Lowe's chain of 306 stores was anticipating fierce competition from their major market rival, Home Depot. As they reformulated the size of their new prototype stores and the mix of their merchandise, what would be the ultimate format? What impact would it have on their advertising strategy? How could they retain their contractor business which had been the mainstay of their operation since the 1950s. In addition, how should they emphasize in their advertising: wide selection, good service, and everyday attractive prices.
Swot Analysis of "Lowe's" written by Walter J. Salmon, David Wylie includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lowe's Reformulated facing as an external strategic factors. Some of the topics covered in Lowe's case study are - Strategic Management Strategies, and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Lowe's casestudy better are - – cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, geopolitical disruptions,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lowe's case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lowe's Reformulated, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lowe's Reformulated operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Lowe's can be done for the following purposes –
1. Strategic planning using facts provided in Lowe's case study
2. Improving business portfolio management of Lowe's Reformulated
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lowe's Reformulated
Strengths Lowe's | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lowe's Reformulated in Lowe's Harvard Business Review case study are -
Analytics focus
– Lowe's Reformulated is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Walter J. Salmon, David Wylie can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Lowe's Reformulated has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Lowe's Reformulated is present in almost all the verticals within the industry. This has provided firm in Lowe's case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Lowe's Reformulated is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Lowe's Reformulated is one of the leading recruiters in the industry. Managers in the Lowe's are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Lowe's Reformulated is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lowe's Reformulated is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lowe's Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Lowe's Reformulated has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lowe's Reformulated to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Lowe's Reformulated in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Sales & Marketing field
– Lowe's Reformulated is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lowe's Reformulated in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Sales & Marketing industry
– Lowe's firm has clearly differentiated products in the market place. This has enabled Lowe's Reformulated to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Lowe's Reformulated to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Lowe's Reformulated has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lowe's HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Lowe's Reformulated has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Lowe's - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Lowe's | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lowe's are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lowe's, is just above the industry average. Lowe's Reformulated needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Walter J. Salmon, David Wylie suggests that, Lowe's Reformulated is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
No frontier risks strategy
– After analyzing the HBR case study Lowe's, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Lowe's Reformulated has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lowe's Reformulated even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lowe's, in the dynamic environment Lowe's Reformulated has struggled to respond to the nimble upstart competition. Lowe's Reformulated has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Lowe's Reformulated has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study Lowe's that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Lowe's can leverage the sales team experience to cultivate customer relationships as Lowe's Reformulated is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Lowe's Reformulated, firm in the HBR case study Lowe's needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Lowe's Reformulated has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Lowe's should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Lowe's Reformulated has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Lowe's Reformulated is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Lowe's Reformulated needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lowe's Reformulated to focus more on services rather than just following the product oriented approach.
Opportunities Lowe's | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Lowe's are -
Buying journey improvements
– Lowe's Reformulated can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lowe's suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lowe's Reformulated in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Lowe's Reformulated has opened avenues for new revenue streams for the organization in the industry. This can help Lowe's Reformulated to build a more holistic ecosystem as suggested in the Lowe's case study. Lowe's Reformulated can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Lowe's Reformulated has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lowe's - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lowe's Reformulated to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lowe's Reformulated can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for Lowe's Reformulated to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Lowe's Reformulated can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lowe's Reformulated to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lowe's Reformulated to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Lowe's Reformulated can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lowe's Reformulated in the consumer business. Now Lowe's Reformulated can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Lowe's Reformulated can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lowe's Reformulated can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lowe's Reformulated can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Lowe's Reformulated has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Lowe's External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lowe's are -
Environmental challenges
– Lowe's Reformulated needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lowe's Reformulated can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lowe's Reformulated will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lowe's Reformulated.
Shortening product life cycle
– it is one of the major threat that Lowe's Reformulated is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lowe's Reformulated in the Sales & Marketing sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lowe's, Lowe's Reformulated may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Consumer confidence and its impact on Lowe's Reformulated demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lowe's Reformulated needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Lowe's Reformulated can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of Lowe's Reformulated
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lowe's Reformulated.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lowe's Reformulated can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Lowe's .
Weighted SWOT Analysis of Lowe's Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Lowe's needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Lowe's is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Lowe's is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Lowe's is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lowe's Reformulated needs to make to build a sustainable competitive advantage.