Executive Summary of CaseExternal Environment AnalysisOpportunitiesThreat of new entrants:The barriers to entry are high due to high fixed costs, lack of history in the local community, zoning regulation, and not-in-my-back-yard protests.
Power of suppliers:Funeral consolidators such as Loewen group can put a great deal of pressure on suppliers to reduce prices.
Power of buyers:The funeral home is usually the buyers first point of contact, therefore the funeral home has first chance at selling all related services and supplies.
Product substitutes:The small family owned funeral homes cannot compete with the consolidators because the consolidators offer the consumer every option available while the family owned homes cannot.
Intensity of rivalry:Although there were over 10,000 privately owned funeral homes in Canada in 1996, Loewen group maintained their share of the market because of namesake. Also only 30 percent of family businesses make it to the second generation, and only 10 percent to the third. Competitor general analysis:a. Future Objectives:b. Current Strategy:c. Assumptions:d. Capabilities:Economic: Everybody dies, and because of this there will always be a market for funeral services.
Socio-Cultural:Being a consolidated funeral home they can offer cheaper services for those without a great deal of income, but they can also provide the top-of the-line funeral service for those who want to pay for it.
Global:SCI has paved the way, and Loewen Group can follow their example to move into the global market without any R&D costs, and steal some of SCIs market share.
Technological:There are not many technological advantages for a company that relies on tradition.
Political/Legal:They are legally investing their money from the accrued pre-need revenues. The fact that they are allowed to invest these revenues allows them to create more money.
Demographic:No matter where one lives, how they live, what income level they possess, or their heritage, everybody dies and presents possible revenue for Loewen Group.
ThreatsThreat of new entrants:Not a great threat due to high barriers of entry into the market.
Power of suppliers:Because of the Internet, suppliers can now sell their products online directly to the consumer virtually eliminating the funeral home from the bereavement process.
Power of buyers:Buyers are becoming a lot more educated in the costs of funeral homes and itemized expenses. Because of this funeral homes cannot mark-up their costs the way they used to.
Product substitutes:Today there are companies that offer caskets that one can make by themselves. They can use the casket as a coffee table until it needs to be used for its other purpose.
Intensity of rivalry:The threat of being bought out by SCI is very intense and the price they were offering shows how greatly they wanted to incorporate Loewen Group into SCI.
Competitor general analysis:a. Future Objectives:b. Current Strategy:c. Assumptions:d. Capabilities:Economic:Because of the increasing education of the consumer, many may choose to bypass the funeral home as a way of lowering costs.
Socio-Cultural:Global:The different cultures of the world have different burial and bereavement traditions. They may not be open to outsiders coming in and offering these services or even other options of burial.
Technological:If the option of freezing people became cheap and customary, it would threaten the funeral home business because the accessibility to that form of technology is very limited.
Political/Legal:If laws were passed to prevent burial due to environmental reasons and cremation became the way, then funeral homes would loose a large part of their revenue.
Demographic:Because people are living longer, and the population is becoming larger, there is a need for more land for these people to inhabit. Because of this need land will become scarce for the use of cemeteries, and cremation will become the choice for most people.
Internal Environment AnalysisStrengthsResources:a. Tangible1. Financial:2. Organizational:A strength that Loewen Group had in this area is the fact that they kept the same staff when the acquired another home. They do this because those people are successful in running the company in that area and they already know what works.
3. Physical:A physical strength is that they own lots of funeral homes all over North America. 4. Technological:There are no technological strengths.
b. Intangible1. Human Resources:One thing Mr. Loewen looked at every employee as a strong part of the company. This led to Sharing The Vision stock plan. 2. Innovation Resources:This strength is simiilar to their organizational strength in the fact that they keep the same staff at each house bought. Most companies keep the same staff but not as part of management, more for human relations.
3. Reputational Resources:Loewen believed that their reputation as The preferred acquirer was a significant advantage in attracting high quality acquisitions. 4. Management:One strength is that management is open to everyone that works under them. They are very interested in helping funeral homes reach their goals. Capabilities:1. Distribution:There is no distribution.
2. Marketing:One of the main ways Loewen Group got their name out was through community involvement.
3. IT:There is no IT 4. Manufacturing:Loewen group provides services so therefore does not manufacture anything.
Core Competencies:The companys core operations consist of the funeral and cemetery activities of its operating subsidiaries. The Companys operations also include insurance business in support of the support of the core operations.
Value Chain Analysis:Loewen claimed it has one of the most customer-focused approaches and a genuine concern for sellers needs. It worked on offering excellent service and providing community involvement to increase the brand equity of the Loewen Group name. Another thing that gave value to the customer was that it was a one-stop shop. They offered combination facilities that enabled customers to take care of funeral and cemetery arrangements in one place.
Competitive Advantage:Loewen Group got to where it is today with several competitive advantages. The first of these is an acquisition group that is very skilled and very dedicated to identifying and closing the sell. The second advantage was that the regional partnership program had often accounted for more than 50% of its yearly acquisitions. The next advantage was that it built a reputation for doing its up most to satisfy the needs of sellers. The last competitive advantage is that Loewen was building its in house expertise in cemetery management.
WeaknessesResources:c. Tangible:1. Financial:The main financial weakness is that the company went bankrupt. 2. Organizational:One organizational weakness is the fact that they do not have a homogeneous operating guideline for all homes.
3. Physical:A physical weakness is that they are not located in the global market.
4. Technological:The weakness here is that they have no technology.
d. Intangible1. Human Resources:2. Innovation Resources:A weakness in this area is that their innovative strength is one that is easily imitated.
3. Reputational Resources:One weakness is the fact that they did not use the Loewen Group name on all of their acquired funeral homes. 4. Management:Poor decision making by the management is what caused the company to go bankrupt.
Capabilities:1. Distribution:no distribution2. Marketing:This is similar to Reputational in the fact that they have to market every funeral home different because they have different names.
3. IT:no IT4. Manufacturing:no ManufacturingCore Competencies:We mentioned that the core competency is customer service,This is something that can be easily copied.
Value Chain Analysis:One thing that other companies such as SCI did that helped lower their costs was the idea of clustering. This gave them the opportunity to use personnel, facilities, and automotive equipment for several funeral homes. This cuts prices for the company which in turn cuts costs for the customer, offering greater value.
Competitive Advantages:One competitive weakness that the company has is the fact that they use the original suppliers of the funeral homes they acquire. Financial AnalysisProfitability Ratios:Return on total assets:Return on stockholder equity:Net profit margin:Liquidity Ratios:Current Ratio:Leverage Ratios:Debt-to-assets:Debt-to-equity:Activity Ratios:Total sales turnover:Accounts Receivable turnover:Average collection period:Shareholder Return Ratio:Dividend yield on common stock:Price earnings ratio:Critical Issues To Prevent BankruptcyCritical Issue Immediate:a. Action Step:b. Action Step:Critical Issue 1 to 5 Years:a. Action Step:b. Action Step:Critical Issue Long Term:a. Action Step:b. Action Step:Update Since CaseBibliographyhttp://www.hoovers.comhttp://www.wsj.comhttp://www.loewengroup.com
