Porter’s Five Forces

Lowe’s (LOW) and Home Depot (HD) are competitors in the every growing market of Home Improvement. The following analysis of each company will examine the home improvement industry, the individual companies, their operating philosophies, their financial strengths or weaknesses, and a final conclusion on which company would be a better long-term investment.

Home Depot’s corporate-level strategy is one of internal growth. This conclusion was reached based on the increased focus that Home Depot has placed on growing its existing online and traditional retail operations. Between 2016 and 2018, Home Depot is expected to invest approximately four billion dollars into improvements in its online and physical retail locations in order to make both work more synergistically and grow sales (Petro, 2016). Home Depot hopes that these investments will continue to increase sales at both its physical and digital retail locations, thereby growing the company without adding significant numbers of physical locations.

Retailing building supply stores have become a popular retail industry sector due to increased public awareness and the need of many homeowners for the home improvement products. Back in the 1970s, long before warehouse stores ruled home improvement land, do-it-yourselfers shopped at “home centers.” These 30,000 square foot stores offered cheaper prices and wider selection of products, about 25,000 more than local hardware stores and eliminated the extra trip to the lumberyard. The dependence of many of these retailers upon the homebuilding industry for much of their business has also been reduced and the warehouse superstores, such as Home Depot, have become more important. The smaller companies in the

The first of Porter’s Five Forces is the threat of new entrants. According to the case study, there has been a wave of new entrants to the retail industry. These include Best Buy, Costco, Wal-Mart, Old Navy and the recently irrelevant, Target Canada. The second force, the threat of substitute products or services, is also prevalent in the retail market. Inevitably, the target audience that the Hudson’s Bay Company is trying to cater to, will shop at other retail stores for the same goods due to consumers behaviours and preferences. Another impacting force is the bargaining power of suppliers. However, this force does not play as large of an impact to HBC as one might initially assume. Traditionally, HBC among other large retail stores makes a large percentage of their

While Lowes and Home Depot follow similar differentiation and low cost strategies, there are a few differences in marketing due to the fact that Lowes seems to be more targeted towards women with bright and colorful displays, wide aisles and product stacking that is lower and easier to reach (Clemons, 2012). While this is a calculated decision because women make 80% of home improvement decisions, it may distract from growth in the contractor business since the vast majority of home improvement professionals are men. The advantage shifts toward Home Depot since men also spend thirty five percent more than women on home improvement supplies therefore, attracting men may actually be more efficient in terms of return of investment (Goodfellow, 2013). The ability to quickly locate products and return to work is a tremendous advantage for contractors who would prefer to be on the job instead of leisurely strolling the aisles of a store while examining multitudes of options. This may be a major component of Home Depot’s rebound since they derive a larger percentage of their sales from professionals and the rebounding housing markets and rebuilding efforts from Hurricane Sandy have introduced significant cash flow into the industry (Cheng, 2013).

Businesses are not only faced with competition within the industry they operate in. They also face competition from businesses in other industries.

The home improvement sector of the economy is large with two major players in the industry and with many smaller local and regional competitors. These two major competitors are Home Depot and Lowe’s. These two companies account for over $110 billion in total sales each year. Even though sales have gone down over the past few years due to the downturn in the economy they have not gone down nearly as much as home sales and this is due to more people deciding to do more home improvements to their own home then buying a new home. Both of these companies have been able to keep up sales and increase them year over year by improving current

Lowe’s Companies, Inc. is now focusing on the expansion of its superstores in to the Northeast and, Western United States, Florida, and urban markets. Lowe’s is currently undergoing a five year two billion dollar expansion plan. This expansion plan is combined with the merger and re-merchandizing of Eagle Hardware & Garden, Inc. In 1999, Lowe’s transformed forty-one Eagle Hardware & Garden stores into Lowe’s stores. Most of these stores were located in the Western United States. Some might say that this aggressive expansion plan that Lowe’s is undertaking, might be overdoing it. That is nonsense; Lowe’s and its largest competitor Home Depot,

The first company that will be analyzed is Home Depot. Home Depot's total assets increased to $40,518 million from $40,125, an increase of 0.9%. These figures, however, are lower than the value of total assets on the books for HD for the prior three years. The 2008 fiscal year was the point where Home Depot had the highest asset levels at $44.324 billion. The recession has been the biggest culprit for the decline in the size of Home Depot. All of the firms in the building supplies industry have a strong relationship between their sales and the strength of the housing market, as home purchases are a major impetus for home renovation projects. Home Depot's size declined with the onset of slowness in the housing market, and it is expected that its size will not begin to increase until the housing market recovers. Home Depot management has noted that there are signs of life in the US housing market, and that this should be taken as an encouraging sign for the company (Isidore, 2012). Indeed, the company's balance sheet has grown in size throughout the 2013 fiscal year, so that the latest Q3 total

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

The competitive pressures for substitutes for D.R. Horton, Inc. are strong. D.R. Horton, Inc. competes on a cost basis through vertical integration. Horton not only builds houses, but is involved in every step of the process from purchasing and developing their own lots, to subsidiary companies who handle mortgages and closings. They exhibit very little differentiation with respect to the industry as a whole due to the E.P.A. setting regulations and standards, and municipalities specifying strict zoning ordinances. A customer has little or no cost of switching to a competitor of Horton with little to set them apart from the rest of the industry. The products they sell, mostly single-family homes, are readily available from any builder

The five competitve forces that shape strategy also know as Porter’s five forces was first pubilshed in 1979 in the Harvard Business Review by a young associate professor at the Harvard Business School, Michael E. Porter. This article started a revolution in the strategy field and has since than shaped a generation of academic research and business practise. Throughout the last thirty years Porter’s Five Forces Analysis has been the most used strategy tool in academics as well as management training. (Porter, 2008) Porter used a certain structure for his study, called framework. In a framework only the smallest number of core elements are used to capture the full richness

In which industry does P&G compete? Apply Porter’s Five Forces Model to the industry. Is this an attractive industry?

The biggest threat to new businesses or big companies is competition. Knowing who your competitors are and what they are doing that is going to affect your strategic planning are essential questions a company should ask and explore. Porter’s six forces model would allow a company to answer those questions and provide detailed insights about the competition. Furthermore, the model helps determine the profitability of a company based on competition. In other words, the model allows companies recognize the elements affecting their

Europe being the main market segment for Srilanka, due to economic conditions there Is a growing tendency to travel within the region. Intra regional and domestic travelling is a clear substitute. Lake district in Uk, Croatia, Catalonia in Spain, and Mediterranean cruise ships are