Company Overview
Lowe’s (LOW) is a home improvement company that was founded in 1946. The company was then incorporated in 1952. Lowe started as insignificant hardware store to become the second largest home enhancement retailer in the world. Lowes is ranked 54 Fortune’s top 500 companies list. As of February 2012, 1, 745 stored in the United States, Canada and Mexico were operational. The company’s customer includes homeowners, renters, and commercial business customers. The company offers a range of products that include maintaining, repairing, modeling, and home caring. In addition to offering appliances, the company also sells different companies products throughout the stores. These include tools, seasonal living materials, home fashions, storage, cleaning (Reuters Company Profile, 2012). The company’s space accounts for an estimate of 197 million square feet of retailing space globally.
The company‘s customer support headquarters is in Mooresville North Carolina. The company also has a new corporate campus that was built next to Charlotte while the headquarters of the Subsidiary company is in Toronto Ontario. The company chair and CEO is Robert Niblock. The company’s chief competitors include Home Depot Inc, Menard Inc, True Value Company, Wal-Mart Stores, Ace hardware Corporations, Sears, and Roebuck and Co and several other companies (Hoovers Report, 2012). According to Hoover Company’s profile, the company had 248, 000 employees. The employee growth rate was 6 percent. The company’ sales for 2012 were 50, 2008.0 M that was a growth of 2.9 percent. The audited report for the month of May 2012 indicates the company had a total asset of $ 37, 208 with total liabilities of $ 10, 996. The total liabilities and the company’s shareholders equity was $ 37, 208 ( About Lowe’s.com, 2012).
Lowes’s success as a retail company has not come easy. The annual report for the company indicates a company that has strived hard to satisfy its customers. For the last year, the company offered credit card for retail customers under a deal that the company signed with GE Money Bank. This deal offered credit for the section of the customers that owned commercial customers. The deal included aspects such as Lowe’s Business account for small and medium size business, Lowe’s account receivable for medium size businesses. In general, these deals accounted for about for 5 percent of the company’s 5 percent discounts (Hoover.com, 20120.
Lowe’s form 10- K report is an annual report that is required by the United States Securities and the Exchange Commission otherwise called (SEC). The 10k report summarizes the public company’s performance. The 10-k report is distinct from the Annual report. While the annual report is a colorful document that the company sends to its shareholders when it holds its annual meeting to elect shareholders, the 10-k report that includes aspects such as the company’s history, organizational culture, executive remuneration, equity subsidies, and audited financial statements.
Outside Factors: Market Situation
After the growth stagnation caused by the 2007-2009 economic recession, Lowers sales increased by 1.3 percent for the first time since 2005. This growth was unusual since the home improvement market was on the decline. The growth in times when the general market in home ownership was contracting was because of Lowe’s values that emphasized great service, operational excellence, and innovative merchandize. In the year 2010, the company helped the customers make use of the government stimulus programs that cut taxes on home improvements. This way, Lowe’s customers were able to increase sales and generate solid earnings for 10- 19 of product categories (Niblock, 2011). In addition to making use of government surplus, the company also made use of the corporations and partnership with leading companies such as Stain Master that cleans carpet and Valspar that deals with paints. The company also expanded horizontally so that existing stores were able to generate more sales.
Lowes Company’s goal is to provide customer valued solutions at lower prices. This helps customers find smart solution for home improvement that mixes affordable prices with quality. This mission had been the cornerstone in the company’s success even in the situation when the home market was rocked with foreclosures and failed payments. The few homeowners that made it through the storm still valued Lowes as a trusted partner.
Brief History
Lowes started as a low profile company in 1940s and 1950s, by 1970s; Lowes had evolved into a regional company in providing home solutions. Today, Lowe’s has evolved into an international chain in home improvement being the company in the US for home improvement and present in all the 50 US stores. The Lowe’s stores sell more than 40, 000 products for homeowners and constructors in the home making industry. While Sears is the biggest company in the United States for providing home hardware solutions, Lowe’s is the fasted growing retail home solutions retail store.
Even though the company was incorporated in 1952 at the New York State Stock Exchange, the big leap towards success in home building market did not arrive until 1960s when the founders of the company Buchan passed on and the office of the company was created. By 1961, the company had gone public and renamed itself as Lowe’s companies, Inc. Whereas the company was a public company, it still retained the old system of small scale retail outlets spread across the nation. At this time, the company had 50 stores in the nation and its sales were barely hitting the $100 million mark. The market in home industry environment did not do the company a favor. The increasing cost of home ownership made many homeowners to the dirty work alone and to avoid using constructors. When the Federal Housing Administration program was founded in 1970s, the company witnessed an increase in sales. By 1979, the company’s sales had gone to $900 million from $ 170 million in 1961 (Gale Directory of Company’s History, 2012).
In 1980s, Lowes shifted from the small chain technique to large chain store with warehouses and relocations, remodeling, and chain conversation being the company’s primary goals. During this time, the company rapidly grew to become a major player in home improvement solutions serving not only consumers but also constructors and commercial stores. The company strategy at this time was to increase sales to consumers while retaining contractors as the regular customers. By the early 2000, the company made use of the North America Trade Agreement to expand to Canada and Mexico. Today, the company has joined the global ranks and aims to expand in Australia by the end of 2012 (Hoovers Company Report, 2012).
Why Lowe’s is Successful
Breuinig, Bradford & Liang ( 2003) reported that to be unbeaten in business, there is a need for a firm to be constantly assessing itself to provide an opportunity for improving all the dimensions of the business. Standardization of performance thus becomes an important aspect of measuring how a firm is doing in respect to improving its performance. Metrics becomes the cornerstone of measuring the level of progress. A company needs to identify its needs in order to provide a clear and well-developed strategy to be able to measure performance. Lowe’s is not an exception to this rule. Standardization of performance bases on three objects that include strategic goals, objectives, and metrics. Setting up goals is the first step in measuring performance. The company can then measure how far it has made progress depending on the number of goals achieved. Objectives refer to the purposes of the goals or what the goals are intended for. \
Another model that Lowe’s can use to improve its performance is the popular Porter’s five forces model. Porter fronted an argument that a nation has the ability of creating new factors for making stable industries. Such factors include skilled labor, technological base, support from government and cultural values among others. Porter’s five forces are a threat of new competition, threat of substitute products and services, the bargaining power of clients, and suppliers’ bargaining power. Several resources need to be transferred in Lowe’s for the functionality of this model. Labor, both skilled and unskilled, need to be uniformly distributed well in all the plants. In addition, the company uses avenues of advertisement to increase its sales. Such strategies may include using social networks for advertising. However, before venturing into new markets, the company should first strengthen the already existing markets. This will enhance the already existing client base and such base will be of encouragement for venturing in new markets.
Risks that Lowe’s Company Faces
In the business industry that Lowe’s company, there is many risks that the company has to face. First, the retail in homeownership is susceptible to the economic crisis. In the situation of an economic recession, sales drop because few homeowners consider home improvement of homes as a priority. Moreover, the real estate market falls and so is the demand for home appliances. A company as big as Lowe’s will take time to feel this pinch, but eventually it takes a toll on the company and forces it to have to cut expenditure which usually leads to lay outs of employees. When this happens, employee complaints generate customer dissatisfaction that affects the company negatively.
Another risk that the company faces is the limited nature of homeownership that limits expansion to other countries. In a rapidly globalizing world, many companies go global in many countries. However, different requirement in homeownership limits the expansion of home retailers such as Lowe. Moreover, government regulations differ from regions to regions.
Another risk is the high degree of competition in the industry. While competition is a good thing for the growth of business, unhealthy competition often cut the company’s profits. Lowe is susceptible to competition from many companies that sell the same product. In addition, the nature of the industry leaves little room for innovation in terms of use of machines that means that the company has to deal with a large number of employees and huge budget for employee salaries.
Laske (2001) wrote about learning and growth development. According to them, the growth and development is a framework for quantitatively assessing employee satisfaction, productivity, and relation in the framework of scorecard balance. The learning and growth method emphasizes measures not only as employee’s behaviors but also in developmental terms at work. One way of smart accounting is using technology such as CRM. CRMs are over the edge because they are designed to help a business identify, capture, and retain customers and potential customers. Managing CRM requires keeping data, useful information, and recording details of the prospective customer. The CRM system has made it easy for Barclays to manage the complexity of managing individual customer relationships across multiple channels while steering across volumes of data. The CRM is a highly targeted and event triggered marketing campaign that makes it possible for Barclays Bank to identify significant changes in customer behavior that are pointers to income change. The advantage of this system is that it facilitates timely service to customers.
Lowe’s Financial Strength
Lowe’s has had a P/E ratio of 18.91 compared to the industry’s P/E ratio of 11.82 for the year 2011. The company’s sales grew by about 1.36 percent for the last five years with a dividend growth of 24.11 for the last five years. In the year 2011, shareholders increased their earnings by 14.3 percent, which was the highest since the company went public in 1961. In the year 2010, the total revenue for the company was $ 48, 5815 billion with an operating income of $ 3, 560 billion. The total assets were $ 18, 112 billion and total equity accounted for $ 18, 112 billion. Based on this figures, the company has good chances of doing good next year. Lowe’s balance sheet looks better and stable compared to other players in the industry.
The audit Plan
The audit plan is a document that the director of finances prepares to check if the company’s finances are managed in the best way as required by the state and for the intended purposes. The objectives of the audit plan are usually to monitor appraisals and to investigate any areas of misappropriation of company’s funds. For a company as big as Lowe’s, the high-risk areas include areas such as dishonest contractors, insufficient client monitoring, payment of unnecessary costs, and inflexible operating systems. Low risk areas include areas such as cash and banking control, employee oversight, and poor recording. Sometime overvaluing of company’s assets or undervaluing can be some form of low risks too. If the manager faced some form of pressure regarding financial performance, the company’s managers might be tempted to work with contractors in terms of warehouse constructions and retail outlest to cover up for expenses. However, this would not do much since the cost is well documenting t before a contract is issued. Corporate audit report will be issued for the company.
Works Cited
About Lowe’s. “Stock Information.” About Lowes. N.p., 10 June 2012. Web. 22 June 2012. >ttp://www.lowes.com/>.
Google Finance. “Lowe’s Companies, Inc.(NYSE:LOW).” Google Finance. Google, 21 June 2012. Web. 22 June 2012. finance?cid=21765>om/finance?cid=21765>.
Hoover’s Company Profiles. “Lowe’s Companies, Inc.” Answers.com. N.p., n.d. Web. 22 June 2012.
Reuters. “Lowe’s Companies Inc (LOW).” Overview. Reuters , 21 June 2012. Web. 22 June 2012.
Weinstein, A., & Johnson, W. (1999). Designing and Delivering Superior Customer Value: Concepts, Cases, and Applications. Miami, FL: CRC Press.
