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Lowes’ Porter's Five Forces Competitive Analysis

1272 words - 5 pages

Lowes’ Porter's Five Forces Competitive Analysis
Michael Porter's Five Forces analyze the external and internal environment of a company to increase the awareness of threats and structure of the industry that company competes within. Thus, the Five Forces is an ideal tool which can help companies to maintain their competitiveness with a higher profitability.
Porter’s Five Forces is defined as threats of new entrants, bargaining power of suppliers, power of buyers, the threat of substitutes and rivalry among existing competitors. New entrants into the industry aim to gain market share from rivals, so the intensity of competition may require to make changes on current strategy of marketing to maintain existing market share. The bargaining power of suppliers is one of the threats on the industry where price changes or product quality by suppliers can impact the profitability. Therefore, it is important for the companies to keep alternate suppliers or a contract to ensure prices, quality and quantity of the product so to avoid the company's supply from falling behind. The power of buyers can force the companies to lower the prices and offer different type products and service. Buyer can threaten the company with the competitors which may cause a negative impact on the bottom line to the companies. Thus, it is important to create a loyalty market share to avoid this threat. The threat of substitutes increases when another industry offers a similar product or services to customers within the same industry with a lower price. In this case, the industry profitability sinks since the product is available at a better price. This threat forces most competitors to price match or better performance. Rivalry among existing competitors creates the strategy in their industry by discounting, differentiating and adding extra value on the product or services. High level, intense rivalry may result with profit lost for the company. In most cases, new entrant barriers are high due to the intensity of rivalry (Porter, 2008).
Lowes’ Porter's Five Forces Competitive Analysis
As relevant to these competitive forces, the common and mutual goal of companies can be explained as better profitability with a greater market share against their rivals. Therefore, implementing Michael Porter’s Five Forces can help the companies determine the issues that may impact the company’s profitability in the long term.
Lowes Company Inc. has grown out of a small hardware store which was located in North Carolina in 1946. The founder and owner Carl Buchan had a vision of chain home-improvement stores at that time. One of the best strategies that Buchan did was working directly with manufacturers instead of wholesalers. This let Lowes come over the power of wholesalers. The company made a big reputation with low prices strategy. In addition, Lowes owns and operates stores in Mexico and Canada as well as United States (About Lowe’s, 2014).
The company's goal is offering the best...

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