Please see the information and instructions. I attached a sample and also par 1 of the paper for reference.

Running Head: LOWE’S STRATEGIC AUDIT

Strategic Audit

Lowe’s

Samantha Miller

Millersville University

May 4, 2020

Table of Contents

Executive Summary……………………………………………………………………..iv

History and Background Information……………………………………………….…1

Timetable……………………………………………….………………………...1

Current Situation……………………………………………….………………………..1

Current Performance……………………………………………….…………...1

Strategic Posture……………………………………………….………………...2

Mission……………………………………………….…………………...2

Objectives……………………………………………….………………...2

Strategies……………………………………………….……………….....2

Policies……………………………………………….…………………....3

Corporate Governance……………………………………………….………………….3

Marvin R. Ellison……………………………………………….………………..3

David M. Denton……………………………………………….………………...3

Seemantini Godbole……………………………………………….……………..4

William P. (Bill) Boltz……………………………………………….…………...4

Richard W. Dreiling……………………………………………….……………..4

External Environment……………………………………………….…………………..4

Societal Environment……………………………………………….…………....4

Economical Trends………………………………………………….…….4

Technological Trends……………………………………………….……..5

Political-Legal Trends……………………………………………….…….5

Social-Cultural Trends……………………………………………….……5

Task Environment……………………………………………….………………5

The Threat of New Entrants……………………………………………….5

Bargaining Power of Buyers………………………………………………6

The Threat of Substitute Products or Services…………………………….6

Bargaining Power of Suppliers……………………………………………6

Rivalry Among Competing Firms………………………………………...6

Key Factors in the Immediate Environment…………………………………...6

Opportunities and Threats Facing Lowe’s……………………………………..7

Strategic Group Analysis……………………………………………….……….7

Table of External Environment…………………………………………………8

Summary of External Factors…………………………………………………...8

Internal Environment……………………………………………………………………9

Financial Resources……………………………………………….……………..9

Other Resources and Internal Issues………………………………………….10

Table of Internal Environment………………………………………………...11

Analysis of Strategic Factors (SWOT) ………………………………………..11

Review of Mission and Objectives……………………………………………..12

Strategic Alternatives and Recommended Strategy………………………………….13

SWOT Matrix and Feasible Strategies………………………………………..13

Strategic Alternatives……………………………………………….………….14

Recommended Strategy……………………………………………….………..15

Implementation……………………………………………….………………...16

Evaluation and Control……………………………………………….………..16

Bibliography.……………………………………………….…………………………...18

Executive Summary

Lowe’s started as a small hardware store and has since grown to one of the leading companies in the home improvement industry, providing customers with a wide range of home improvement products from appliances to lumber. Operating over 2,200 home improvement and hardware stores and serving approximately 18 million customers has propelled Lowe’s to be the second largest home improvement store in the industry, the eighth largest retailer in the United States, and the 19th largest retailer in the world. The company continues to make a name for itself in the home improvement and retail industry. This is evident from the improvement of Lowe’s financial health in recent times. In the past fiscal year, Lowe’s has seen an increase in sales and operating income. They saw a return on investment of 18.40% and recorded 72.148 billion dollars in revenue for fiscal year 2020.

While numbers are increasing and looking hopeful for Lowe’s, other numbers and factors generate more concern for the company’s financial health. One of the most impactful external influences on all businesses at this time is the Coronavirus. The economy has been hit hard by a loss of jobs and decreased spending and stores are being forced into closures, customer limits, and reduced hours. Additionally, Lowe’s is being financed by a significant amount of debt, which puts the company at financial risk. However, Lowe’s has strengths it can capitalize on and opportunities available as well. As Millennials have begun to enter the workforce, there has been a steady increase in the number of do-it-yourself (DIY) projects. Lowe’s puts a strong emphasis on catering to the demands of the DIY market, so this is a huge opportunity to attract new customers. Furthermore, Lowe’s has developed a strong brand portfolio over the years, which has been useful in launching new products. Financially, Lowe’s has seen an increase in its return on equity (ROE) recently, which indicates they are effectively investing capital and improving at being able to generate profit without needing as much capital.

While Lowe’s stands as the second leader in the industry, its rival, Home Depot, has continuously beaten it out in many aspects. Home Depot caters to the professional market better, which Lowe’s lacks. They have also penetrated domestic and international markets more efficiently, hire better management, produce more profits, and advertise more effectively. True Value, another competitor, exceeds Lowe’s in customer service and employee dedication. However, Lowe’s has stood its ground on a number of aspects. They have a competitive advantage in catering to the DIY market, competitive prices, product variety, and customer loyalty, which are arguably four of the most important qualities to have in the industry.

While Lowe’s has some obvious areas of struggle, feasible strategies have been identified to capitalize on opportunities and strengths, while minimizing weaknesses and the impact of threats. It is recommend that Lowe’s pursue a market penetration strategy through the use of their strong distribution network, updated online platform, and demonstrated catering to the DIY market. Lowe’s should further penetrate the growing DIY market, as this is one of the company’s strengths, along with markets newly opened by the government and a heavy emphasis on attracting professionals. Penetrating international markets and catering to the professional market are two of Lowe’s biggest weaknesses that suppress it from passing Home Depot in the industry. Therefore, strategies dedicated towards utilizing Lowe’s strengths to achieve the penetration of these markets will help gain more market share and exceed Home Depot.

I. History and Background Information

Timetable:

1921 Lucius Lowe opens the first Lowe’s in North Wilkesboro, North Carolina as “Lowe’s North Wilkesboro Hardware.”1

1940Lucius Lowe dies and his daughter, Ruth Buchan, inherits the business. She sells it to her brother, Jim Lowe.1

1943 Jim Lowe partners with Ruth’s husband, Carl Buchan, in running the business.2

1946Lowes is officially founded.1

1952 Buchan and Jim Lowe breaks up their business partnership with Buchan taking control of the hardware business and Jim Lowe later opening Lowe’s Foods.1

1960 Buchan dies and Lowe’s five-man executive team takes over.1

1961 The five-man executive team takes Lowe’s public and enacts a profit-sharing plan to allow employees to have ownership in the company.2

1979 Lowe’s is listed on the New York Stock Exchange.2

1980 In addition to builders, Lowe’s begins targeting the do-it-yourself (DIY) market.1

1982 Lowe’s reports its first billion-dollar revenue year with a profit of $25 million.1

1994 The “modern” iteration of Lowe’s began with the opening of stores with more than 85,000 square feet of retail space.1

1999 Lowe’s purchases Eagle Hardware and Garden.2

2007 Lowe’s opens its first stores in Canada.1

2010 Lowe’s opens its first store in Mexico.1

2012 Lowe’s opens two styles of store – 117,000 square foot stores for large markets and 94,000 square foot stores for smaller markets.1

2018 Lowe’s has a series of store closures and abandons its smaller-store strategy.3

II. Current Situation

A. Current Performance

1. Sales increased from approximately 2.5 to 3.0 percent.4

2. Operating income increased from approximately 12 to 16 percent.4

3. Company expects to repurchase around $5 billion of stock.4

4. Diluted earnings per share increased from $6.38 to $6.58.4

5. Lowe’s received a Return on Investment (ROI) of 18.40 percent in fiscal year 2020.5

6. Lowe’s recorded 72.148 billion dollars in revenue for fiscal year 2020.6

7. Lowe’s had a current ratio of 1.01 for fiscal year 2020.7

8. Lowe’s had a debt-to-equity ratio of 10.50 for fiscal year 2020, indicating a higher amount of financing coming from liabilities rather than equity.8

B. Strategic Posture

1. Mission

“Together, deliver the right home improvement products, with the best service and value, across every channel and community we serve.”9

1. Objectives

• Engage customers10

• Drive merchandising excellence10

• Deliver a seamless, omni-channel experience while maximizing operational efficiency10

These objectives are consistent with each other and Lowe’s mission statement. Their mission statement focuses around offering high-value products through great service and multiple channels, which is reflected in the second two objectives. In addition, the first objective of engaging customers is reflected within the first word of the mission statement: “together.”

1. Strategies

Lowe’s has recently been using a retrenchment strategy in light of the growing product overlap between e-commerce stores and Lowe’s products, while also attempting to beat out competition. Lowe’s made a strategic move to scale back on square footage in their stores to save on costs and maximize the profits of well-performing stores.11 The stores being closed are concentrated in Lowe’s California and Canada markets.11 Most of the stores that were closed were underperformers. Lowe’s strategically severed these weak links and is now focusing on imposing a stronger sales strategy in well-performing stores in order beat out Home Depot in sales performance.11

A second strategy Lowe’s has adopted recently is market penetration. Lowe’s has always paid most of its attention to do-it-yourself (DIY) customers and have paid little attention to professional contractors. Lowe’s new strategy consists of directing more marketing efforts towards professionals in the home improvement industry.12 With this new strategy in place, Lowe’s has already seen improvement in sales. The company added 35,000 pro customers in the third quarter of fiscal year 2019 alone and beat out Home Depot in sales growth during the second quarter.12

Finally, Lowe’s is following an overall growth strategy, and using organic growth to propel it. In early 2019, Lowe’s announced its plans to hire more than 65,000 associates in the year to come.13 Lowe’s purpose behind this plan is to improve customer service and product availability.13 CEO and President, Marvin R. Ellison, said, “We are sharpening our focus on retail fundamentals and simplifying our business.”13

These strategies are consistent with each other, the mission statement, and objectives. Like the mission statement, these strategies focus on delivering great service and high-value products to every community needing home improvement supplies. Similar to the objectives, these strategies focus on maximizing operations and having merchandise readily available in stores.

1. Policies

Lowe’s lists its major policies publicly on its corporate website. Its major policies revolve around social responsibility, safety of materials, and government regulations. Lowe’s major policies consist of a Conflict Minerals Policy, Human Rights Policy, Wood Policy, Safer Chemicals Policy, and Political Engagement and Contribution Policy.14 The Conflict Minerals Policy and Safer Chemicals Policy focus on the company’s commitment to sourcing their products safely and responsibly.14 Their Human Rights Policy points out their dedication to carrying out principles in their business that respect international human rights standards.14 In an environmental effort, Lowe’s instills their Wood Policy to ensure all wood products sold are from well-managed and non-endangered forests.14 Finally, the Political Engagement and Contribution Policy discusses Lowe’s engagement with the government through outreach and lobbying activities relevant to the industry, company, customers, and shareholders.14 These policies are consistent with each other and the mission in providing the right products to Lowe’s communities.

III. Corporate Governance

A. Marvin R. Ellison15

• Ellison replaced Robert Niblock as President and Chief Executive Officer in July 2018 when he also joined Lowe’s Board of Directors.

• He earned a Bachelor’s Degree in Business Administration from the University of Memphis and went on to earn an MBA from Emory University.

• Ellison has over 30 years of retail industry leadership and operational experience.

• Most recently, Ellison served as chairman and CEO of J.C. Penney Co.

• Ellison spent 12 years in senior-level roles at Home Depot.

B. David M. Denton15

• Denton joined Lowe’s in 2018 and serves as the Executive Vice President and Chief Financial Officer.

• He earned a Bachelor’s Degree in Business Administration from Kansas State University and an MBA from Wake Forest University.

• Denton has been in the finance and operational field for over 25 years.

• Prior to Lowe’s, Denton was the Executive Vice President and CFO of CVS Health and a part of a management consulting firm, Deloitte and Touche, prior to CVS.

C. Seemantini Godbole15

• Godbole serves as Lowe’s Executive Vice President and Chief Information Officer, joining Lowe’s in 2018.

• She earned a Bachelor’s Degree in Electrical and Electronics Engineering from the National Institute of Technology in Nagpur, India, accompanied by a Master’s Degree in Computer Science from Texas Tech University.

• Godbole has over 25 years of global technology experience.

• Prior to joining Lowe’s, she served as a Senior Vice President of digital marketing technology at Target Corp.

• She also held senior technology leadership roles at Sabre and Travelocity.

D. William P. (Bill) Boltz15

• Boltz is the Executive Vice President of Merchandising for Lowe’s, joining the team in 2018.

• He earned a Bachelor’s Degree in Communications from Montana State University, followed by an MBA from the Kellogg School of Management at Northwestern University.

• He has over 30 years of retail operations, marketing, and merchandising experience.

• Before joining Lowe’s, he was the president and CEO of Chevron North America.

• He also held leadership roles at Home Depot and worked at Sears Holdings Corp. for more than 20 years.

E. Richard W. Dreiling

• Dreiling was appointed Chairman of the Board for Lowe’s in 2018 after serving on the board of directors for six years.16

• He earned a Bachelor’s Degree in Industrial Relations from Rockhurst University in Missouri.17

• He brings over 40 years of retail industry experience at all operating levels to the table.16

• Prior to Lowe’s, he served as the chairmen for Retail Industry Leaders Association and as CEO and chairman for Dollar General Corporation for about 7 years.16

• He currently serves on the board of Aramark, Kellogg Company, and PulteGroup.16

IV. External Environment

A. Societal Environment

1. Economical Trends

• The International Monetary Fund stated that it expects a global recession that will be as least as bad as the recession of 2008 due to the Coronavirus pandemic (THREAT).18 This is a threat because there will be a widespread drop in spending.

• Retail sales companies are expected to lose jobs because of the rise in the popularity of e-commerce (THREAT).19 With this prediction, retail companies must reevaluate the use of e-commerce in their business models to keep up with the transition from in-person to online sales.

1. Technological Trends

• Payment innovations continue to develop for consumer banking and more recently, business users (OPPORTUNITY).20 A shift from cards to direct-from-account payments could save businesses a small fortune.20

• Phil Rowley, global head of innovation at PHD, predicts a rise in personal privacy technology, which gives users better protection of their data and online footprint (THREAT).20As data continues to be of importance in making strategic business decisions, this predicted trend could upend this relationship and make it difficult for Lowe’s to collect and use data to their advantage.

1. Political-Legal Trends

• Cyber attacks are common and a part of doing business these days (THREAT).21 Hackers continuously improve and refine their tactics to illegally access data.21

• The coronavirus pandemic is causing delays in performance or cancellations for home improvement contracts (THREAT).22 This acts as a threat because Lowe’s is losing money from cancellation of projects.

1. Socio-Cultural Trends

• Customers are looking for more than just the products in their home improvement projects; they are looking for help and information, especially Millennials (OPPORTUNITY).23 With Lowe’s focus on organic growth by hiring more associates and emphasizing great customer service, this can be their chance to differentiate themselves from the competition.

• Mobile sales are growing in the home improvement industry (OPPORTUNITY/THREAT).23 Shoppers want more convenience; they want to be able to research and learn online before committing to a product.23 This serves as a threat for Lowe’s because it currently is working on organic growth by employees, and therefore focusing on in-store sales, which this trend would compromise. However, it could be an opportunity as well if they capitalize on their e-commerce.

B. Task Environment24

1. The Threat of New Entrants (Moderate)

• The cost of doing business in the home improvement market is manageable, which makes it easier for new firms to enter the industry.

• Low switching costs for consumers in this industry make it easier for new entrants to compete against Lowe’s.

• Brand development can be very expensive, and thus weaken the effects of new entrants.

1. Bargaining Power of Buyers (Strong)

• Low switching costs for customers give them higher bargaining power with Lowe’s because prices do not vary much among the industry.

• Consumers have a large availability of substitutes and an ease of transferring to other firms, which give them an edge in influencing firms like Lowe’s.

• Lowe’s can still expect and receive high demand for their products even if buyers switch to another firm because of the large population of buyers in the industry.

1. The Threat of Substitute Products or Services (Strong)

• There is high availability of substitutes in the industry. Even general retailers outside the industry such as Walmart offer home improvement products and consumers can also turn to professional home improvement contractors for products and expert advice.

• Low switching costs and satisfactory performance of these substitutes for consumers serve as a strong threat of substitution against Lowe’s products.

1. Bargaining Power of Suppliers (Weak)

• The large population of suppliers in the industry gives Lowe’s power over suppliers they work with because they could easily switch to another.

• The exclusive relationships of suppliers with home improvement retailers weaken their impact in the industry.

1. Rivalry Among Competing Firms (Strong)

• Lowe’s competes against many firms in the home improvement industry, with its biggest competitor being Home Depot.

• Low switching costs of customers moving from one firm to another make the industry especially competitive when it comes to competing for customers, especially their loyalty.

• Moderate exit barriers make it more difficult for firms to exit the market, which make them continue to compete against Lowe’s.

C. Key Factors in the Immediate Environment

• Home Depot targets more home improvement industry professionals, whereas Lowe’s targets more of do-it-yourself customers.25 Thus, Home Depot captures a lot of the professional market.25

• Retail sales are transitioning to a more online environment, forcing the home improvement industry to start focusing on their online efforts.

• The coronavirus pandemic has led to temporary store closures and limitations on travel that has caused a decrease in spending among consumers.

• The home improvement industry is highly correlated with the housing industry. Since 2012, home prices have increased around 30 percent.26 As prices increase for houses, consumers see more value in their houses and continue to invest more in home improvement.26

D. Opportunities and Threats Facing Lowe’s

• Increase in do-it-yourself projects (OPPORTUNITY). Lowe’s can capitalize on this as they heavily target this market in the home improvement industry.

• Increase in e-commerce sales (OPPORTUNITY).27 Lowe’s has made investments in their online platform recently and has captured a new sales channel through the investment.27 The use of this channel can help Lowe’s capture data that helps them know their customers better and serve their needs.

• Rising pay level movements (THREAT).27 With movements supporting higher wages, Lowe’s profitability is threatened.

• Opening of new markets (OPPORTUNITY).27 Government agreements have led to free trade agreements and the adoption of new technology standard that gives Lowe’s an opportunity to enter new emerging markets.27

• Rising raw material prices (THREAT).27 The increases in raw material prices pose a threat to Lowe’s profitability.

• Highly Competitive Industry (THREAT). The home improvement industry is highly competitive, with Home Depot taking the highest percentage in market share.

E. Strategic Group Analysis

Lowe’s strategic group members reside in the home improvement industry and the hardware retail industry. In these markets, price as well as variety in products and styles is important to customers. Among Lowe’s strategic group members are Home Depot, Ace Hardware, and True Value Company. Home Depot is known as the best home improvement store in the industry, with a large variety of products and services and average prices but offer a price match policy. Consumers value Home Depot highly in the home improvement industry. Lowe’s has a smaller variety of products compared to Home Depot, but still has a fair variety and is more expensive than all the other stores. Ace Hardware is the least expensive of all the stores, but has a much lower variety of products. It sometimes comes off as a local shop than a chain. Finally, True Value Company offers higher than average prices and offers a very low selection of items in each department.

F. Table of External Environment

This table represents the external factors that affect Lowe’s. Six key factors were identified with respective weights based on their importance to Lowe’s success. Ratings on a scale of 1 to 4 were assigned on the basis of how well Lowe’s is responding to the opportunity or threat. A rating of 1 indicates a poor response and a rating of 4 indicates a superior response. The weighted score was calculated by multiplying each factor’s weight by its rating. The weighted score of 2.65 indicates that Lowe’s is responding well to external factors, but could still use improvement.

G. Summary of External Factors

After an analysis of the external environment surrounding Lowe’s, it is clear which factors are most important in the success of the company and the home improvement industry. With the transition to online-based business, a focus on e-commerce sales in the home improvement industry is crucial to success. Customers want to be able to research products online and make strategic consumer decisions based on factors like price and quality. Secondly, it is important to penetrate all markets in the home improvement industry, specifically do-it-yourself consumers and professionals. Without paying focus to either of these markets, home improvement companies can lose out on a large portion of sales because of the large population of these consumers. Lowe’s needs to put more focus in attracting professionals in order to capture more sales and match Home Depot’s success. Finally, it is highly important for Lowe’s to establish a competitive advantage and better establish its brand in the home improvement industry, given its high competitiveness. A proactive approach to external factors like these is key in succeeding in the industry.

IV. Internal Environment

A. Financial Resources

Upon analysis, many weaknesses stood out from this table of Lowe’s financial ratios. First of all, Lowe’s had a quick ratio below 1.00 for both historical dates of 2017 and 2018. This indicates that they do not have enough quick assets to pay for its current liabilities. Quick assets refer to assets that can easily be converted into cash. Therefore, Lowe’s has poor liquidity, which means they will have a harder time paying off debts. Secondly, Lowe’s debt ratios indicate risky high levels of debt in the company. Their total debt-to-total assets ratio indicates that creditors are financing around 80% of the company’s assets, which is high risk as it indicates a higher degree of leverage. Their total debt-to-equity ratio is also high, showing that the amount of financing through debt is over four times more than the amount of financing through equity via shareholders. To top it all off, Lowe’s operating profit margin is low for the industry. For every dollar of sales, Lowe’s is only generating around 10 cents to cover non-operating expenses or fixed costs. This explains why a lot of their financing comes from creditors, but by doing this, they have put themselves in a risky position.

Despite the strong financial weaknesses that are shown in this table, strengths are shown as well. Lowe’s times-interest-earned ratio is great and indicates the company continues to easily meet its interest obligations because earnings are significantly higher than interest charges. This shows they have good solvency for long-term debt. Perhaps their greatest financial strength is their return on equity (ROE) ratio, which is very good. Even better, ROE increased significantly from 2017 to 2018. This indicates not only that Lowe’s is effectively reinvesting capital, but the company is also increasing its ability to generate profit without needing as much capital.

Lowe’s ranks the highest in 4 categories: product variety, catering to DIY individuals, price competitiveness, and customer loyalty. It is great that Lowe’s ranks the highest in catering to DIY individuals because that is their primary target market. This shows they have done an effective job at reaching and serving this market. For this reason, I would say that this is their competitive advantage over their competitors along with the other categories they ranked highest in. Fortunately, they only ranked last in the category of international market penetration, which is a known weakness. However, Home Depot received the highest amount of 4’s and a higher total score than Lowe’s. This shows that although Lowe’s is competing well in the industry, the clear-cut leader is Home Depot. If Lowe’s is going to beat out Home Depot, they need to develop strategies to focus on areas where Home Depot exceeds.

B. Other Resources and Internal Issues

• Lowe’s has a strong distribution network (STRENGTH).27 Lowe’s has built a reliable network of storage facilities and transportation systems that help them reach the majority of their potential market.27

• Lowe’s has developed a strong brand portfolio (STRENGTH).27 This promotes expanding into new product categories because these established brands ensure customer confidence in new products.

• Lowe’s workforce has a high attrition rate (WEAKNESS).27 They spend more than other companies in the industry to train and develop their employees.27 This might indicate that they might not be hiring the right people as well.

• The company has a great track record of successful product innovation while simultaneously coming up with new ways to improve in-store efficiency and experiences (STRENGTH).27

• Lowe’s lacks investment in new technologies (WEAKNESS).27 With plans to expand geographically, the company has not matched its investments to its vision.27 More money needs to be invested in technologies in order to integrate processes in all stores and locations.27

• Despite being a leader in the home improvement industry, Lowe’s struggles to establish itself in other product segments (WEAKNESS).27

C. Table of Internal Environment

This table represents the internal factors that affect Lowe’s. Eight key factors were identified with respective weights based on their importance to Lowe’s success. Ratings on a scale of 1 to 4 were assigned on the basis of how well Lowe’s is responding to an identified strength or weakness. A rating of 1 indicates a poor response and a rating of 4 indicates a superior response. The weighted score was calculated by multiplying each factor’s weight by its rating. The total weighted score of 2.13 indicates that Lowe’s is not responding well to internal factors. This implies new strategies may be needed or even a new direction, vision, or mission.

D. Analysis of Strategic Factors (SWOT)

1. The prediction of a recession due to the coronavirus pandemic poses a huge threat to all businesses; Lowe’s included (THREAT). Even everyday operations of businesses that remain open are also being affected. Due to the virus, Lowe’s has reduced store hours, temporarily increased wages by $2 an hour, implemented a customer limit protocol, and increased third-party cleaning shifts.28 All of these actions have an affect on the profitability and success of Lowe’s.

2. Millennials are using technology, creativity, and entrepreneurism to take on more DIY projects (OPPORTUNITY).29 With Lowe’s great catering to the DIY market, they have an opportunity to capitalize on this trend and attract new customers.

3. Lowe’s has high amounts of debt, which is reflected in their financial ratios (WEAKNESS). High amounts of debt create more financial leverage, which can increase risk of failure and decreases financial flexibility. On the shareholder front, unattractive debt ratios turn away new investors and decreases potential equity.

4. Lowe’s has developed a strong brand portfolio over the years (STRENGTH). Building a brand portfolio produces many benefits such as ease in entering different markets, making cross-promotion, and building credibility of newer brands through association with already established and successful brands.30

5. An increase in e-commerce sales poses an opportunity to Lowe’s (OPPORTUNITY). Lowe’s has invested in their online platform over the years and has created a new channel for sales. With the rise in e-commerce, they can begin driving customers to their new and improved online channel to make purchases.

6. Compared to its competitors, Lowe’s has poorly penetrated international markets (WEAKNESS). Starting in 2018, developed countries have seen trends in renovation and remodeling along with a rise in consumer spending on exterior home improvement projects.31 By not investing in international markets, Lowe’s is missing out on potential customers and sales.

7. Lowe’s has created a strong distribution network of storage facilities and transportation systems (STRENGTH). A reliable and efficient distribution network helps Lowe’s reach a wider market while doing it faster.

8. Lowe’s has low liquidity as seen by their quick ratio (WEAKNESS). This serves as a weakness because it makes it harder to pay off debts, which accounts for a large portion of the company’s current financing. This can have negative long-term effects if debts become too excessive.

E. Review of Mission and Objectives

While being inspiring, Lowe’s current mission statement is missing many of the essential components that make a great mission statement. Furthermore, it does not address many of the identified critical strategic factors. Currently, it only consists of 20 words in a single sentence. It needs to be updated in order to be more appropriate for the identified critical strategic factors and meet the essential components of a mission statement. One of the most important factors that must be addressed in the revised mission statement is the company’s concern for survival, growth, and profitability. High debt and poor financial ratios could turn potential investors away. Therefore, identifying Lowe’s dedication to growth and profits will reassure investors that the company is continuously striving to improve performance and that Lowe’s is a good investment. Furthermore, Lowe’s needs to identify the markets they serve in their mission statement. In doing this, they should point out that they also place importance in serving international customers and are working on entering international markets where they currently do not operate. As penetrating international markets is a weakness of Lowe’s, this is essential in becoming more successful than leading firms like Home Depot. One final component that they should identify in their mission statement is their use of technology in operations. This would assure customers and investors that the firm is keeping up with technology, which builds trust because it conveys they are effectively utilizing and updating technology to grow.

Lowe’s objectives also need to be revised, as they seem to already have succeeded at achieving their current objectives. For example, they have an objective to, “engage customers,” but they appear to be doing a good job at that already as seen by a rating of 4 for customer loyalty and a 3 in customer service in the competitive profile matrix. They have also already devoted years to developing their online channel, which was another objective. Lowe’s needs to include new objectives designed to address weak operational areas. As previously discussed, their international market penetration is poor compared to competitors, so they should develop objectives concentrated on penetrating international markets. They also slack in attracting the professional market. Fortunately, Lowe’s has already made efforts to further penetrate this market, but an objective focused around this would be beneficial as well. Finally, one of Lowe’s weakest fronts is the amount of debt that the company has incurred. An objective that focuses on reducing the amount of debt financing and replacing it with equity could steer Lowe’s in a better direction to gain more investors.

By revising and replacing its mission statement and objectives, Lowe’s can refocus on weak areas where competitors may be succeeding. In doing this, decisions will be made that support these objectives and mission, and consequently turn Lowe’s weaknesses and threats into strengths and opportunities.

V. Strategic Alternatives and Recommended Strategy

A. SWOT Matrix and Feasible Strategies

B. Strategic Alternatives

1. Use Lowe’s strong distribution network to reach markets newly opened by the government.

• This would help to penetrate more international markets, which is a weakness of Lowe’s (PRO).

• Penetrating international markets can be costly, and Lowe’s has already used a lot of debt financing (CON).

• Would increase the number of Lowe’s potential customers quickly (PRO).

• Less competition would exist in newly opened markets (PRO).

1. Cross-promote Lowe’s various brands online.

• Cross promotion builds credibility for newly introduced products (PRO).

• Cross promotion is cost effective and good for a limited marketing budget, which Lowe’s needs because of high debts and a low operating profit margin (PRO).32

• It can be difficult to find suitable partners for product or brand cross promotion (CON).32

• Using cross promotion can increase ROI faster than using SEO (PRO).32

1. Design an online marketing campaign to target professionals in the home improvement industry.

• Internet marketing can reach target customers more effectively and easily (PRO).33

• Lowe’s would be able to reach professionals around the world (PRO).

• Heavy competition exists in online advertising, which can make it hard to stand out (CON).33

• Internet marketing does not require a large capital investment (PRO).33

• There is no instant consumer trust with online marketing because of the plethora of ads that customers see everyday (CON).33

1. Attract new DIY customers online through demonstrated catering to that market.

• Lowe’s has already penetrated the DIY market; so further penetration may not be needed (CON).

• There has been an increase in DIY projects recently so there is a possibility that Lowe’s could capture more of that market (PRO).

1. Continue heavily catering to the DIY market to create a competitive advantage in the industry.

• Lowe’s has already penetrated the DIY market; so further penetration may not be needed (CON).

• Because Lowe’s does better at catering to this market than other firms, they may be able to steal customers if they further their efforts towards this market (PRO).

• Lowe’s could use this to set itself apart from competitors in the industry (PRO).

• This could deter Lowe’s from attempting to attract the professional market as well (CON).

1. Establish credibility through successful brands to draw customers to Lowe’s during decreased spending.

• Marketing during difficult times caused by the coronavirus may come off as profit-driven (CON).

• New products will be accepted more easily if related to successful brands (PRO).

1. Research how competitors are targeting and attracting professionals and replicate.

• Competitor strategies to reach the professional market may not be in line with Lowe’s objectives and mission (CON).

• Lowe’s can learn how Home Depot is more successfully attracting the professional market and implement similar tactics (PRO).

• Lowe’s struggles in attracting the professional market, and learning how to attract them can help them surpass leaders in the industry like Home Depot (PRO).

VI. Recommended Strategy

I recommend that Lowe’s pursue a market penetration strategy at the corporate and business level while attempting to achieve differentiation from competitors. Firstly, I recommend Lowe’s utilize their strong distribution network, expand upon it, and reach markets newly opened by the government. This would occur at the corporate level because Lowe’s would be entering international markets, which is a high-level goal that top management makes the decisions on. I recommend this strategy because Lowe’s has poorly penetrated international markets. With the opening of new markets because of the government agreements have led to free trade agreements and the adoption of new technology standards, Lowe’s has an opportunity to turn its weakness into an advantage and will increase the number of potential customers. Secondly, I recommend that Lowe’s create an online marketing campaign geared towards professionals in the home improvement industry. This strategy is considered to be at the business level because it is a part of Lowe’s competitive position. Other firms like Home Depot succeed more at capturing this market over Lowe’s, which is why Lowe’s continues to be second in the industry. Penetration of the professionals market for the home improvement industry is exactly what the company needs to catch up and surpass Home Depot in sales numbers and market share. An online marketing campaign does not require a significant investment of capital, which is why it is ideal for Lowe’s at this time, given their current level of debt. Finally, I recommend that Lowe’s continue to attract the DIY market in penetrating these two new markets. This is also at the business level. Even though the professionals market should be Lowe’s primary focus, more people are participating in DIY projects and it would be foolish to avoid this growing market that Lowe’s specializes in. In attracting and catering to the professional market and DIY market, Lowe’s can differentiate itself from competitors because businesses in the home improvement industry generally tend to target one market more than the other. This will also grow Lowe’s overall market share.

These strategies effectively deal with strategic factors as well as long-term and short-term problems. In the long-term, they all aim to turn weaknesses into strengths and capitalize on current strengths. Penetrating these different markets completely will position Lowe’s to capture not only a wider variety of customers, but also a larger number of potential customers. The strategies are primarily cost efficient, which will help to minimize the amount of debt that Lowe’s incurs while implementing them in the short-term. Overall, the strategies will position Lowe’s to capture new markets, which will help the company surpass its rival, Home Depot, and differentiate itself from other firms in the industry.

In implementing these strategies, Lowe’s needs to develop policies pertaining to international business ethics, as it is an important topic when conducting business abroad. In penetrating new, international markets, investors need to be assured that Lowe’s is approaching the operation safely and responsibly as to avoid criticism in the public eye. Lowe’s already has policies in place that support this notion such as the human rights policy, so the configuration of this policy will be nothing out of the ordinary, but it will take a good amount of research on rules and regulations in each new international market they plan to enter.

VII. Implementation

A restructuring will be needed to fully implement this strategy. Currently, Lowe’s has a Stores Department, which is divided into regions: North, South, and West.34 They also have a separate president in charge of Lowe’s operations in Canada.15 In order to put an emphasis on international market penetration, I recommend that they create a geographic division dedicated to nondomestic operations. I recommend that the Board of Directors develop and be in charge of this restructuring as they are a nonbiased entity that puts the success of Lowe’s first.

VIII. Evaluation and Control

In evaluating the performance of Lowe’s post-strategy implementation, I recommend that Lowe’s use a balanced scorecard. A balanced scorecard will help evaluate the strategy in terms of nonfinancial measures and financial measures. The evaluation of financial measures is important to learn how this strategy has affected Lowe’s financial numbers, but nonfinancial measures are also important in strategy evaluation, as they are a better predictor of what will happen in the future. The balanced scorecard will evaluate five key issues: customers, operations/processes, social responsibility, business ethics, and financial. This method will help determine what has already happened by the reporting differences in financial measures and help to determine the strategies current and future success through nonfinancial measures. Through continuous evaluation using this mechanism, Lowe’s will be able to reevaluate the use of these strategies and whether they should continue to be implemented.

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