Lowes Industry Analysis
| Industry Analysis | Home Improvement Industry: Lowe’s | | James Britton;Evan Sturm;Patrick Flanagan;Donald Rome | February 29, 201 |
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Introduction:
The Lowes Corporation operates in what is known as the home improvement industry. The home improvement industry is about $300 billion in the US and another $48 billion in Canada. This industry was formed out of a consolidation of the industry of local hardware stores. Local hardware stores still exist and are a small competitor in the home improvement industry. However, the home improvement industry took on a form of its own in the late 1970’s when The Home Depot Corporation made a decision to compete with a large regional chain of hardware stores called Lowes. Lowes recognized the threat of competition and both Lowes and Home Depot stores begun to invest in rapid expansion and grew their stores to be large big box retailers where customers could come to buy a variety of products ranging from appliances to tools, to paint, lumber and nursery products to improve their home. There have since been a few large regional chains that have been able to penetrate this market including Menards and Rona. This industry is largely confined to North America, with the exception of the recent expansion of Home Depot into China. Between the big box retailers in this industry, there is little differentiation and the margins are generally pretty low.
Intensity of Rivalry:
Factors that determine intensity:
Highly Intense Factors: * Competitors are numerous * Industry growth is slow * Fixed costs are high * Products are largely undifferentiated * Brand loyalty is largely insignificant * Consumer switching cost is very low
Moderately Intense Factors: * Two of the largest competitors (Home Depot and Lowe’s) have equal market share and the remainder is consumed by a host of small competitors * Exit barriers are fairly high
Interpretation: Highly Intense * This makes the
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Introduction:
The Lowes Corporation operates in what is known as the home improvement industry. The home improvement industry is about $300 billion in the US and another $48 billion in Canada. This industry was formed out of a consolidation of the industry of local hardware stores. Local hardware stores still exist and are a small competitor in the home improvement industry. However, the home improvement industry took on a form of its own in the late 1970’s when The Home Depot Corporation made a decision to compete with a large regional chain of hardware stores called Lowes. Lowes recognized the threat of competition and both Lowes and Home Depot stores begun to invest in rapid expansion and grew their stores to be large big box retailers where customers could come to buy a variety of products ranging from appliances to tools, to paint, lumber and nursery products to improve their home. There have since been a few large regional chains that have been able to penetrate this market including Menards and Rona. This industry is largely confined to North America, with the exception of the recent expansion of Home Depot into China. Between the big box retailers in this industry, there is little differentiation and the margins are generally pretty low.
Intensity of Rivalry:
Factors that determine intensity:
Highly Intense Factors: * Competitors are numerous * Industry growth is slow * Fixed costs are high * Products are largely undifferentiated * Brand loyalty is largely insignificant * Consumer switching cost is very low
Moderately Intense Factors: * Two of the largest competitors (Home Depot and Lowe’s) have equal market share and the remainder is consumed by a host of small competitors * Exit barriers are fairly high
Interpretation: Highly Intense * This makes the
Bibliography: “Lowe’s Home Improvement | Company Overview.” Web. 25 Feb. 2012. Bargaining Powers: Souers, Michael (2012) Yahoo! Finance (2012). Home Depot Balance Sheet,Oct. 30, 2011. Retrieved from http://finance.yahoo.com/q/bs?s=HD Threat of new entry: Hoovers Online: Home Centers & Hardware Stores http://www.hoovers.com/industry/home-centers-hardware-stores/1539-1.html Forbes Online, April 5, 2011