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 - – supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, geopolitical disruptions, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies,
cloud computing is disrupting traditional business models, increasing energy prices, 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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the Lowe's Reformulated are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Successful track record of launching new products
– Lowe's Reformulated has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lowe's Reformulated has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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.
Innovation driven organization
– Lowe's Reformulated is one of the most innovative firm in sector. Manager in Lowe's Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
Training and development
– Lowe's Reformulated has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lowe's Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
Low bargaining power of suppliers
– Suppliers of Lowe's Reformulated in the sector have low bargaining power. Lowe's has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lowe's Reformulated to manage not only supply disruptions but also source products at highly competitive prices.
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.
Weaknesses Lowe's | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lowe's are -
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lowe's Reformulated is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lowe's can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Lowe's Reformulated has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lowe's, it seems that the employees of Lowe's Reformulated don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lowe's Reformulated supply chain. Even after few cautionary changes mentioned in the HBR case study - Lowe's, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lowe's Reformulated vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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 -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lowe's Reformulated can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Lowe's, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Lowe's Reformulated to increase its market reach. Lowe's Reformulated will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Leveraging digital technologies
– Lowe's Reformulated can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lowe's Reformulated can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lowe's Reformulated is facing challenges because of the dominance of functional experts in the organization. Lowe's case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lowe's Reformulated can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 -
Regulatory challenges
– Lowe's Reformulated needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Technology acceleration in Forth Industrial Revolution
– Lowe's Reformulated has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Lowe's Reformulated needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
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.
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.
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.
High dependence on third party suppliers
– Lowe's Reformulated high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lowe's Reformulated with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lowe's Reformulated in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.