Economic Forecast for Lowes (the home improvement store) - Research Proposal Example

Lowes Economic Forecast al Affiliation This Paper looks at different estimating strategies utilized for ive and quantitative business forecasting and their utilization in Lowe Corporation in order to speculate the future progress of the company in terms of performance. Data is obtained over a period of time for use in exploration of various economic variables that hinder Lowes performance. Business forecasting as a methodology concentrates on authentic execution with the end goal of utilizing the information picked up to venture future business conditions. Therefore, choices made on Lowe will aid in the accomplishment of the company objectives. Business forecasting assumes a vital part in today’s indeterminate worldwide commercial center. Forecasting is customarily either subjective or quantitative, with every offering particular points of interest and disadvantages. Forecasting can be characterized into subjective and quantitative. Subjective procedures are subjective or judgmental and are taking into account appraisals and conclusions. Time series strategy that is a typical type of subjective estimate, permits specialists to make a compelling estimate under states of great instability. Lowes quantitative procedure utilizes a measurable investigation of past deals of performance keeping in mind the end goal to adequately anticipate better future results. Future performance results of Lowe Corporation can be restricted under states of vulnerability. The project therefore concentrates on economic variables which directly affect the company performance. INTRODUCTION Lowes Company is situated in United States. It runs a series of home retail improvement services. In addition, Lowe has appliance stores situated in Mexico, Canada and the United States. It was founded in the year 1946 in North Carolina, North Wilkesboro. The chain contains about 1835 stores across Mexico, Canada and United States. Its enlargement began in 2007 by opening Hamilton Ontario during the beginning of 2008. Lowe’s began the building two stores at Monterrey Mexican city and it officially entered into the Mexican market. The year 2011, Lowe’s issued a plan to construct more than 150 stores in Australia. The companies owned by Lowe was ranked 43 out of the 500 companies in the well doing companies by year 2010. Lowe’s is second biggest hardware chain that is based in the North Carolina, in the United States it follows Home Depot and it is a head of Menards. Worldwide Lowe’s is again the second –biggest hardware chain that is also ranked behind Home Deport; however it is a head of B&Q and OBI European stores (Pass, Lowes & Robinson, 2014). Lowe’s first store in the North of Wilkesboro was started in the North Wilkesboro and in the North Carolina in the year 1921 by Smith Lowes Lucius (1879-1940), he had a Baptist background. Lowe died in the year 1940 and the business was possessed by Ruth his daughter who later sold the business to her brother in the same year, the brother also partnered with Buchan in the year 1943.Under the guidance of Buchan the store aimed at the hardware and constructing materials but before this product mix had included dry goods notions snuff and horse tack groceries and produce. The business then purchased another location at the Sparta, North Carolina in 1949. Lowe and Buchan differed on the enlargement of the business to the new location hence they parted in the year 1952 with Buchan solely controlling the hardware and constructing distributing business while Lowe taking part in the controlling of the car dealership, therefore Buchan became the only owner of Lowe’s in the year 1954 when he started the Lowes grocery and food store chain. By 1955 Buchan also expanded the business by opening stores rapidly in North Carolina where most of the stores had opened in the 1950s. Unfortunately Buchan also died in the year 1960 from the disease of the heart attack at the tender age of 44 years and his five man staff that included Leonard, Robert Strickland, and Herring took the business public in the 1961. By the year 1962 the Lowes business now operated 21 stores making the yearly report of millions. Lowes started to trade in the exchange in the New York Stock in 1979 (Caldwell, 2004). In the year 1980s Lowes suffered as a result of market conditions and added competition from new big box chain store. For some time Lowe’s resisted to adopt the mega store system because its management believed that the smaller towns in most cases could not operate in order to support big stores. However Lowe’s business finally adopted the big system for the purpose of survival. Nowadays many of Lowe’s stores are section of big-box variety even if some pure system stores remains in the smallest markets. Lowe’s since then has grown nationally as it was supported by the buying of Renton, Washington situated at Garden and Eagle Hardware Company in the year 1999. Now the business is the second largest home improvement store chain found in the United States of America and has commenced to expand to the outside of the United States beginning with Southern Ontario in the intersection of Woodward Avenue and Barton Street (Scott, 2008).  METHODOLOGY Lowes (home improvement store) incorporation being among the largest institutions which offer a wide range of store services faces a lot of competition from its rivals in the same sector. Apart from stiff competition rendered, Lowes economic performance is hindered by different economic variables such as unemployment rate and retail price of commodities. In order to ascertain its future economic trends, a hypothesis test is performed to identify the degree to which various economic variables actually affect future performance of the company. Business forecasting in Lowe establishment can be utilized as a part of a wide mixture of connections and assortment of organizations. Case in point, viable determining can focus deals in light of participation at an exchange show where the client is interested for items. A standout amongst the most essential suppositions of business forecasters is that the past goes about as a critical aide for whats to come. It is imperative to note that forecasters of Lowe Company must consider various new data, including quickly changing monetary conditions and globalization when making business forecasts in light of past sales. Globalization and financial stillness has made organizations subject to a lot of instability (Caldwell, 2004). In this season of fast change, world economies change quickly, new markets open up and old ones change. Interest for items is regularly questionable due to huge number of people realized in a state. In that capacity, Lowes organizations must be adaptable and versatile in the sorts of strategies that they use to figure future performance deals. In perpetually changing worldwide commercial center, associations are continually heading up against irregular and novel circumstances. It is in these circumstances that current techniques for business forecasting to monitor performance trends can be particularly helpful. Advanced anticipating routines are typically gathered into two primary classifications which are subjective strategies and quantitative techniques. Hypothesis of the Study Null hypothesis (Ho): The test is to investigate whether cost of services such as electricity cost, unemployment rate, sale of new homes directly affect revenue of Lowes (The Home Depot) establishments. Alternative hypothesis (H1): The test is to find out whether the cost of electricity, sale of new homes and unemployment rate does not affect Lowes revenue. Lowes revenue is obtained by summing all the variables obtained in the model including rate of unemployment, averaging the retail price of electricity, revenue of competitors, sum of all new houses sold as well as extraction and construction occupations. In most states, unemployment rate is an important indicator which clearly shows the markets jobs available in the market more so those that Lowe Corporation offers. Retail prices electricity for instance of Lowe company if made average would trigger many people to make use of electricity in bid of improving their living standards. Good living conditions ensure well health status of populations’ thus prolonged life (Scott, 2008). People are willing to spend more where services are readily available. To ensure income development, numerous administrators of diverse establishments promptly concentrate on Sales and Marketing to see what they are not doing and that they ought to be doing. It acts as their performance indicator to reveal on the progress and where to strengthen if underperformed. In real sense, Sales and Marketing are two spots which Lowe organization has put focus on. When Lowe Organization deals with enhancing their Customer Service division, it aims at avoiding loss of clients instead of on the grounds that they trust it will include clients. Endeavors in advancement show up reactive highlights attaining equality with contenders who drive interest for Lowes items and administrations. When we take a forecast at the advertising techniques and crusades of Lowe organizations, we notice little proof of showcasing insight driving the battles. The battles do not recognize clients that have varying items. Clearly, accounting has this exact data on the grounds that accounting sends the right receipt to one side client. Then again, marketing does not have the data that accounting has. Data obtained for the study clearly shows revenue obtained after regressing value of electricity cost, unemployment rate and sale of new homes. FORECAST MODEL AND RESULTS Upon carrying out a regression analysis, results obtained clearly indicate the variations between independent and dependent variables. Results show how variables in the model actually affect revenue either directly or indirectly in Lowe Company. Summary statistics obtained show different means, standard deviations, quartiles and median. They are measures of dispersion. From result table of summary statistics, revenue contains the greatest value when compared to independent variables. If the cost of living in a particular state or economy is high, total revenue shoots as well since people will be willing to spend more. When unemployment rate declines, there will be increased standards of living thus people will be demanded to spend more money thus increased revenue. A situation where the rate of people without work is high, living standards of that particular place reduces rendering the economy stagnant since there will be little money in circulation. Lowe revenue as the dependent variable for the model, it greatly dwells on independent variables whereby it is the sum of all independent variables. Both forms of variables depend on each other thus strongly correlate with each other. Electricity cost, rate of unemployment and quantity of sale of new homes is true reflector which shows the dependency ratio of the variables. Null hypothesis set is determining whether revenue is affected by cost of electricity, sale of new homes and unemployment rate. We therefore accept our null hypothesis since all the three tested independent variables affect total revenue of Lowe establishment in one way or another. To some extent, sale of new homes by Lowe may not directly hinder total revenue but it actually contributes to reduction or increase of revenue. A realization of more sales of homes triggers more revenue and few sales ensure reduced revenue. This has led to job creations since several real estate companies have emerged enabling more people being absorbed to work for the companies. Summary Statistics Variable N N* Mean SE Mean StDev Minimum Q1 Median Q3 Maximum Revenue 77 0 8307.3 483.2 4240.2 1635.0 4172.0 9064.0 11886.5 15711.0 Cost per KWh 77 0 9.7292 0.1758 1.5428 7.5800 8.4200 9.2100 11.4300 12.5400 Rate 77 0 11.2714 0.4907 4.3061 4.8000 7.8000 11.3000 12.9500 24.6000 Quantity (thousands) 77 0 63.727 2.943 25.823 21.000 39.000 66.000 83.000 116.000 Revenue_1 77 0 14445.9 630.9 5535.8 3569.0 10154.0 16277.0 18866.5 22592.0 Plotting a scatter plot of revenue against revenue 1, using SPSS software, a line of best fit is obtained. Data points are seen concentrated near the regressed space an indication of normality. Using the limits of revenue (15711.0) and revenue 1(22592.0), a straight line is obtained. This means that all the variables included in the model under study are highly correlated thus depend much on each other. New homes offer satisfaction to human life since nice residence relating to better living standards makes one to be comfortable prolonging his or her life expectancy with a relaxed mind. The Home Improvement Store gets a support when there is more homeownership and accordingly conceivably more homes require more progress. CEO Robert Nib lock expresses that when taking forecast on the company, financial matters go hand in hand with quality in the home change advertisement. He further realizes that the organization is getting a more positive and reasonable pattern relating existing home deals alongside an ascent in expensive tasks. Lowe Institution should put in place mechanisms to aid the organization in achieving the best in terms of revenue which are maximized. More state revenue ensures a stable economy adding to global economy. Linear CONCLUSION Unusual from the responsibility of the company to make the energy profitable and more transparent, it needs other big companies to publish yearly report that shows their revenue profits and costs also the separated figures should be presented for the purposes of supply. The future consumers of electricity should be given great attention as part of the objective that it is aiming in order to improve the transparency and the profitability of the electricity company. This would instill confidence to the new firms that are willing to venture into the electricity using market business as well as any other business that uses energy in its production. Lowe’s data also assists the business people to asses and monitor their business on how much capital it spends on the electricity bills. The company will always lower the price of the products that it produces if only the price of the electricity is lowered by the company that produces it, this will lead to increased profits on its part as they will lower the prices of their products hence attract many customers hence higher sales that will lead to increased profit. In case the cost of energy hikes so much, the cost of production will rise as well and the cost of the products. The increased prices may discourage the customers from the bulk buying of the products hence the profit of the company will go down. If a situation like this one persists for so long it means that there will be chances of the company running at a loss hence opt to retrench some of its employees in order to minimize the expenditure of the business and this is direct creation of unemployment on the some of the working staff. Power blackout is another issue that may lead to reduced revenue of the companies as noted from the statistics carried out therefore the company should ensure that it supplements electricity with other forms of energy such as generators and the solar energy that will ensure frequent run in the production of the products hence maximizing the profit generated by the company. Unemployment was another issue that was experienced in Lowe’s company due reduced turn over which forced the company to sack some of its workers in order to minimize the money that was spent on the payment of salaries. This happened mostly during the time of winter when it was extremely cold hence there were no enough customers to buy the goods, the services required were few and this forced the company to reduce its casual workers in order to avoid loss. Also unemployment took place the Lowe’s company when the management failed to manage the business leading to its declaration as bankrupt and finally its closure. In case the closure of the company took place it would cause great unemployment than other causes of unemployment combined. Lowe’s business gained much of its revenue from the selling of the homes that they constructed from money gained from other sources of revenue. This is because once they build a home there was ready market due to availability of high demand , the constructed houses were the most items that appreciated most in the company and once they were build it was noted that they tripled the money that was used in the construction. It was noted that the price of the constructed houses was not the same throughout, the houses that were build within the town generated high revenue compared to those constructed in the interior area this was similar to the homes that were constructed in areas with good social amenities such as schools, hospitals and churches. REFERENCES Caldwell, B. J. (2004). Hayeks challenge: An intellectual biography of F.A. Hayek. Chicago: University of Chicago Press. Lowes, B., & Sparkes, J. R. (2009). Modern managerial economics. London: Heinemann. Pass, C. L., Lowes, B., & Robinson, A. (2014). Business and macroeconomics. London: Routledge. Scott, D. F. (2008). Basic financial management. Englewood Cliffs, N.J: Prentice Hall. The Wall Street Journal. (2007). New York: Dow Jones & Co. Read More