The Butler Lumber Co. is faced with a need for increased bank financing due to its rapid sales growth and low profitability. Students must determine the reasons for the rising bank borrowing, estimate the amount of borrowing needed, and assess the attractiveness of the loan to the bank. A rewritten version of an earlier case. Allows students to practice ratio analysis, financial forecasting, and evaluating financing alternatives.
Swot Analysis of "Butler Lumber Co." written by Thomas R. Piper includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Butler Lumber facing as an external strategic factors. Some of the topics covered in Butler Lumber Co. case study are - Strategic Management Strategies, Forecasting, Recession and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Butler Lumber Co. casestudy better are - – cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Butler Lumber Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Butler Lumber Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Butler Lumber, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Butler Lumber 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 Butler Lumber Co. can be done for the following purposes –
1. Strategic planning using facts provided in Butler Lumber Co. case study
2. Improving business portfolio management of Butler Lumber
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Butler Lumber
Strengths Butler Lumber Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Butler Lumber in Butler Lumber Co. Harvard Business Review case study are -
Successful track record of launching new products
– Butler Lumber has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Butler Lumber 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.
Superior customer experience
– The customer experience strategy of Butler Lumber in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Butler Lumber is present in almost all the verticals within the industry. This has provided firm in Butler Lumber Co. case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Butler Lumber is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Butler Lumber has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Butler Lumber Co. 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.
Operational resilience
– The operational resilience strategy in the Butler Lumber Co. 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.
Highly skilled collaborators
– Butler Lumber 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 Butler Lumber Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Butler Lumber digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Butler Lumber 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.
Learning organization
- Butler Lumber 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 Butler Lumber is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Butler Lumber Co. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Butler Lumber is one of the leading recruiters in the industry. Managers in the Butler Lumber Co. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Finance & Accounting industry
– Butler Lumber Co. firm has clearly differentiated products in the market place. This has enabled Butler Lumber to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Butler Lumber to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Butler Lumber has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Butler Lumber Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Butler Lumber Co. are -
Interest costs
– Compare to the competition, Butler Lumber 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.
Lack of clear differentiation of Butler Lumber products
– To increase the profitability and margins on the products, Butler Lumber needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Butler Lumber 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 operating costs
– Compare to the competitors, firm in the HBR case study Butler Lumber Co. 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 Butler Lumber 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Butler Lumber Co., is just above the industry average. Butler Lumber needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Butler Lumber is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Butler Lumber needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Butler Lumber to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Butler Lumber has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Butler Lumber even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Butler Lumber 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Butler Lumber Co. 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 Butler Lumber has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Butler Lumber Co., it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Butler Lumber, firm in the HBR case study Butler Lumber Co. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Butler Lumber Co. | 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 Butler Lumber Co. are -
Manufacturing automation
– Butler Lumber can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Butler Lumber 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.
Loyalty marketing
– Butler Lumber 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Butler Lumber can use these opportunities to build new business models that can help the communities that Butler Lumber operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Butler Lumber 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Butler Lumber is facing challenges because of the dominance of functional experts in the organization. Butler Lumber Co. 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.
Better consumer reach
– The expansion of the 5G network will help Butler Lumber to increase its market reach. Butler Lumber will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Building a culture of innovation
– managers at Butler Lumber 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 Finance & Accounting segment.
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 Butler Lumber in the consumer business. Now Butler Lumber can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Butler Lumber can develop new processes and procedures in Finance & Accounting 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.
Learning at scale
– Online learning technologies has now opened space for Butler Lumber 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Butler Lumber can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Butler Lumber can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Butler Lumber to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Butler Lumber to hire the very best people irrespective of their geographical location.
Threats Butler Lumber Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Butler Lumber Co. are -
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 Butler Lumber in the Finance & Accounting sector and impact the bottomline of the organization.
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
– Butler Lumber 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 Finance & Accounting industry regulations.
Environmental challenges
– Butler Lumber 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. Butler Lumber can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Butler Lumber with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Butler Lumber has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Butler Lumber needs to keep up with the evolution of technology in the Finance & Accounting 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Butler Lumber in the Finance & Accounting industry. The Finance & Accounting 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.
Shortening product life cycle
– it is one of the major threat that Butler Lumber is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Butler Lumber Co., Butler Lumber may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Butler Lumber will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Butler Lumber can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Butler Lumber 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 Butler Lumber Co. .
Stagnating economy with rate increase
– Butler Lumber can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Butler Lumber Co. 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 Butler Lumber Co. 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 Butler Lumber Co. 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 Butler Lumber Co. 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 Butler Lumber Co. 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 Butler Lumber needs to make to build a sustainable competitive advantage.
