Executive Summary
The presented report is the attempt to find solutions to the problem of the insufficient market share of the Lowe’s Corporation in the home improvement industry.
Competitor Analysis
The competitor analysis of the Lowe’s market share shows that the company actually needs strategies for improvement. The research of the competition conditions and the main strengths and weaknesses by the Home Depot, Lowe’s main competitor, will allow adopting a challenger strategy for increasing the Lowe’s market share at the expense of the Home Depot’s one.
Market Share Can Be Increased by 50%
As a result of the successful challenger strategy implementation, the market share of the Lowe’s Corporation can be increased by 50%, the figure by which the Home Depot currently outweighs Lowe’s in the home improvement industry. Although the costs of the strategy are rather substantial, its potential benefits are four times as high.
Introduction
Need for Action
Nowadays, the U.S. and the global markets of home improvement goods and services are dominated by three major players. These are the Home Depot, the Lowe’s Corporation, and the Menards, Inc (Daily Finance, 2010). As the order of their listing shows, the companies have unequal market shares, and Lowe’s Corporation takes only the second place in the home improvement industry after the Home Depot. However, Lowe’s Corporation is a rather ambitious company, and its major goal is to establish its domination over the market, increase its market share, and gain competitive advantage over other companies operating in the industry.
Purpose
Accordingly, the presented report is the attempt to research the market conditions in which Lowe’s Corporation operates and suggest strategies for increasing its market share by using the competitive analysis. In more detail, the purpose of the presented report is to identify the trends and products that allow the company’s competitors to achieve success, and to use this knowledge for improving the market position of Lowe’s Corporation. More specifically, based on the outcomes of the competitive analysis, it will become possible to identify what the Lowe’s Corporation needs to do to increase its influence in the home improvement industry.
Scope
The scope of the presented report will be rather narrow and specific. As far as the increase of the market share is the basic task for this report, it will be useful to carry out a competitive analysis of such companies as Home Depot and Menards, Inc. Such an analysis will allow seeing what policies allow these companies either exceed or come closer to market position that the Lowe’s Corporation takes at the time. Drawing from this, the report will cover the market trends used by the Lowe’s Corporation’s competitors, the most innovative products, and the trends of market supply and demand in the home improvement industry. In its nature, the report will be brief, but its findings are expected to suggest improvement strategies to the Lowe’s Corporation.
Procedure
The information for the current report has been collected mostly from the primary sources, i. e. the web sites of the companies analyzed (Lowe’s Corporation, Home Depot, and Menards, Inc.). As well, additional information has been collected from such secondary sources as reputable online economic sources and theoretical scholarly works that provide insights into how the work on market share increase should be structured and carried out. The basic assumptions and conclusions in this report are made on the basis of the financial data that illustrate the relation of the Lowe’s Corporation’s market position to the financial data regarding its competitors, their revenues, and income projections.
Problem Discussion
The problem to which the current report is dedicated is the need to improve the market share of the Lowe’s Corporation, the second largest retailer of home improvement goods and services in the U.S. market (Data Monitor, 2010). Although being the second in such a large market might be considered success, the Lowe’s Corporation aims at the highest tops of the home improvement market. The comparison of some basic figures regarding the Lowe’s Corporation and its main competitors reveals that there is a problem that Lowe’s has to solve.
For example, the market shares and the annual revenues of the three discussed companies for the 2009 fiscal year present the following proportion (Daily Finance, 2010):
- Home Depot – 28% ($66.18 billion);
- Lowe’s – 14.8% ($47.22 billion);
- Menards, Inc. – 3% ($8 billion).
So, one can see that although the third company in the home improvement industry is far behind Lowe’s Corporation in almost all its financial activities, Lowe’s itself needs to do much to catch up with Home Depot as there is a difference of over 13% between the market shares of the two leaders (The Home Depot, 2010; Lowe’s, 2010; Menards, Inc., 2010).
Solution Discussion
Thus, seeing the problem faced by Lowe’s, it is necessary to find a solution. Kotler (2008) argues that there are three ways that Lowe’s can take up. These are the challenger, the follower, and the nicher strategies (pp. 480 – 481). The challenger strategy is, according to Kotler (2008), one of the most widely used methods of gaining additional market share (p. 480). This strategy presupposes that the company that aims at market share increase, i. e. Lowe’s Corporation in this case, directly attacks the market leader, i. e. Home Depot, trying to win additional customers, market sectors, and niches. As well, a market challenger can attack smaller companies trying to expand its market share by acquiring their customers or the whole companies.
The follower strategy sees the company trying to increase its market share as investigating, copying, and improving the policies adopted by the market leader. Such a strategy, if carried out carefully, allows slow but steady growth (Kotler, 2008, p. 481). Finally, the nicher strategy is the way for a company to focus on one niche of its activity and develop its market share in this niche at the expense of other niches (Kotler, 2008, p. 482). However, the latter strategy is inapplicable to Lowe’s as the company deals in various market niches and does not have more than 9% of its sales in any of them (Lowe’s, 2010). So, a nicher strategy will make Lowe’s from one of the leaders into one of the losers in the home improvement market.
Accordingly, the Lowe’s Corporation is to select between the challenger and the follower strategies. The main advantage of the challenger strategy is the potential for the fast growth, while the major drawback is the risk of a serious failure is the market leader, i. e. Home Depot, manages to overcome the effects of Lowe’s actions and make changes into its policy prior to Lowe’s catching up with them (Kotler, 2008, p. 484). The follower strategy has lower risks as its main advantage, but the slow pace of the growth this strategy promises is, probably, not acceptable for Lowe’s in its current position. Therefore, the challenger solution is still the best option for Lowe’s Corporation.
Sticking to this strategy, the Lowe’s can resort to a variety of techniques to challenge, and as a result to change, the market share of Home Depot and increase its own market share. First of all, the Lowe’s should take up the study of Home Depot in all aspects (Kotler, 2008, p. 488). In more detail, the Lowe’s should study Home Depot’s financials, products offered currently and only planned for launching, strategies and techniques of advertising, customer care methods, and even the system of discounts and special offers that Home Depot exercises. In the light of the fact that the Lowe’s Corporation is the second largest home improvement retailer in the USA, the risk of failing in this market leader attack is minimal, and even if this risk is realized, the Lowe’s have resources to recover from it shortly and keep on working on market share increase (Lowe’s, 2010).
Cost
The cost of the solution proposed to Lowe’s is rather high, but it is still worth the results that the company might achieve after the challenger strategy’s successful implementation. Thus, the Home Depot spends an average of $4.2 billion on administrative needs that include innovation development and research, market analysis, advertising, customer care, and other relevant points (The Home Depot, 2010).
Therefore, to challenge Home Depot, the Lowe’s will have to take up similar expenses and add about 6%, the traditional rate charged by independent market analysis companies, for investigating all Home Depot peculiarities (Spiwak, 2007). So, the total cost of the suggested solution for the Lowe’s is expected to be about $4.41 billion. However, the potential benefit of this solution is the achievement of Home Depot’s income levels that amounted to $66.18 billion in 2009, which is by $18.95 billion more than the Lowe’s had for the same year. So, the pure benefit for the Lowe’s can be $14.54 billion.
Summary of Conclusions and Recommendations
Thus, the obvious need to increase the Lowe’s market share can be satisfied by using the challenger strategy towards the Home Depot, Lowe’s main competitor. This strategy offers fast results, and the potential benefit that the Lowe’s can have amount to $14.54 billion. Moreover, becoming the leader of the U.S. market, the Lowe’s Corporation will gain the necessary back up for the international expansion.
Summary/Conclusions
So, the current report has managed to show that the study of the competitor’s products and trends can allow the Lowe’s Corporation to solve its major problem, i. e. increase its market share. In more detail, this report has managed to find out that:
- Lowe’s Corporation is the second largest home improvement retailer in the USA;
- The Home Depot is the main competitor whose market share interests the Lowe’s;
- The challenger strategy should be used by the Lowe’s to attack the Home Depot and win its market share;
- Market research and competitor analysis are necessary to achieve the Lowe’s goals;
- The challenger strategy will be rather costly for the Lowe’s, but the potential benefits outweigh the costs almost 4 times.
Implementation
Finally, the specific timeframe for the implementation of the proposed market share increase solution is as follows:
References
Daily Finance. (2010). Lowe’s Cos Inc. Top Competitors. Web.
Data Monitor. (2010). Premium Company Profile: Lowe’s Companies, Inc. Web.
Kotler, P. (2008). Principles of marketing. NJ: Pearson Education.
Lowe’s. (2010). Official corporate web.
Menards. (2010). Official corporate web site. Web.
Spiwak, S. (2007). Lowe’s 2010. Web.
The Home Depot. (2010). Official corporate web site. Web.