Tree House (THEA) SWOT Analysis / TOWS Matrix / MBA Resources
Personal Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Tree House (India)
Based on various researches at Oak Spring University , Tree House is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing transportation and logistics costs,
geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Tree House can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tree House, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tree House 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 Tree House can be done for the following purposes –
1. Strategic planning of Tree House
2. Improving business portfolio management of Tree House
3. Assessing feasibility of the new initiative in India
4. Making a Personal Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tree House
Strengths of Tree House | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tree House are -
High switching costs
– The high switching costs that Tree House 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.
High brand equity
– Tree House has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tree House to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Tree House is one of the leading players in the Personal Services industry in India. It is in a position to attract the best talent available in India. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Tree House has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Tree House staying ahead in the Personal Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Tree House 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 Personal Services industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Tree House in Personal Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Tree House comprises – understanding the underlying the factors in the Personal Services 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.
Strong track record of project management in the Personal Services industry
– Tree House is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Tree House
– The covid-19 pandemic has put organizational resilience at the centre of everthing Tree House does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Tree House has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Personal Services industry. Secondly the value chain collaborators of Tree House have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Tree House in the Services sector have low bargaining power. Tree House has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tree House to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Tree House has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tree House 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.
Weaknesses of Tree House | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tree House are -
High bargaining power of channel partners in Personal Services industry
– because of the regulatory requirements in India, Tree House is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Personal Services industry.
Capital Spending Reduction
– Even during the low interest decade, Tree House 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 Personal Services industry using digital technology.
High cash cycle compare to competitors
Tree House has a high cash cycle compare to other players in the Personal Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Tree House 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 Tree House products
– To increase the profitability and margins on the products, Tree House needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Tree House has high operating costs in the Personal Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Tree House lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Tree House has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Personal Services industry over the last five years. Tree House 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.
Slow to strategic competitive environment developments
– As Tree House is one of the leading players in the Personal Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Personal Services industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Tree House is dominated by functional specialists. It is not different from other players in the Personal Services industry, but Tree House needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tree House to focus more on services in the Personal Services industry rather than just following the product oriented approach.
Employees’ less understanding of Tree House strategy
– From the outside it seems that the employees of Tree House don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Tree House has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Tree House Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tree House are -
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 Tree House 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.
Use of Bitcoin and other crypto currencies for transactions in Personal Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Tree House in the Personal Services industry. Now Tree House can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Tree House to increase its market reach. Tree House 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.
Manufacturing automation
– Tree House can use the latest technology developments to improve its manufacturing and designing process in Personal Services sector. 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.
Creating value in data economy
– The success of analytics program of Tree House has opened avenues for new revenue streams for the organization in Personal Services industry. This can help Tree House to build a more holistic ecosystem for Tree House products in the Personal Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Tree House can improve the customer journey of consumers in the Personal Services industry by using analytics and artificial intelligence. It 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Personal Services industry, but it has also influenced the consumer preferences. Tree House can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tree House 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 Tree House to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Tree House has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Personal Services sector. This continuous investment in analytics has enabled Tree House to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tree House to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tree House 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, Tree House can use these opportunities to build new business models that can help the communities that Tree House operates in. Secondly it can use opportunities from government spending in Personal Services sector.
Leveraging digital technologies
– Tree House 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.
Building a culture of innovation
– managers at Tree House 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 Personal Services industry.
Threats Tree House External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tree House are -
Shortening product life cycle
– it is one of the major threat that Tree House is facing in Personal Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Tree House needs to understand the core reasons impacting the Personal Services industry. This will help it in building a better workplace.
Increasing wage structure of Tree House
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Tree House.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tree House 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 Tree House prominent markets.
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 Tree House business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Tree House demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Personal Services industry and other sectors.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Tree House.
Environmental challenges
– Tree House 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. Tree House can take advantage of this fund but it will also bring new competitors in the Personal Services industry.
Regulatory challenges
– Tree House 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 Personal Services industry regulations.
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 Tree House in the Personal Services sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Tree House 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 Personal Services industry.
High dependence on third party suppliers
– Tree House 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.
Easy access to finance
– Easy access to finance in Personal Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tree House can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Tree House Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Tree House 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 Tree House 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 Tree House 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 Tree House 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 Tree House needs to make to build a sustainable competitive advantage.