Home Depot and Analysis

Home Improvement Retail Operations Analysis A Comparison and Analysis of Company-Specific Strategies used by Lowes and The Home Depot The two biggest firms operating in the retail space that targets the home improvement niche are Lowes and the Home Depot.

These two firms essentially dominate the industry with Home Depot accounting for nearly sixty percent of total revenues, and Lowe's capturing a bulk of the rest (about 39%), but there are number of smaller firms that also target specific market segments as well as various local markets that all compete for a smaller share of the market. In this industry there is not a great deal of opportunity to create a strategy in which product differentiation can offer a competitive advantage.

For example, most stores carry either the same product mixes, or products that could be considered direct substitutes, and most of the consumer preferences will be related to price, convenience, customer service, and ordering and delivery options. Furthermore, the industry in general is highly correlated to the performance of the housing market, and any movements in this market have a significant amount of influence over any developments in the home improvement industry.

One analysis of the industry summarizes the key points by describing that the mature retail industry is largely characterized by a high degree of market concentration and homogeneous product lines, leading to high levels of price competition, particularly between two major companies that dominate the market (IBIS World, 2016) This analysis will consider some of the industry and company specific challenges that these two industry giants face in the U.S. home improvement retail market.

The Home Depot Home Depot's (HD) approach to a mission statement is fairly broad and includes mention of service, selection and price. The business is focused solely on the home improvement industry states that it will satisfy customer needs through offering a large selection at a low price. Other than that information, the company does not publish readily available information on its target market or other aspects of its strategy.

Rather, the company focuses more on its value system, consisting of eight values, that it has crafted into a "value wheel" and includes items such as an entrepreneurial spirit, relationships, service, etc. (The Home Depot, N.d.). However, the organization does not explicitly give away much information about its market strategy. Other sources are more informative however.

For example, the Panmore Institute has recently published a guide that outlines the foundation for the current strategy such as that the Home Depot's current generic strategy (based on Porter's model) is broad differentiation combined with cost leadership; however, it also provides some information about the company's initial generic strategy was cost leadership (Smithson, 2016). Home Depot stores first opened in 1979, and used a cost leadership strategy to begin building its market share while advertising this under the slogan of "Everyday Low Prices" to begin building its customer base.

Despite being the larger of the pair today, HD was actually founded over 30 years later than Lowe's, Home Depot in 1978 and Lowe's in 1946, and through the low-cost leadership strategy, the company grew quickly and has grown to 2,269 stores, of which 1,976 are in the United States, 182 are in Canada, and 111 are in Mexico (Fernando, 2015). However, Home Depot now uses broad differentiation as its main generic strategy, it's customer service levels, and is targeted more towards the professional with an industrial-type layout being utilized throughout its stores.

Lowes Despite being the older company, Lowes is comparatively smaller, but is still large operation consisting of 1,840 stores, of which 1,793 are in the United States, 37 are in Canada, and 10 are in Mexico (Fernando, 2015). It competes for exactly the same target market with some small variances. For example, while HD has more of an industrial feel, Lowes tries to present themselves as more polished and consumer oriented which is likely more focus on new do-it-yourself individuals and families as compared to the home improvement professional or seasoned veteran.

It uses its distinctive branding efforts to try to make its stores seem less intimidating to consumers who are not used to shopping in home improvement type locations and leverage this strategy to increase its potential market. Furthermore, another difference in the overall strategies between the two competitors can also be seen in their attitudes to providing a full-service option for many of their goods.

For example, Lowes will connect its customers with local contractors and manage the installation of many of the items it sells such as carpet or appliances. By contrast, HD prefers to focus on other areas of its strategy such as modernizing its supply chain and building a network of regional distribution centers (Fernando, 2015). Lowes is also placing a great deal of its resources on improving its current customer service capacities relative to the HD who has typically used this as a point of.