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Lowe's SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Lowe's managers to do a situational analysis of the firm . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Lowe's is facing in its current business environment.
The Lowe's is one of the leading organizatations in its industry. Lowe's maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Lowe's to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Lowe's strengths, and eradicate its weaknesses.
Step by Step Guide to Lowe's SWOT Analysis
Strengths of Lowe's – Internal Strategic Factors
As one of the leading organizations in its industry, Lowe's has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Lowe's are –
- Strong Free Cash Flow – Lowe's has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Successful track record of developing new products – product innovation.
- Highly skilled workforce through successful training and learning programs. Lowe's is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Automation of activities brought consistency of quality to Lowe's products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong distribution network – Over the years Lowe's has built a reliable distribution network that can reach majority of its potential market.
- Strong Brand Portfolio – Over the years Lowe's has invested in building a strong brand portfolio. The SWOT analysis of Lowe's just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Good Returns on Capital Expenditure – Lowe's is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Highly successful at Go To Market strategies for its products.
Weakness of Lowe's – Internal Strategic Factors
Weakness are the areas where Lowe's can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Lowe's needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Limited success outside core business – Even though Lowe's is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Lowe's has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The profitability ratio and Net Contribution % of Lowe's are below the industry average.
Opportunities for Lowe's – External Strategic Factors
- The market development will lead to dilution of competitor’s advantage and enable Lowe's to increase its competitiveness compare to the other competitors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Lowe's to capture new customers and increase its market share.
- The new technology provides an opportunity to Lowe's to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Lowe's an opportunity to enter a new emerging market.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Lowe's in other product categories.
- Government green drive also opens an opportunity for procurement of Lowe's products by the state as well as federal government contractors.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Lowe's to drive home its advantage in new technology and gain market share in the new product category.
- New trends in the consumer behavior can open up new market for the Lowe's . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Threats Lowe's Facing - External Strategic Factors
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Rising raw material can pose a threat to the Lowe's profitability.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Lowe's in those markets.
- Imitation of the counterfeit and low quality product is also a threat to Lowe's’s product especially in the emerging markets and low income markets.
Limitations of SWOT Analysis for Lowe's
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Lowe's
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Lowe's
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Lowe's managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Lowe's
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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