Lowe’s Home Improvement Company, Essay Example

Abstract

Microeconomics is the study of firms’ behaviors. The main strength of microeconomics is in its simplicity and close connections with real-life economics. This paper provides a brief insight into the place and position of Lowe’s Home Improvement Company from the microeconomic perspective. The range of products sold by Lowe’s Home Improvement Company is discussed. The main competitors are listed and evaluated. The industry in which the firm operates is categorized into one of the four market structures. Implications for the firm’s development and growth are provided.

Keywords: Lowe’s Home Improvement, microeconomics, oligopoly.

Microeconomics

Microeconomics is the study of firms’ behaviors. The main strength of microeconomics is in its simplicity and explicit connections with real-life economic processes. Microeconomics provides an insight into firms’ decisions and behavioral patterns. Microeconomics helps to understand how various market factors affect the place and position of firms. Lowe’s Home Improvement is one of the leaders in the home appliances market. Since its inception in 1946, the company has become the world’s second largest provider of home improvement products (Lowe’s, 2011). To ensure continuous growth and success, the company must be aware of the economic processes affecting its market position. Microeconomics facilitates the analysis of Lowe’s competitive position and provides implications for the future of Lowe’s business in the home appliances market.

The name of the firm in question is Lowe’s Home Improvement. Since 1946, Lowe’s has been helping its customers improve their homes (Lowe’s, 2011). The firm started as a small hardware store, slowly turning into the world’s leading provider of home appliances (Lowe’s, 2011). It is noteworthy, that Lowe’s is not a manufacturing company; it is merely a retailer for more than 40,000 products in 20 product categories (Lowe’s, 2011). These products range from simple painting appliances and tools, to nursery and lumber products (Lowe’s, 2011). Customers can also make a Special Order, to choose from hundreds of thousands of products that are not regularly available through Lowe’s stores (Lowe’s, 2011). The main product focus of Lowe’s is on everything that helps customers to build, beautify, and enjoy their homes (Lowe’s, 2011). In 2010, Lowe’s was ranked the 49^th on the Fortune 500 list and became the Gold Winner of the Best Employers for Healthy Lifestyles Award (Lowe’s, 2011). Lumber is probably one of the foundational ingredients of the company’s product assortment. This is where Lowe’s competes with other companies and tries to win a greater share of the home appliances market.

84 Lumber Company is the main competitor of Lowe’s Home Improvement Company. 84 Lumber Company was founded in 1956 and is currently the U.S.’s leading provider of building materials to professionals and build-it-yourselfers (84 Lumber Company, 2011). Like Lowe’s, 84 Lumber provides a wide range of goods and services, from insulation, moulding and roofing, to trim, drywall, and hardware (84 Lumber Company, 2011). Both companies provide various lumber decks, to meet the most unexpected demands of customers. There are also other competitors, including Ace Hardware Corporation (Hoovers, 2010). Yet, there is no competitor stronger and more experienced than 84 Lumber. Both competitors sell identical products and must work hard to win the hearts and minds of their customers.

The market in which Lowe’s operates is an example of oligopoly. The latter means that the industry is being dominated by a few sellers (McEachem, 2003). The lumber decks market is dominated by two huge retailers – Lowe’s Companies, Inc. and 84 Lumber Company. In this oligopolistic atmosphere, the two firms must always consider each other’s actions and their influence on each other’s strategic position. Really, the market structure of oligopoly is that of interdependence (McEachem, 2003). In the meantime, with just a few market participants, their behaviors are extremely difficult to predict (McEachem, 2003). It is like a tennis match, where actions of both players depend on how each of them holds and kicks the ball (McEachem, 2011). Therefore, Lowe’s must be prepared to monitor its competitor’s decisions and actions. Possible effects of these decisions and actions must be considered, too. Lowe’s must realize that it cannot escape the influence of 84 Lumber Company on its operations. The firm should also think several steps ahead, to predict the effects of its actions on the entire lumber decks market. Most probably, the two firms will continue to dominate the home appliances market, but the risks of new entrants cannot be disregarded. Both firms sell different and differentiated products, and there is always a possibility that new retailers will win some of the market share they currently occupy.

References

84 Lumber Company. (2011). 84 Lumber Company. 84 Lumber. Retrieved from http://www.84lumber.com/Home/AboutUs.aspx

Hoovers. (2010). Lowe’s Companies, Inc.: competitive landscape. Hoovers. Retrieved from http://www.hoovers.com/company/Lowes_Companies_Inc/rfstif-1-1njea3.html

Lowe’s. (2011). Company overview. Lowe’s Home Improvement. Retrieved from http://media.lowes.com/company+overview/

McEachem, W.A. (2010). Microeconomics. Cengage Learning.