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 – geopolitical disruptions, cloud computing is disrupting traditional business models, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation,
technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Cross disciplinary teams
– Horizontal connected teams at the Tree House are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
Training and development
– Tree House has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Learning organization
- Tree House 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 Tree House is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Tree House emphasize – knowledge, initiative, and innovation.
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.
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.
Sustainable margins compare to other players in Personal Services industry
– Tree House has clearly differentiated products in the market place. This has enabled Tree House to fetch slight price premium compare to the competitors in the Personal Services industry. The sustainable margins have also helped Tree House to invest into research and development (R&D) and innovation.
Digital Transformation in Personal Services industry
- digital transformation varies from industry to industry. For Tree House digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tree House 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.
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.
Weaknesses of Tree House | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tree House are -
Compensation and incentives
– The revenue per employee of Tree House is just above the Personal Services industry average. It 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.
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 dependence on Tree House ‘s star products
– The top 2 products and services of Tree House still accounts for major business revenue. This dependence on star products in Personal Services industry has resulted into insufficient focus on developing new products, even though Tree House has relatively successful track record of launching new products.
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.
No frontier risks strategy
– From the 10K / annual statement of Tree House, it seems that company is thinking out the frontier risks that can impact Personal Services industry. 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.
Products dominated business model
– Even though Tree House has some of the most successful models in the Personal Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Tree House should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
Aligning sales with marketing
– From the outside it seems that Tree House needs to have more collaboration between its sales team and marketing team. Sales professionals in the Personal Services industry have deep experience in developing customer relationships. Marketing department at Tree House can leverage the sales team experience to cultivate customer relationships as Tree House is planning to shift buying processes online.
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.
Tree House Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tree House are -
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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Personal Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tree House 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. Tree House 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Tree House can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Tree House 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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tree House in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Personal Services industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tree House 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 Tree House to hire the very best people irrespective of their geographical location.
Threats Tree House External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tree House are -
Technology acceleration in Forth Industrial Revolution
– Tree House has witnessed rapid integration of technology during Covid-19 in the Personal Services industry. As one of the leading players in the industry, Tree House needs to keep up with the evolution of technology in the Personal Services 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.
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.
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.
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.
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.
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. Tree House 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Tree House may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Personal Services sector.
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.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tree House in Personal Services industry. The Personal Services 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.
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.