Mgmt 436
3/8/16
Case: Lowes
Student: Brayall
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STRATEGIC AUDIT FACTOR ANALYSIS WORKSHEET
STRATEGIC AUDIT
PARAMETER
I.
ANALYSIS
(+) Factors
COMMENTS
(-) Factors
CURRENT SITUATION
I.A. Past corporate performance
indexes
Net earnings grew by 27.6 percent in
’03. Earnings per share increased to
$2.34, up 26.5 % over ‘02. Reached
$30 billion in sales, shareholders’
equity exceeded $10 billion.
I.B. Strategic Posture:
Mission
Objectives
Strategies
“Provide customer-valued solutions with
the best prices, products and services
to make Lowe's the first choice for
home improvement.”
Grow domestic sales space AN by 16%,
w/ 150 new stores projected to open
both in ’05 & ’06 in predominately metro
areas w/ populations of 500K+
(specifically NYC/NJ/Chi)
Presently #2 in mkt. Re-position to gain
mkt share of higher end product lines,
installed sales, special order sales &
commercial busns sales.
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margin products
of ‘big box’ sector, sell greater
proportion of
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Policies
Divisions of responsibility, established
policies and procedures which include a
code of conduct to foster a strong
ethical climate enhanced w/ internal
audits & improvement suggestions rpt’d
to mgmt & the board. Careful selection,
training and development of its people
& msn, obj & strat are coherent &
directed to the same goal.
II. Corporate Governance
SWOT Begins
II.A.
Board of Directors
Robert L. Tillman Chairman of the
Board and Chief Executive Officer,
Lowe’s Companies, Inc.,
Mooresville, NC
Robert Niblock named chairman
and chief executive officer to take
the helm in ’04.
Leonard L. Berry, Ph.D.
Distinguished Professor of
Marketing and M.B. Zale Chair in
Retailing and Marketing
Leadership, Texas A&M
University, College Station, TX
Peter C. Browning Non-Executive
Chairman of the Board, Nucor
Corporation, Dean of McColl
Graduate School of Business at
Queens University of Charlotte, NC
Paul Fulton Chairman of the Board,
Bassett Furniture Industries,
Bassett, VA
Dawn E. Hudson President, PepsiCola Company, Purchase, NY
Robert A. Ingram Chairman, OSI
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Pharmaceuticals, Inc.,
Vice Chairman Pharmaceuticals,
GlaxoSmithKline, Research
Triangle Park, NC
Richard K. Lochridge President,
Lochridge & Company, Boston, MA
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Claudine B. Malone President and
Chief Executive Officer, Financial &
Management Consulting, Inc.,
McLean, VA
Robert A. Niblock President, Lowe’s
Companies, Inc., Mooresville, NC
Stephen F. Page Vice Chairman
and Chief Financial Officer, United
Technologies Corporation, Hartford,
CT
O. Temple Sloan, Jr. Chairman and
Chief Executive Officer, General
Parts, Inc., Raleigh, NC
II.B.
Top Management
III. EXTERNAL ENVIRONMENT:
[External Factor Analysis
Summary, or EFAS]
III.A
Societal Environment
Natural Environment
Store expansion strategy may be
impacted by environmental
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regulations, local zoning issues and
delays, availability and development
of land, and more stringent land use
regulations than we have
traditionally experienced as well as
the availability of sufficient labor to
facilitate our growth.
Sociocultural Environment
Low mortgages, higher turnover in real
state mkt, Do It Your-Selfer’s;
ownership and fix-up trends
Task Environment (Industry
Analysis)
#2 in national mkt. Serves appx 10M
customers a week at more than 950
home improvement stores in 45 states.
III.B. Task/Industry
Environment
Threat of Entry
Threat of Substitution
Low to medium national threat due to
Home Depot & its mkt share. High
costs prohibitive.
Highly competitive mkt- Lowes
provides over 40,000 products in
stock and hundreds of thousands
more by special order. Cost &
convenience are the factors most
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Power of Suppliers
easily substituted.
reliable supply of inventory at
competitive prices and our ability to
effectively manage our inventory-
Power of Customers
“How-To” clinics - “do-it-yourself”
expands to more “do-it-for-me”
projects,
Stakeholders
Rivalry
Comprehensive employee training,
enhanced ‘03, - in service and
execution of fundamentals of
retailing- financial assistance to
attend colleges- diversity and
inclusion. CRS - community
outreach w/ victims of the disasters
Home Depot on ‘Big Box’ scale and
local and regional competition in
smaller mkts e.g., Building
Materials Holdings, House 2 Home.
Electronic order placement,
Other
IV. INTERNAL ENVIRONMENT
IV.A.
Corporate Structure
IV.B.
Management
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well-staffed, organized stores and
knowledgeable employees who stand
ready to provide
exceptional customer service
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IV.B.
Corporate Culture
IV.C.
Corporate Resources
MC1
Marketing
MC2
Finance
well-staffed, organized stores and
knowledgeable employees who stand
ready to provide
exceptional customer service
“How-To” clinics - “do-it-yourself”
expands to more “do-it-for-me”
projects. Lowe’s targets three key
specialty sales areas: Installed Sales,
the Commercial Business Customer
and Special Order Sales (SOS).
HGTV network. Lowe’s #48
NASCAR. Home Safety Council.
Credit programs- driving traffic &
purchases. In-store design
assistance- Website usability- design
help, order & tracking
CRS victims of the disasters- 40 in ‘03
Habitat for Humanity- Lowe’s
Charitable and Educational Foundation
awarded ten
$100,000 grants in ’03.
Net earnings 2003 increased 28% to
$1.9 billion or 6.1% of sales compared
to $1.5 billion or 5.6% of sales for 2002.
Net earnings for 2002 increased 44% to
$1.5 billion or 5.6% of sales compared
to $1.0 billion or 4.7% of sales for 2001.
share were $2.34 for 2003 compared to
$1.85 for 2002 and $1.30 for
2001.Return on beginning assets,
defined as net earnings divided by
beginning total assets, was 11.7% for
2003, compared to 10.7% for 2002 and
9.0% for 2001, and return 22.6% for
2003, compared to 22.0% for 2002 and
18.6% for 2001.Return on invested
capital, defined as net earnings plus
The Company’s major market risk
exposure is the potential loss arising
from the impact of changing interest
rates on long-term debt. The Company
currently only has fixed rate debt. Has
leverage w/ vendors due to volume
buys, and better Supply Chain Mgmt
(SCM) greater inventory mgmt drove
down cost of goods sold.
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after-tax interest divided by the sum of
beginning debt and equity, was 16.5%
for 2003, compared to 15.1% for 2002
and 13.8% for 2001.
MC3
Research and
Development
MC4
Operations & Logistics
MC5
Human Resources
MC6
Information Systems
(IT)
Prices low requires us to make
substantial investment in new
technology & processes whose
benefits could take longer than
expected and could be difficult to
implement. Special Order Service –
electronic ordering & ability for
customers to monitor until delivery.
Nine state-of-the-art regional
distribution centers. 50% of goods
sold went through these centers- rest
were direct shipped. Vendor
relationships: 7000 world-wide.
Working to direct purchase (cutting
out re-purchaser). Efficient
distribution is the key to profitably
serving small markets and vital to
flowing product to high-volume,
large markets to maximize sales.
Customer oriented that direct their
efforts to range of customers- home
owners to contractors.
Website Kiosks Instore Design
Centers / Comp based aides
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V. ANALYSIS OF STRATEGIC
FACTORS
(Strategic Factor Analysis
Summary, or SFAS)
.
V.A
S.W.O.T
Key Internal and External
Strategic Factors.
(+) Factors
(-) Factors
Opportunities
Abel to sell related products in different
markets all linked by common
technology
Dominate player in the market
Threats
Big competition
Take over candidate
Threat of substitution
Communicate better within the
organization
Integration of sub cultures
Leverage real estate and currency
rate exchanges
Weaknesses
Slow to Asia
Strengths
Little threat of entry
Dealing with large competitors
Currently growing at 12%-15%
Mission statement
Vertically integrated
Objectives statement
Strong management team
V.B. Review of Mission and
Objectives
Mission statement needs to be
supported by objectives and actions of
the company
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STRATEGIC RECOMMENDATIONS
VI. STRATEGIC ALTERNATIVES
& RECOMMENDED
STRATEGY
VI.A.
Strategic Alternatives
Pro/Con
ADVANTAGES
DISADVANTAGES
Alt.1
Alt.2
Alt.3
VI.B.
Recommended Strategy
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VII. IMPLEMENTATION
VIII. EVALUATION AND
CONTROL
(ASSESSMENT)
NOTES:
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