Loewen Group Case Study

Executive Summary of Case

External Environment Analysis

Opportunities

Threat 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 SCI's 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.

Threats

Threat 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 Analysis

Strengths

Resources:

a. Tangible

1. 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