Our Free Sample Essay On Research and Development

Research and Development is a crucial portion of any business’ operations. In the case of companies in the home improvement industry, these companies have many subsidiaries which create their products, while also selling products from other companies. Lowes has 10 featured house brands[1]; Home Depot has 10 private label brands[2]; Canadian Tire has 50[3] and Tractor Supply has 13[4]. All of these companies have a high number of private label brands and subsequently develop many products every year to increase their profits and tailor their services for their customers. While developing products is a large portion of these firms’ R&D expense, so too is expanding the company. Home improvement companies constantly try to find new opportunities to expand their product lines through mergers and acquisitions. Analyzing the previous three years, all four companies had undertaken at least one merger or acquisition. These acquisitions are often done to expand the company’s possible clientele by expanding into previously weak, or non-existent business sectors.

Tractor Supply acquired Petsense in 2016, for a total price cost of $116 million. This was to increase their portfolio to also include pet products, which is a $60 billion market.[5] Obtaining a diversified portfolio also helps to mitigate losses in other portions of their business. Likewise, Canadian Tire also had one acquisition in 2017 where they acquired Padinox, owner of Paderno, a highly respected kitchenware company. Canadian Tire believes that owning its own brands will set them apart from its competitors and will assist them in developing more innovative products.[6]

Lowes and Home Depot both acquired two companies within the previous 3 years. Lowes purchased Rona and Maintenance Supply Headquarters, while Home Depot acquired Compact Power Equipment and Interline Brands. Home Depot’s purchases were to expand their pro division for contractors for $1.63 billion (Interline Brands)[7] and rental equipment to assist both contractors and DIY oriented individuals for $265 million (Compact Power Equipment).[8] Home Depot is further investing in its construction-oriented services. While Tractor Supply is diversifying, Home Depot and Canadian Tire have been strengthening their current divisions. Lowe acquired RONA for $2.4 billion to expand its functions in Canada[9], and acquired Maintenance Supply Headquarters for $512 million to have a stronger presence in the professional sector.[10] Through these two acquisitions, Lowe’s shows that they are trying to bolster its current business divisions to be more competitive. By acquiring Rona, Lowe’s now has an additional 539 stores in Canada, and through Maintenance Supply Headquarters, Lowe’s is now more capable of competing with Home Depot in the professional sector of the industry. As seen below, we can see that Lowe’s has spent more money in the past 3 years on acquisitions than Tractor Supply and Home Depot, and most of the money spent was for the acquisition of RONA in Canada.

Chart 98: Amount Spent on Acquisitions of Lowe’s and its Main Competitors

Source: Lowe’s[11], Forbes[12], Fortune[13], Home Depot[14], Tractor Supply[15]

ValuableYesIn the case of Rona, acquiring 539 stores in one of Lowe’s secondary countries of operation is a large asset to gain. Acquiring new areas to operate is key to the overall well-being and profit of an organization.
RareNoAs we can see above, all four of the companies in the strategic group have done at least one acquisition in the last three years. While the size of acquisitions varies, expansion is necessary for companies in this industry to continue growing.
Costly to ImitateYesAcquisitions of other companies are quite expensive. As we can see in the case of Lowe’s, approximately $3 billion was spent in the last three years on acquisitions. Smaller companies do not have enough capital to purchase other companies.

[1] Lowe’s. Featured Brands. https://www.lowes.com/cd_Featured+Brands_944498525_ (Accessed Feb 3, 2018).

[2] Home Depot. Our Brands. https://careers.homedepot.com/our-brands/ (Accessed Feb 8, 2018).

[3] Canadian Tire. All Brands. (Accessed Feb 8, 2018).

[4] Tractor Supply. Tractor Supply Brands. http://www.canadiantire.ca/en/all-brands.html (Accessed Feb 8, 2018).

[5] Tractor Supply. Tractor Supply Company Announces Acquisition of Petsense, a Growth-Oriented Pet Specialty Retailer With 136 Stores. http://ir.tractorsupply.com/file/Index?KeyFile=36071081 (Accessed Feb 8, 2018).

[6] The Globe and Mail. Canadian Tire Acquiring Padinox, Owner of the Paderno Brand in Canada. https://www.theglobeandmail.com/globe-investor/news-sources/?mid=cnw.20170510.C2387 (Accessed Feb 9, 2018).

[7] Fortune. Home Depot just made its biggest acquisition in nearly a decade. http://fortune.com/2015/07/22/home-depot-interline-brands-deal/ (Accessed Feb 9, 2018).

[8] Home Depot. The Home Depot Agrees to Purchase Compact Power Equipment Inc. http://ir.homedepot.com/news-releases/2017/07-06-2017-130500872 (Accessed Feb 9, 2018).

[9] Lowes. Lowes Completes Acquisition of Rona. https://www.lowes.ca/articles/lowes-completes-acquisition-of-rona_a6524.html (Accessed Feb 9, 2018).

[10] Forbes. How Lowe’s Can Benefit From Its Acquisition of Maintenance Supply Headquarters. https://www.forbes.com/sites/greatspeculations/2017/06/29/how-lowes-can-benefit-from-its-acquisition-of-maintenance-supply-headquarters/#5151bd63408d  (Accessed Feb 9, 2018).

[11] Lowes. Lowes Completes Acquisition of Rona. https://www.lowes.ca/articles/lowes-completes-acquisition-of-rona_a6524.html (Accessed Feb 9, 2018).

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