average 32,000 square feet of garden space.
Lowe’s also stocks 40,000 items, up to 10,000 more than
certain Home Depot stores. Having wider isles, more signs,
and better store lighting are also competitive advantages of
Lowe’s. In addition, Lowe’s has around 69 to 89 percent
fulltime employees to Home Depot’s 59 percent. Despite
these “competitive advantages,” Home Depot is
outperforming Lowe’s, and by what some analysts say is by
alarming margins.
Lowe’s is continuing its expansion and is attempting to better attract
customers who normally would not visit home improvement stores. In
addition, Lowe’s has implemented a new strategy to attract an
increasing number of female customers.
Lowe’s has over 190,000 products online and recently started shipping
items to customers from service stores and regional distribution
centers. Historically, Lowe’s only shipped online purchased items from
its dedicated Internet warehouse. This new strategy enables Lowe’s to
provide faster deliveries, reduce order filling costs, and improve
profitability overall. Building on the increased online presence, Lowe’s
plans to reduce its brick-and-mortar expansion plans by 15 stores
annually thereafter, or around a 50 percent reduction in planned new
stores.
The Economy
Home prices are slowly rising in the USA and home construction too is
rising, both good news for Lowe’s. June 2012 new home sales in the
USA were up 15.1 percent over the prior year.
Sales of existing homes are increasing, up to 4.37 million
units in June 2012 from 4.18 units in June 2011 or a 4.5-
percent increase. Unemployment rates have fallen to just
below 8 percent in the USA, and are trending downward,
good news for Lowe’s. More and more people are
remodeling their homes, also good news for Lowe’s. The top
four homebuilders in the USA are: D.R. Horton Inc., KB
Homes, PulteGroup Inc., and Lennar Corp.; all four
companies are growing and this is good news for Lowe’s.
The 30-year fixed mortgage rate is over 3 percent and rising. Despite
low rates however, banks are still reluctant to lend. Throughout much
of the previous decade, banks would allow someone to purchase a
home with as little as 5 percent down, but now banks are commonly
requiring 20 percent cash down. In addition, banks are also requiring
higher credit scores to qualify for a mortgage. Scores as high as 720
would historically be automatic for a loan, but scores as high as 755 are
now not automatic for approval. Low interest rates are allowing many
people to refinance their homes, thus providing them with additional
cash to potentially spend on home improvement projects.
CEO Frank Blake of Home Depot in October 2012 said: “This housing
market has been very very bad and it’s going to take some time to
recover.” Blake’s comments were on the heels of the Federal Reserve
blaming the U.S. housing situation for the country’s overall slow
economic recovery. In Blake’s opinion, when customers start to
consider home improvement projects, such as installing a new granite
countertop as a home investment rather than a cost, then the housing
market is likely heading for a more sustainable recovery.
Competition
Largely dependent on the state of the economy and especially the state
of the housing market, competition is intense in the home
improvement industry. Major players Lowe’s and Home Depot have the
greatest market share, but many other firms such as True Value
Hardware, Ace Hardware, and even Walmart all facilitate increased
competition. For example, Ace markets its business as a one-stop place
where a customer can receive friendly help with an appropriated size
store that enables customers to find everything they need “without the
use of a gps.” This marketing strategy is clearly aimed at behemoths
Lowe’s and Home Depot and suggests that by being large warehouse
stores, customers do not receive the personal attention Ace can
deliver. True Value positions its business model around each store
being independently owned and operated, providing customers with a
store that offers products more tailored to local needs.
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