Persimmon (PSN) SWOT Analysis / TOWS Matrix / MBA Resources
Construction Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Persimmon (United Kingdom)
Based on various researches at Oak Spring University , Persimmon is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, there is backlash against globalization, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing commodity prices, talent flight as more people leaving formal jobs, geopolitical disruptions,
increasing energy prices, 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 Persimmon can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Persimmon, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Persimmon 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 Persimmon can be done for the following purposes –
1. Strategic planning of Persimmon
2. Improving business portfolio management of Persimmon
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Persimmon
Strengths of Persimmon | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Persimmon are -
High switching costs
– The high switching costs that Persimmon 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.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Persimmon digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Persimmon 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.
Effective Research and Development (R&D)
– Persimmon has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Persimmon staying ahead in the Construction Services 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 of Persimmon comprises – understanding the underlying the factors in the Construction 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.
Learning organization
- Persimmon 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 Persimmon is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Persimmon emphasize – knowledge, initiative, and innovation.
Ability to lead change in Construction Services
– Persimmon is one of the leading players in the Construction Services industry in United Kingdom. Over the years it has not only transformed the business landscape in the Construction Services industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Persimmon in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Persimmon in the Capital Goods sector have low bargaining power. Persimmon has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Persimmon to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Construction Services industry
– Persimmon is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Construction Services industry
– Persimmon has clearly differentiated products in the market place. This has enabled Persimmon to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Persimmon to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Persimmon in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Persimmon has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Persimmon to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Persimmon 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 Construction Services industry. The technology infrastructure of United Kingdom 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.
Weaknesses of Persimmon | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Persimmon are -
Lack of clear differentiation of Persimmon products
– To increase the profitability and margins on the products, Persimmon needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Persimmon 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.
Employees’ less understanding of Persimmon strategy
– From the outside it seems that the employees of Persimmon 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.
Compensation and incentives
– The revenue per employee of Persimmon is just above the Construction 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.
High dependence on Persimmon ‘s star products
– The top 2 products and services of Persimmon still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Persimmon has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Persimmon is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Persimmon needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Persimmon to focus more on services in the Construction Services industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that Persimmon needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction Services industry have deep experience in developing customer relationships. Marketing department at Persimmon can leverage the sales team experience to cultivate customer relationships as Persimmon is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Persimmon is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Persimmon is slow explore the new channels of communication. These new channels of communication can help Persimmon to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Persimmon has high operating costs in the Construction Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Persimmon lucrative customers.
Low market penetration in new markets
– Outside its home market of United Kingdom, Persimmon needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Persimmon Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Persimmon are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Persimmon can use these opportunities to build new business models that can help the communities that Persimmon operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Persimmon 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. Persimmon 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Persimmon 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 Persimmon to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Persimmon 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.
Leveraging digital technologies
– Persimmon 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.
Buying journey improvements
– Persimmon can improve the customer journey of consumers in the Construction 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Persimmon in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Persimmon in the Construction Services industry. Now Persimmon can target international markets with far fewer capital restrictions requirements than the existing system.
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. Persimmon can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Persimmon 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 Construction Services industry.
Developing new processes and practices
– Persimmon can develop new processes and procedures in Construction Services 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.
Using analytics as competitive advantage
– Persimmon has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Persimmon to build a competitive advantage using analytics. The analytics driven competitive advantage can help Persimmon to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Persimmon can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Persimmon External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Persimmon are -
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. Persimmon 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.
Increasing wage structure of Persimmon
– 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 Persimmon.
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 Persimmon.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Persimmon may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Persimmon 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 Persimmon prominent markets.
High dependence on third party suppliers
– Persimmon 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.
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.
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 Persimmon business can come under increasing regulations regarding data privacy, data security, etc.
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 Persimmon in the Construction Services sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Persimmon is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Persimmon 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. Persimmon can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Regulatory challenges
– Persimmon 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 Construction Services industry regulations.
Stagnating economy with rate increase
– Persimmon 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 Construction Services industry.
Weighted SWOT Analysis of Persimmon Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Persimmon 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 Persimmon 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 Persimmon 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 Persimmon 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 Persimmon needs to make to build a sustainable competitive advantage.