SWOT Analysis / TOWS Matrix for Balfour Beatty (United Kingdom)
Based on various researches at Oak Spring University , Balfour Beatty is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, talent flight as more people leaving formal jobs, technology disruption, supply chains are disrupted by pandemic ,
customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Balfour Beatty can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Balfour Beatty, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Balfour Beatty 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 Balfour Beatty can be done for the following purposes –
1. Strategic planning of Balfour Beatty
2. Improving business portfolio management of Balfour Beatty
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 Balfour Beatty
Strengths of Balfour Beatty | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Balfour Beatty are -
Diverse revenue streams
– Balfour Beatty is present in almost all the verticals within the Construction Services industry. This has provided Balfour Beatty 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.
High switching costs
– The high switching costs that Balfour Beatty 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
– Balfour Beatty has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Balfour Beatty to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Construction Services industry
– Balfour Beatty has clearly differentiated products in the market place. This has enabled Balfour Beatty to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Balfour Beatty to invest into research and development (R&D) and innovation.
Learning organization
- Balfour Beatty 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 Balfour Beatty is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Balfour Beatty emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Balfour Beatty has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Balfour Beatty 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.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Balfour Beatty digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Balfour Beatty 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.
Analytics focus
– Balfour Beatty 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.
Highly skilled collaborators
– Balfour Beatty has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Balfour Beatty have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Balfour Beatty 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.
Cross disciplinary teams
– Horizontal connected teams at the Balfour Beatty 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.
Superior customer experience
– The customer experience strategy of Balfour Beatty in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Balfour Beatty | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Balfour Beatty are -
Low market penetration in new markets
– Outside its home market of United Kingdom, Balfour Beatty needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Balfour Beatty 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 Balfour Beatty products
– To increase the profitability and margins on the products, Balfour Beatty 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 Balfour Beatty 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.
Capital Spending Reduction
– Even during the low interest decade, Balfour Beatty 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 Construction Services industry using digital technology.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Balfour Beatty supply chain. Even after few cautionary changes, Balfour Beatty is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Balfour Beatty vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Balfour Beatty 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Balfour Beatty is slow explore the new channels of communication. These new channels of communication can help Balfour Beatty to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– From the outside it seems that Balfour Beatty 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 Balfour Beatty can leverage the sales team experience to cultivate customer relationships as Balfour Beatty is planning to shift buying processes online.
High cash cycle compare to competitors
Balfour Beatty has a high cash cycle compare to other players in the Construction 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.
Workers concerns about automation
– As automation is fast increasing in the Construction Services industry, Balfour Beatty 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.
Balfour Beatty Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Balfour Beatty are -
Loyalty marketing
– Balfour Beatty 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Balfour Beatty 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.
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. Balfour Beatty can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Balfour Beatty can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Balfour Beatty 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
– Balfour Beatty 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Balfour Beatty 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 Balfour Beatty to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Balfour Beatty 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 Balfour Beatty to build a competitive advantage using analytics. The analytics driven competitive advantage can help Balfour Beatty to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Balfour Beatty 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.
Manufacturing automation
– Balfour Beatty can use the latest technology developments to improve its manufacturing and designing process in Construction 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Balfour Beatty can use these opportunities to build new business models that can help the communities that Balfour Beatty operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Balfour Beatty 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 Balfour Beatty 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
– Balfour Beatty 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.
Threats Balfour Beatty External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Balfour Beatty are -
Increasing wage structure of Balfour Beatty
– 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 Balfour Beatty.
High dependence on third party suppliers
– Balfour Beatty 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Balfour Beatty with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Balfour Beatty 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.
Environmental challenges
– Balfour Beatty 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. Balfour Beatty can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
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 Balfour Beatty.
Technology acceleration in Forth Industrial Revolution
– Balfour Beatty has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Balfour Beatty needs to keep up with the evolution of technology in the Construction 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.
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.
Regulatory challenges
– Balfour Beatty 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.
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 Balfour Beatty business can come under increasing regulations regarding data privacy, data security, etc.
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. Balfour Beatty 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.
Stagnating economy with rate increase
– Balfour Beatty 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Balfour Beatty in Construction Services industry. The Construction 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 Balfour Beatty Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty needs to make to build a sustainable competitive advantage.