Lowe’s has already entered the marked of Canada with 34 stores. Taking into account huge potential of the market, it is necessary to increase the companys presence in order to increase profits. At the same time the administrative and legal expenses, necessity to adjust the functional units to the strict local restrictions and vast number of strong local competitive require new solutions that differ from the standard approaches to new market entrance. The acquisition of Rona, the Canadian-based chain with 79 big box locations and more than 700 smaller stores is good idea as it will reduce the additional expenses of launching new retailing facilities and will limit risks of failure associated with the direct expansion.
It should be noted that all efforts should be made in order to avoid the hostile takeover as such actions will be negatively accepted by the public that may split the general sustainably-oriented public image of Lowe’s. After the acquisition of the company the rebranding should take place in order to adjust Ronas stores to the corporative and supplying values of the company. Also the tradition layouts used by Lowe’s in other countries may be implemented in stores in order to increase the rate of brand recognition by Canadian population.
The demand for hardware and house improving goods may be explained by relatively stable economy of Australia. In order to meet the needs of the vast number of population and achieve the economy of scale in regional framework, the extension of retail facilities is needed. Moreover in order to match the presence of Ace and remain competitive the opening of 150 new stores in Australia is the right direction for further growth. It is relevant to notice that the competitors operating on this market are mainly represented by multinational corporations. Outperforming of these competitors is easier to reach on regional markets, but it will be the prerequisite of creating the general advantage in framework of global perspectives. According to calculations based on the data presented in the case and other sources available for public, it is fair to conclude that the return on investment will be brought by 150 new stores in three-year period. Taking into account the impact of unexpected factors such as decreased demand, the strategy of new stores in Australia is expected to be beneficial.
The strategy of Lowe’s to set up stores of two sizes with the same front size proved to be efficient especially on the Australian market. The smaller retailing facilities of the Home Depot may be explained by its strategy of reducing cost. The principle of saving space within its stores is also actively used. To my mind, there is no need in matching the size of stores with the competitor. Moreover each square meter of additional space may be efficiently used as competitive advantage ensuring better diversification of the range of goods. The launching of line of products for women and children located within the extra space will result in enhanced brand strategy and guarantee increased sales. In order to take the final decision it is better to calculate total expenses for constructing additional space and compare this figure with potential net profit growth raised from selling products for children and women.
In order to outperform the direct competitor of Lowe’s - Home Deport – it is necessary to find out the key factor influencing the current success of Home Deport. Bearing in mind that the level of prices for hardware and construction materials is raising, customers pay more attention to saving and quality. The Lowe’s also states that the company offers the best price, but according to statistics customers tend to buy more products of Home Deport. The strategy of Lowe’s should be based on the huge marketing campaign to be conducted at the US with motto that Lowe’s provides the Lowe’st cost with highest value for clients.
Another strategic component is expansion of foreign markets where Home Deports is not represented such as Russia and Argentina. These two housing markets have great potentials. The level of government-imposed restrictions is rather low. Therefore the successfully chosen strategy of positioning will lead to strengthening of Lowe’s position all over the world.
Lowes may also increase cooperation with top selling brands such as Kitchen Aid and Pittsburgh paints. Moreover the orders of governments will create new opportunities and strengthen the sustainable and socially-oriented strategy of the company. That will highlight the values of the company and their effective cooperation with social movements. The strategy of product diversification by of selling products for women and children will lead to increased sales. Finding and contracting new vendors on the basis of unique right selling agreement and manufacturing some products under Lowe’s brand will be efficient in outperforming the competitor. Finally, the projections initiated by the company such as opening 150 new stores in Australia and the acquisition of Ronas 400 stores will bring positive outcomes.
The projected financial statements shall be based on the two prior years. The case consists of financial statement of 2011, 2012, 2013 years. There is no data concerning previous 2014 year. Therefore in order to presume the case requirements and bearing in mind that the acquisition of Rona is already completed we will use the data given in case only and write model-based projections for 2014, 2015, 2016 without usage of the current data.
References
(2016, 07 05). Retrieved from Lowe’s oficcial website: http://www.Lowe’s.com/
Porter, M. E. (1980). Competitive Strategy. Free Press.
Rumelt, R. P. (2011). Good Strategy / Bad Strategy. Crown Business.
