Lowe’s (LOW) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Home Improvement)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Lowe’s (United States)
Based on various researches at Oak Spring University , Lowe’s is operating in a macro-environment that has been destablized by – increasing energy prices, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing commodity prices, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lowe’s can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lowe’s, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lowe’s 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 of Lowe’s
2. Improving business portfolio management of Lowe’s
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Home Improvement) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lowe’s
Strengths of Lowe’s | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lowe’s are -
Successful track record of launching new products
– Lowe’s has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lowe’s 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.
Operational resilience
– The operational resilience strategy of Lowe’s comprises – understanding the underlying the factors in the Retail (Home Improvement) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Retail (Home Improvement) industry
- digital transformation varies from industry to industry. For Lowe’s digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lowe’s has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Lowe’s 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.
Analytics focus
– Lowe’s 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 Retail (Home Improvement) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Lowe’s is one of the most innovative firm in Retail (Home Improvement) sector.
Superior customer experience
– The customer experience strategy of Lowe’s in Retail (Home Improvement) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Lowe’s has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lowe’s staying ahead in the Retail (Home Improvement) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Retail (Home Improvement) industry
– Lowe’s is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Lowe’s in the Services 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 to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Lowe’s has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– Lowe’s is one of the leading players in the Retail (Home Improvement) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Lowe’s | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lowe’s are -
Employees’ less understanding of Lowe’s strategy
– From the outside it seems that the employees of Lowe’s 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.
Increasing silos among functional specialists
– The organizational structure of Lowe’s is dominated by functional specialists. It is not different from other players in the Retail (Home Improvement) industry, but Lowe’s needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lowe’s to focus more on services in the Retail (Home Improvement) industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Lowe’s 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 Retail (Home Improvement) industry using digital technology.
Skills based hiring in Retail (Home Improvement) industry
– The stress on hiring functional specialists at Lowe’s 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.
Need for greater diversity
– Lowe’s 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.
High cash cycle compare to competitors
Lowe’s has a high cash cycle compare to other players in the Retail (Home Improvement) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Lowe’s has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Home Improvement) industry over the last five years. Lowe’s 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.
Products dominated business model
– Even though Lowe’s has some of the most successful models in the Retail (Home Improvement) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lowe’s should strive to include more intangible value offerings along with its core products and services.
High dependence on Lowe’s ‘s star products
– The top 2 products and services of Lowe’s still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Lowe’s has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Lowe’s, in the dynamic environment of Retail (Home Improvement) industry it has struggled to respond to the nimble upstart competition. Lowe’s has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Retail (Home Improvement) industry, Lowe’s needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Lowe’s Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lowe’s are -
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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lowe’s can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Lowe’s 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Home Improvement) industry, but it has also influenced the consumer preferences. Lowe’s can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Lowe’s has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Home Improvement) sector. This continuous investment in analytics has enabled Lowe’s to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lowe’s to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Lowe’s 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 Retail (Home Improvement) industry.
Learning at scale
– Online learning technologies has now opened space for Lowe’s 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lowe’s can use these opportunities to build new business models that can help the communities that Lowe’s operates in. Secondly it can use opportunities from government spending in Retail (Home Improvement) sector.
Developing new processes and practices
– Lowe’s can develop new processes and procedures in Retail (Home Improvement) 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 Retail (Home Improvement) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lowe’s 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 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lowe’s in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Home Improvement) industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lowe’s 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.
Loyalty marketing
– Lowe’s 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 of Lowe’s are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lowe’s 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 Lowe’s prominent markets.
Consumer confidence and its impact on Lowe’s 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 Retail (Home Improvement) industry and other sectors.
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.
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.
Easy access to finance
– Easy access to finance in Retail (Home Improvement) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lowe’s can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lowe’s may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Home Improvement) sector.
Environmental challenges
– Lowe’s 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 can take advantage of this fund but it will also bring new competitors in the Retail (Home Improvement) industry.
Shortening product life cycle
– it is one of the major threat that Lowe’s is facing in Retail (Home Improvement) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lowe’s business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Lowe’s 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 Retail (Home Improvement) industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Home Improvement) industry are lowering. It can presents Lowe’s with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Home Improvement) sector.
Technology acceleration in Forth Industrial Revolution
– Lowe’s has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Lowe’s needs to keep up with the evolution of technology in the Retail (Home Improvement) 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.
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 at 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 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 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 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 needs to make to build a sustainable competitive advantage.
