Case Study Description of Southwest Lumber Distributors
Concerns a lumber wholesaler who has been asked to give a forward price commitment. The market price has been volatile and the type of wood is different from that traded on the futures market. The question is: What to do about customer's request?
Swot Analysis of "Southwest Lumber Distributors" written by David E. Bell, R.L. Vaughan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lumber Wholesaler facing as an external strategic factors. Some of the topics covered in Southwest Lumber Distributors case study are - Strategic Management Strategies, Customers, Decision making, Financial analysis, Financial markets, Pricing, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Southwest Lumber Distributors casestudy better are - – increasing government debt because of Covid-19 spendings, there is backlash against globalization, increasing transportation and logistics costs, increasing household debt because of falling income levels, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
there is increasing trade war between United States & China, increasing energy prices, etc
Introduction to SWOT Analysis of Southwest Lumber Distributors
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Southwest Lumber Distributors case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lumber Wholesaler, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lumber Wholesaler operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Southwest Lumber Distributors can be done for the following purposes –
1. Strategic planning using facts provided in Southwest Lumber Distributors case study
2. Improving business portfolio management of Lumber Wholesaler
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lumber Wholesaler
Strengths Southwest Lumber Distributors | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lumber Wholesaler in Southwest Lumber Distributors Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Lumber Wholesaler in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Lumber Wholesaler digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lumber Wholesaler has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Organizational Resilience of Lumber Wholesaler
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lumber Wholesaler does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Lumber Wholesaler has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Southwest Lumber Distributors Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Lumber Wholesaler is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David E. Bell, R.L. Vaughan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Lumber Wholesaler is one of the most innovative firm in sector. Manager in Southwest Lumber Distributors Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Lumber Wholesaler has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lumber Wholesaler has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Strategy & Execution field
– Lumber Wholesaler is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lumber Wholesaler in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Lumber Wholesaler is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lumber Wholesaler is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Southwest Lumber Distributors Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Lumber Wholesaler has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Southwest Lumber Distributors HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Lumber Wholesaler has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Southwest Lumber Distributors - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Southwest Lumber Distributors Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Southwest Lumber Distributors | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Southwest Lumber Distributors are -
Increasing silos among functional specialists
– The organizational structure of Lumber Wholesaler is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Lumber Wholesaler needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lumber Wholesaler to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Lumber Wholesaler, firm in the HBR case study Southwest Lumber Distributors needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Southwest Lumber Distributors HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Lumber Wholesaler has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Southwest Lumber Distributors HBR case study mentions - Lumber Wholesaler takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Lumber Wholesaler needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High operating costs
– Compare to the competitors, firm in the HBR case study Southwest Lumber Distributors has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lumber Wholesaler 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Lumber Wholesaler has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Lumber Wholesaler has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Capital Spending Reduction
– Even during the low interest decade, Lumber Wholesaler has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Lumber Wholesaler has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Southwest Lumber Distributors, in the dynamic environment Lumber Wholesaler has struggled to respond to the nimble upstart competition. Lumber Wholesaler has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Southwest Lumber Distributors | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Southwest Lumber Distributors are -
Leveraging digital technologies
– Lumber Wholesaler can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lumber Wholesaler is facing challenges because of the dominance of functional experts in the organization. Southwest Lumber Distributors case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Lumber Wholesaler to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Developing new processes and practices
– Lumber Wholesaler can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Loyalty marketing
– Lumber Wholesaler has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Learning at scale
– Online learning technologies has now opened space for Lumber Wholesaler to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Lumber Wholesaler can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lumber Wholesaler can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Southwest Lumber Distributors, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Lumber Wholesaler can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Southwest Lumber Distributors suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lumber Wholesaler can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lumber Wholesaler can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lumber Wholesaler can use these opportunities to build new business models that can help the communities that Lumber Wholesaler operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lumber Wholesaler in the consumer business. Now Lumber Wholesaler can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Southwest Lumber Distributors External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Southwest Lumber Distributors are -
Technology acceleration in Forth Industrial Revolution
– Lumber Wholesaler has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Lumber Wholesaler needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lumber Wholesaler can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Southwest Lumber Distributors, Lumber Wholesaler may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lumber Wholesaler with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lumber Wholesaler can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Southwest Lumber Distributors .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lumber Wholesaler in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lumber Wholesaler business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lumber Wholesaler in the Strategy & Execution sector and impact the bottomline of the organization.
Environmental challenges
– Lumber Wholesaler needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lumber Wholesaler can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Lumber Wholesaler high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Regulatory challenges
– Lumber Wholesaler needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Weighted SWOT Analysis of Southwest Lumber Distributors Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Southwest Lumber Distributors needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Southwest Lumber Distributors is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Southwest Lumber Distributors is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Southwest Lumber Distributors is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lumber Wholesaler needs to make to build a sustainable competitive advantage.
