Business
Financial Analysis
The financial condition of the company, which is evident from balance sheet, income statement, and cash flow statement, is indicative of the fact that the financial strength of the company is satisfactory. The horizontal analysis of balance sheet of Lowes Company is also showing improvement in performance of the company. Such as it can be seen from the Horizontal and vertical analysis that account payable of the company has increased, which means that there is improvement in payment of debts, and total shareholder’s equity of the company has also increased. Similarly, the horizontal analysis of income statement of the company is representing increase in net sales of the company, which is pointing out towards the profitability of the company. The vertical and horizontal analysis of income statement of the company is showing that cost of sales is consistent for 7 years, total expense of the company has decreased, gross margins, selling, general and administrative expense are showing consistency.
The profitability ratios give useful insight and show clear picture of the performance of the company. The revenue of the company has increased if 7 years from 2009 to 2015 are considered. Total sales of the company have increased. Operating margins of the company have also shown an increase as shown in Table 1, which is indicating that operating efficiency and the pricing strategy of the company are in accordance with the requirements of the market. Furthermore, EBT margin of the company has also shown significant improvement. Additionally, the financial strength of the company can be considered from its profitability ratios. In this regard, Return on Asset % and Return on Equity % are worth considering. Both the ratios have indicated betterment as compared to previous years. These ratios are pointing out towards the fact that the company is generating profit from the money it has invested on assets and on shareholders.
However, from financial statements of Lowes Company it can be seen that return on invested capital of the company has also increased, which is representing the capability of the company to turn its capital into profit. Increase in return is indicating that Lowes Company is efficient in changing capital into company’s profitability. But, as a matter of fact, the company is also facing an issue as gross margin of the company is not showing any significant improvement. This means that the company is not effectually managing its supplies as well as its labors. Overall position of the company is showing that the strategy of the company is working. In order to achieve efficiency in its operations, and to attain growth and profitability, the company has to ensure management of labors and supplies. The reader should be aware of doing financial analysis by calculating ratios, which can be done by incorporating values in formula from balance sheet and income statement.
SWOT Analysis
Strengths
In order to ensure effectual marketing and efficient merchandizing, Lowes Company has particular departments in order to cater needs and wants of different customers. The company is also maintaining its marketing and advertising department in order to create awareness, and also to attract customers, which is strength of the company. The company has several distribution systems at regional level. It has distribution centers for building materials, lumbers, and fashion fixtures etc. It is, however, allowing the company to properly and efficiently distribute its merchandize to the stores at a discounted price so that savings of customers can be ensured. Further, the company is producing goods that emphasize on ensuring retail excellence so that customers can be facilitated with best retail experience, which is contributing to good will and hence to strengths of the company. Lowes Company is using technological systems in its stores such as use of touch screens and Wi-Fi. The company has also introduced a flexible fulfillment system, which is allowing the company to complete orders of customers from the website of the company (Brohan). The orders are delivered to homes of customers within 2 business days.
Weaknesses
The company is just operating in Canada, Mexico, and the United States. There are several products of the company that can be shipped globally, but because of the fact that the company is lacking physical stores in other counties exerts negative influence on gross sales of the company. Moreover, the company is procuring its merchandize from several foreign and domestic suppliers, but it is not focusing on quality control as a result of which it is susceptible to the risks associated with financial stability and foreign policy of countries. Further, the products such as LED clip-on desks lamps that Lowes Company sells exert negative impact on the brand loyalty and retention of customers.
Opportunities
The company should consider bringing improvement in e-commerce and m-commerce services. It can spend more for home improvement, by building energy efficient products, which can increase its sales. It should introduce its products at international level, and should conduct business there so that customer base, market share, and profitability can be increased.
Threats
Economic conditions badly affect housing industry because consumers spend less on home improvement during the time of economic uncertainty (Bardhan, Edelstein and Kroll). The company is facing threats from its competitors such as Home Depot and Wal-Mart etc. The company has to focus on pricing strategy in order to differentiate itself from the competitors.
Cooperate Strategy Analysis
Acquisition and merger, and international expansion are effectual strategies for Lowes Company. International expansion via acquisition is recommended strategy for Lowes Company, as this strategy will help the company to achieve growth. International expansion helps the company in building good relations with partners at international level that further help in creation of more business. Further, expansion at international level is effective for the business as it increases business exposure, which in turn is helpful for gaining increased recognition of the brand in the world (Luo). A new country can provide more favorable economic conditions as compared to home country, as a result of which a company can conduct its business better than the business in home country. International expansion also allows the company to bring new concepts and ideas (Hitt, Ireland and Hoskisson) The company can take advantage of international market via international expansion by introducing new business as new market is not aware of the business model of the company. The strategy of international expansion can, however, also assist the business in taking advantage of the government regulations that are favorable for the business.
Recommendations
The company is facing threats from its competitors so in order to minimize the threat the company should differentiate its products by ensuring innovation and uniqueness, so that customers can be attracted for exceptional product. It should consider the idea of international expansion, because international expansion is helpful for the company in providing good economic climate that is suitable for the business. It also helps the company in growing faster, helps in diversifying stream of revenues, bring an increase in return on capital, and also help in increasing investment rate. Further, there is a need that the company should have a value creating strategy, and this strategy should be in accordance with the objectives of the company. The company needs R & D in order to produce an innovative product, and also for ensuring growth, so it should consider investment in R & D.
References
Bardhan, Ashok Deo, Robert H. Edelstein, and Cynthia A. Kroll. Global Housing Markets: Crises, Policies, and Institutions. Hoboken, NJ: Wiley, 2012
Brohan, Mark. "Flexible Fulfillment Is a Big Hit with Lowes.com Shoppers." Internet Retailer., 20 Apr. 2012. Web. 5 Aug. 2016
Hitt, Michael A., R. Duane Ireland, and Robert E. Hoskisson. Strategic Management: Concepts and Cases, Competitiveness and Globalization.Canada: Cengage Learning, 2014.
Luo, Yadong. Entry and Cooperative Strategies in International Business Expansion. Westport, CT: Quorum, 1999.
