Costain (COSG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Costain (United Kingdom)

Based on various researches at Oak Spring University , Costain is operating in a macro-environment that has been destablized by – geopolitical disruptions, cloud computing is disrupting traditional business models, wage bills are increasing, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Costain

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Costain can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Costain, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Costain 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Costain can be done for the following purposes –
1. Strategic planning of Costain
2. Improving business portfolio management of Costain
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 Costain

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Strengths of Costain | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Costain are -

Digital Transformation in Construction Services industry

- digital transformation varies from industry to industry. For Costain digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Costain 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

- Costain 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 Costain is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Costain emphasize – knowledge, initiative, and innovation.

High brand equity

– Costain has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Costain to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Highly skilled collaborators

– Costain 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 Costain have helped the firm to develop new products and bring them quickly to the marketplace.

High switching costs

– The high switching costs that Costain 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.

Innovation driven organization

– Costain is one of the most innovative firm in Construction Services sector.

Ability to recruit top talent

– Costain is one of the leading players in the Construction Services industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

Strong track record of project management in the Construction Services industry

– Costain is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Diverse revenue streams

– Costain is present in almost all the verticals within the Construction Services industry. This has provided Costain 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.

Analytics focus

– Costain 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.

Superior customer experience

– The customer experience strategy of Costain in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Training and development

– Costain has one of the best training and development program in Capital Goods 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.

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Weaknesses of Costain | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Costain are -

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 Costain supply chain. Even after few cautionary changes, Costain is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Costain vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of Costain, it seems that company is thinking out the frontier risks that can impact Construction 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.

Increasing silos among functional specialists

– The organizational structure of Costain is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Costain needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Costain to focus more on services in the Construction Services industry rather than just following the product oriented approach.

Need for greater diversity

– Costain 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.

Aligning sales with marketing

– From the outside it seems that Costain 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 Costain can leverage the sales team experience to cultivate customer relationships as Costain is planning to shift buying processes online.

Slow decision making process

– As mentioned earlier in the report, Costain has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. Costain 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.

Ability to respond to the competition

– As the decision making is very deliberative at Costain, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Costain has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High dependence on Costain ‘s star products

– The top 2 products and services of Costain 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 Costain has relatively successful track record of launching new products.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Costain 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.

Lack of clear differentiation of Costain products

– To increase the profitability and margins on the products, Costain needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Costain strategy

– From the outside it seems that the employees of Costain 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.

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Costain Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Costain are -

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. Costain can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Better consumer reach

– The expansion of the 5G network will help Costain to increase its market reach. Costain 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.

Buying journey improvements

– Costain 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 Costain 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.

Loyalty marketing

– Costain 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.

Developing new processes and practices

– Costain 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Costain 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. Costain can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Costain can use these opportunities to build new business models that can help the communities that Costain operates in. Secondly it can use opportunities from government spending in Construction Services sector.

Learning at scale

– Online learning technologies has now opened space for Costain 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 Costain can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Manufacturing automation

– Costain 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.

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. Costain 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. Costain 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.

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Threats Costain External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Costain are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Costain 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.

Regulatory challenges

– Costain 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.

Environmental challenges

– Costain 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. Costain can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

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. Costain 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.

Technology acceleration in Forth Industrial Revolution

– Costain has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Costain 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.

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 Costain.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Costain 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 Costain 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 Costain 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 Costain in the Construction Services sector and impact the bottomline of the organization.

Increasing wage structure of Costain

– 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 Costain.

Easy access to finance

– Easy access to finance in Construction Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Costain can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Costain 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.

Consumer confidence and its impact on Costain 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 Construction Services industry and other sectors.

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Weighted SWOT Analysis of Costain Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Costain 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 Costain 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 Costain 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 Costain 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 Costain needs to make to build a sustainable competitive advantage.

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