Although the company gained significant market share, earnings were below previously anticipated numbers. It is anticipated that the economy will continue to negatively affect morale. Salaries for vice presidents and above have been frozen and planned annual salary increases have been reduced for the rest of the organization. The unpredictable economy in America was offset, however, by the companys employees who drove their Customer Focused scores to the highest levels ever (“Company view,” 2010).
Its Lowes entrepreneurial spirit that will be crucial in overcoming these economic challenges. The company continues to develop proprietary product lines to not only take advantage of the continued demand for private labels, such as the Kobalt brand (“Lowes,” 2008) but also to differentiate itself from its competitors. Market expansion also hasnt just been limited to the traditional building of new stores. In 1999, the company expanded in the western U.S. By purchasing 40 Eagle Hardware & Garden stores (Jones, 2000). International expansion into Australia is planned through the companys joint venture with Woolworths (“Woolworths,” 2009).
Recommendations for Lowes include using the companys strong brand name value to diversify themselves beyond simply being a low price leader in the home improvement industry. Competing primarily on price has led to the company resorting to excessive promotions that have severely reduced Lowes gross margins. Instead, the company can become the industry leader in an area that is showing strong growth — eco-friendly products and materials. As consumers are looking for environmentally responsible home improvement renovations, Lowes can set itself apart from competitors like Home Depot by providing well-trained employees to provide eco-friendly solutions to their home improvement projects.
This will be especially helpful to Lowes margins as most consumers are willing to pay more for environmentally friendly products and materials.
This recommendation can help counter the primary threats Lowes is facing as well. Regarding rising labor costs, although there is little the company can do about government mandated increases in minimum wage, higher gross margins will mean the company is able to better able to withstand these increased costs. In addition, although new housing starts may still be on the decline, this means home owners may be more interested in renovation projects for their existing homes. Environmentally responsible projects can not only help create value in existing homes, which is especially important in a faltering home market, but also help reduce costs for homeowners, including reduced energy costs and maintenance costs. This can further help ward against the reduced discretionary spending home owners are experiencing, due to the economic challenges the United States has faced over the last several years. By showing how certain eco-friendly projects are actually an investment that will reap monetary rewards by reducing costs for the home owner, more consumers will be willing to take on these projects, to save money in the long-term.
“Company overview: Lowes Companies Inc.” (2010). Datamonitor 360. Retrieved November 22, 2010.
“Company view: Lowes Companies Inc.” (2010). Datamonitor 360. Retrieved November 22, 2010.
Hellriegel, D., & Slocum, J.W. (2007). Organisational behavior ([11th ed.). South Melbourne, Vic.: Thomson.
“History: Lowes Companies Inc.” (2010). Datamonitor 360. Retrieved November 22, 2010.