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Hardware Industry Essay

1134 words - 5 pages

Overview: Construction market in US is thriving. Mortgage rates are continuously falling encouraging the first time buyers as well as home improvement seekers to innovate and upgrade (1). This provides ample opportunities for the hardware industry to boom. Hardware industry consists of companies that manufacture products such as building material, nails, door openers, furniture etc. The hardware industry production includes Wholesale Cooperatives, Home Centers, and Warehouse stores.Customers: The market broadly caters to following types of customers:1.Do it yourself (DIY) customers.2.Small to medium sized building contractors.3.Farmers.4.House wivesMarket size, market growth rate and number of companies: The hardware Market in North America is dominated by two major players, Home Depot has more then 1500 stores all over the world with reported annual sales of $71.41 billion for the year 2004. Lowe's, Inc. has 850 stores in USA with annual sales of more than $31.17 billion in 2003. The third major player is TruServ Corporation mostly dealing with hardware's has 6,800 retail outlets and sales of over 2 billions, while Ace Hardware boasts of more then 5100 stores world over. (Appendix 1 and 2. 2 - 5) NRHA estimates that industry sales will grow at an average annual rate of 5.2 percent between 2002 and 2007. (6)Competitive rivalry:Most of the raw materials used in the industry are widely available. Though two players dominate the market players suggesting an oligopoly there are many small sized operators, which bite into the pie of the market share. There are numerous customers of hardware, but the costs are usually a large percentage of the final product's total costs. Many users shop around the world for low prices on hardware, which they invariably find due to the competition among the companies.Industry Profitability: Market is profitable with major players gaining significantly. Table No 2 (7)Vertical Integration: Home depot and Lowe's have adapted to vertical integration both upwards as well as downwards, with considerable success. There is a scope for backward integration into the lumbar market as well as for forward integration such as furniture's, doors, windows etc.Stage in Life Cycle: The market is at an upswing due to various factors such as increased Disposable personal income (DIP), as well various social factors such as maturing or baby bloomers, (8) and a rising Confidence Index (CI) (9)Technology and product initiatives: which are taken to improve the market share, are as follows:ØOpening of larger stores having a wide range of products.ØAttacking the independent builder's merchant's share of market.ØProviding complimentary products e.g. furniture, furnishings, home wares.ØRationalize costs & exploit buying power..ØAdd new services.ØGarden design software.ØInstallation & rental services.ØCreate exclusive labels to enhance customer loyalty and create a snob value.Porter's...

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