Home Depot vs. Lowes – Differences in International Strategy   Leave a comment

THE ACADEMY OF BUSINESS STRATEGY

INTERNATIONAL STRATEGY BLOG
Home Depot vs. Lowes – Differences in International Strategy

AUTHOR
John Racine (CBS) MBA (Hons) PMP BA

Two markets under one roof
Both Home Depot and Lowes pursue the strategy of serving both do-it-yourself and building products. That there is considerable overlap between these offerings is one reason this is a viable strategy. However, the needs of do-it-yourselfers and builders can be very different. Do-it-yourselfers get to enjoy the low prices which this highly competitive industry brings in seeking builders as customers. Home Depot and Lowes differ in their strategies, however.

Statistical Analysis
Lowes has recently been stressing multivariate testing analysis in an effort to measure and focus its marketing efforts more effectively. While Home Depot is the leader in the market, Lowes works hard. Like Avis used to claim “We’re second, we try harder”, Lowes seeks to raise profits through targeted advertising campaigns determined by statistical analysis, while Home Depot is not quite so scientific.

Innovative Advertising
Lowes recently pledged $1 million to open a National Garden in Washington, DC. The Garden will draw approximately 1.5 million visitors a year and Lowes will be prominently credited as a benefactor there. Likewise, Lowes has paid the Orlando Predators, an arena football team, to have its name associated with the team. Even more daring, Lowes has made a deal with the former Charlotte Motor Speedway in North Carolina to change the name of the venue to Lowes Motor Speedway.

Seeking new demographics
While Lowes has succeeded in making its stores more appealing to women, who are a growing part of the market, Home Depot has been seeking multiple new demographics, recruiting more Hispanics in order to attract the Hispanic market. Home Depot has changed its slogan from “You can do it. We can help.” to “More saving. More doing.”

Information Technology
Home Depot has been expanding into countries new to it also, as part of their strategy. As part of this strategy, Home Depot has been working hard to improve its information technology, identifying core business practices and IT processes which can be used uniformly throughout the world, allowing them to expand their businesses quickly into new markets, even while tailoring its marketing to each nation. Because it can’t know when it enters a country whether it will open new stores or develop joint ventures, the technology has to be nimble enough to handle any likely scenario. They develop all applications as if they could be used anywhere in the world. Home Depot has also acquired the “Home Decorators Collection”, which provides an online Web Portal for the purchase of furniture, rugs, and lighting, and launched the specialty Web catalogs “10 Crescent Lane” and “Paces Trading”.

Simplification
In an effort to cut costs and streamline the business, Home Depot has eliminated over 200 reports and scorecards. One example of this simplification is a company-wide blackout on e-mail on Tuesdays and Saturday, allowing store managers to attend more to local concerns. They’ve reduced the number of products, while still carrying the number 1 and 2 market leaders’ products in every category, and are attempting to eliminate coupons, rebates, sweepstakes, and gift cards, all in an effort to lower costs and provide savings to all customers without the need for the customers to do anything extra to achieve that.

Remerchandising
Lowes is working internationally to re-merchandize 150 of its earlier format stores to its current format. The goals of this, besides uniformity, are to improve the adjacency of related departments, to move whole departments to places where customers have come to expect them in most current stores, adding self-checkout, and refurbishing or replacing selling centers.

Other global competition
While Home Depot and Lowes often face off against each other, they also face competition from European competitors B&Q and OBI. OBI is the undisputed market leader in do-it-yourself home improvement in Germany and does not cater to the commercial building business. They are expanding internationally aggressively. B&Q is a British home improvement retailer and is the second largest in Europe, catering also to mostly do-it-yourselfers. B&Q has grown rapidly using a series of mergers, acquisitions, and expansions.

Appropriate strategies
Clearly, each company is approaching market development from different angles. This represents both the imagination of these companies and their desire to overcome shortcomings in their existing approaches. The Home Depot vs. Lowes drama is a study in intense free market competition where both seem to be profitable and stable, even in the reality of the low profit margins of their industry as a whole. This competition has lessons for many companies that operate internationally and their strategies should be studied by those seeking international market

ABOUT THE AUTHOR
John Racine (CBS) MBA (Hons) PMP BA is an approved Certified Business Specialist (CBS) with the Academy of Business Strategy and his specialist subject is international strategy. He has achieved an MBA from Strayer University, a PMP from the Project Management Institute and a BA in Psychology from the University of Delaware. He has been employed as a CIO and Consultant for various companies and has experience within the energy, supply chain, information technology, insurance, wholesale, retail and distribution industries. His clients or employers have included British Petroleum, National Cash Register, Boundless Technologies, TigerLogic, Basys Inc, Ramdata Systems Ltd, Centre for Medicare and Medicaid Services, IBM, The State of Maryland, Computer Sciences Corporation, SoftMed Systems, Wesley College, Mid-Atlantic Medical Services Inc, Aireco Supply, Ultimate Data Systems and Ultimate Applications Systems and J G Haldeman and Bro. He has geographical working experience in the United States of America, United Kingdom and Bolivia and speaks English, German and Spanish. His service skills incorporate strategic planning, technology development and sales and marketing.

To contact John Racine, please contact the Academy of Business Strategy by forwarding an email, or alternatively please visit John’s CBS Blog.

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Posted January 23, 2011 by sharonmelissamoore in John Racine (CBS)

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