Strategic management update 23 may 12

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The Loewen Group case in U.S.

The Loewen Group case in U.S.

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  • 1. Strategic Management Yin ChhengSornThe Loewen Group INCGroup 01:Preap Veasna Kao Ly HourSun Sokunthea Sao Sokha 1
  • 2. The Loewen Group INC 2
  • 3.  Literature Review Introduction Histories The ways to run Business Division Organization Business Process Business Obstacles Solutions Conclusion Suggestions 3
  • 4.  Strategy is a plan of action designed to achieve the vision. Strategic planning is an organizations process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. 4
  • 5.  Management is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. 5
  • 6.  The Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. 6
  • 7.  Funeral industry has been one of tradition, representing a mixture of religion and business. Most people a funeral has a religious dimension. The body is placed into its eternal resting-place and the soul is released into the hereafter as defined by the religious beliefs of the deceased. Traditional religious ceremonies have helped add stability to the industry by faith’s final rite can be administered . 7
  • 8.  1985 Loewen Group was foundin Vancouver, Canada by Raymond Loewen. 1987 Loewen was purchase first funeral home in the United State. Dec 2, 1999 Paul Houston was named president and CEO Currently the Loewen Group own or operate more than 1,100 funeral home and more than 400 cemeteries, employing approximately 13,000 people across the U.S, Canada, and United Kingdom. 90% of total revenue is from U.S operation . While the company’s operations had grown substantially, its profitability and stock price. 8
  • 9.  Organization Divisions President and CEO Funeral Service Cemetery Division Division 9
  • 10.  President and CEO: Control all of the business process and make sure all of the stock price of Loewen Group INC is higher. Funeral Service Division: Direct the operation of the company are many funeral homes across the U.S and Canada. A typical home contains a funeral chapel, reposing room, rest rooms, and a show room for casket and other items. Cemetery Division: Assist the family in making a burial arrangements and offers a complete lines of cemetery products, the opening and closing of graves, and cremation services. 10
  • 11.  Funeral homes in U.S. Cemeteries 11
  • 12. Business Process: “ Gentlemens Agreement” within the industry to not compete on the basis of price or to even shop for lower prices. XROADS, a website critical of the funeral industry, has conducted research into the funeral industry, especially its pricing strategy. XROADS argues that there are five to ten times as many funeral home nationally as are needed. 12
  • 13.  In 1997, there were over 2 million deaths in the United States with 22,000 funeral home are handle the service. This means that the average funeral home handled less than two funerals per week. While some funeral home may do 1,000 or more funerals per year, others will have fewer than 30 funerals annually. XROADS argues that high volume homes could charge half to one-third of the going rate and still make a reasonable profit 13
  • 14. Competition: There are 2 potential Competitors in Funeral Industry with Loewen INC Group. 1. Service Corporation International ( Service Corp Int’l or SCI ) 2. Stewart Enterprises 14
  • 15. 1. Service Corp. Int’l: SCI is the largest funeral service provider in the world. SCI is considered the original consolidator in the funeral industry. It operated 3,442 funeral homes, 433 cemeteries, and 191 cremation in 20 countries and on five continents in 1998. Funeral as counted for 63% of revenues in 1998 with a gross profit margin of 21%. The cemetery division had a 36%gross profit margin for the same year. 15
  • 16.  During the mid-90s, SCI spent $1 billion buying foreign funeral homes. It was able to gain the number one or number two position in France, the U.K and Australia. The company hopes to expand product andservice offerings to increase the operating marginsin many of its foreign markets. 16
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  • 18. 2. Stewart Enterprises (NASDAQ-STEI) Stewart Enterprises is based in New Orleans. It is the third large provider of death care planning and delivery services. It has 575 funeral homes and 143 cemeteries operating in 29 states, Puerto Rico, Mexico, Australia, New Zealand, Canada, Portugal, the Netherlands, France, Belgium, and Argentina. The firm operates largely in the Mid west and West Coast although international activity is expected to increase. 18
  • 19.  The company believes the prearranged funeralsrepresent a backlog of future business for itsproducts and services, building current and futuremarket share. Funeral operations accounted for 58% of 1998revenues with most of the remainder coming fromcemetery operations. 19
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  • 21. The Loewen Group The Loewen Group (NYSE-LWN) is the second largest funeralhome and cemetery operator in North America. The BritishColumbia-based firm receives about 90% of its revenue from its U.Soperations. It is the least active of the Big Three funeral services companies inoperation outside of the U.S and Canada. The company is active in the provision of funeral services,products, and cemetery operations, as are its major competitors. 21
  • 22.  Funeral services and products have accountedfor 56, 54, and 60% of revenues in 1998, 1997, and1996, respectively. Cemetery operations as a percent of revenuehave counted for 36, 38, and 31% of revenues forthe same time period. The balance of revenues isfrom the company’s insurance operations. 22
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  • 24.  Acquisition strategy:  Loewen acquired $1.4 billion of 351 funeral homes and 300 cemeteries of other companies during 1996.  In 1997 had spent $546 million to acquire 138 funeral homes and 171 cemeteries.  and $500 million in 1998. Centralize administrative function: by closing some offices and moving those operations to Burnaby headquarters. 24
  • 25.  In early of 1999, the Loewen’s stock price went from $35.75 to $5.125 per share. On June 1, 1999, the company filed for Chapter 11 bankruptcy protection in the U.S. and creditor protection in Canada. On August 10, 1999, the company was notified by New York Stock Exchange that its stock had failed to attain a minimum share price of $1 over a 30-day trading period. Finally to save the company, Paul Houston was selected by BOD to replace Lungren as President and CEO. 25
  • 26.  Preplanning: Preplanning allows survivors to avoid the stress and uncertainty of fulfilling the wishes of the deceased after their death. It was allows families to discuss their many options and expectations of the potential customer. Clustering the funeral homes and cemeteries service together for increasing demands Acquisition strategy is not suggested. 26
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