Home Depot vs Lowes

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Home Depot vs. Lowe’s

Financial Analysis And Comparison

AIM 6344 Group Members
Cenk Tolunay Yan Wang Hong Ma Yuhong Zhang

1) Background
1.1 The Home Depot
The Company was founded in 1978 in Atlanta, Georgia and has since become the world's largest home improvement retailer, operating more than 1,500 stores (Home Depot, EXPO, and other subsidiary companies) across North America. Home Depot caters to both do-it-yourselfers and professional customers who serve the home improvement construction and building maintenance market segments. Today, Home Depot’s stores stock up to 35,000 different kinds of building materials and lawn and garden products. Home Depot’s unique services include free in-store clinics for home improvement skills as well as design and decorating consultation, truck and tool rental, home delivery, free potting and many others. The Home Depot currently operates in 50 U.S. states and in the District of Columbia, eight Canadian provinces, and Mexico. In 1998, Home Depot opened stores in Puerto Rico and recently opened two sourcing offices in China.

1.2 Lowe's Companies, Inc
It is a $26 billion retailer of a complete line of home improvement products and equipment. The company serves more than seven million do-it-yourself and commercial business customers each week through 875 stores in 45 states. Lowe's is the world's second largest home improvement retailer and the 14th largest retailer in the U.S. Lowe's is in the midst of an aggressive expansion plan, opening a new store on average every three days. Lowe's is an active supporter of the communities it serves. Through the Lowe's Heroes volunteer programs and the Home Safety Council, it provides help to civic groups with public safety projects and share important home safety and fire prevention information with neighborhoods across the country. Lowe's has been a publicly held company since October 10, 1961. Its stock is listed on the New York Stock Exchange, with shares trading under the ticker symbol LOW.

2) Industry
Due to the economic expansion over the 90s, the home improvement industry has experienced a rapid growth. Due to the wealth effect, consumers spent high amounts of cash and credit on improving their most prized and expensive possession, their homes. As a result, the home improvement industry experienced rapid expansion and growth. At its peak, the market reached a record level of $377 billion in 2000. There have been other key external forces influencing the industry besides the macro economic cycles, including changing customer needs, increasing percentage of household expenditure on building, wide spread use of the internet, and consolidation within the industry which shifts the industry market structure to oligopoly. All the three major components of the market, namely do-it-yourself, buy-it-yourself and professional witnessed significant increases in sales. However, highest sales growth has been recorded in the home centers and maintenance service (6.9%). Previously, most of the market concentrated on mass or medium-market building material and home improvement and garden projects. But during the past five years, high-end design and renovation projects have developed remarkably. Home Depot has changed the entire industry by initiating the warehouse store format supported by excellent customer service in 1978.

Industry’s Key Success Factors Analysis of customer demands and competitive strategies reveals the following industry key success factors:

DEMAND 1. One-stop shopping 2. Low Price 3. Convenient location 4. Excellent customer service

COMPETITION 1. Super store concept 2. Price based 3. Fragmented market, many local competitors 4. Provide quality customer care

KSF 1. Wide Product Line 2. Economy of scale/ cost efficiency 3. Ability to expand by acquisition and new store opening 4.Educated and trained sales force

3) Strategies
Home Depot’s key success factors are excellent management, competitive prices,...
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