American Woodmark (AMWD) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. - Supplies & Fixtures
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for American Woodmark (United States)
Based on various researches at Oak Spring University , American Woodmark is operating in a macro-environment that has been destablized by – increasing commodity prices, talent flight as more people leaving formal jobs, wage bills are increasing, geopolitical disruptions, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of American Woodmark
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that American Woodmark can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the American Woodmark, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which American Woodmark 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 American Woodmark can be done for the following purposes –
1. Strategic planning of American Woodmark
2. Improving business portfolio management of American Woodmark
3. Assessing feasibility of the new initiative in United States
4. Making a Constr. - Supplies & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of American Woodmark
Strengths of American Woodmark | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of American Woodmark are -
Innovation driven organization
– American Woodmark is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
Sustainable margins compare to other players in Constr. - Supplies & Fixtures industry
– American Woodmark has clearly differentiated products in the market place. This has enabled American Woodmark to fetch slight price premium compare to the competitors in the Constr. - Supplies & Fixtures industry. The sustainable margins have also helped American Woodmark to invest into research and development (R&D) and innovation.
Digital Transformation in Constr. - Supplies & Fixtures industry
- digital transformation varies from industry to industry. For American Woodmark digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. American Woodmark 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.
Superior customer experience
– The customer experience strategy of American Woodmark in Constr. - Supplies & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– American Woodmark 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.
Highly skilled collaborators
– American Woodmark has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. - Supplies & Fixtures industry. Secondly the value chain collaborators of American Woodmark have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– American Woodmark has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – American Woodmark staying ahead in the Constr. - Supplies & Fixtures industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of American Woodmark in the Capital Goods sector have low bargaining power. American Woodmark has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps American Woodmark to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of American Woodmark
– The covid-19 pandemic has put organizational resilience at the centre of everthing American Woodmark does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– American Woodmark is one of the leading players in the Constr. - Supplies & Fixtures industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Constr. - Supplies & Fixtures industry
– American Woodmark is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- American Woodmark 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 American Woodmark is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at American Woodmark emphasize – knowledge, initiative, and innovation.
Weaknesses of American Woodmark | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Woodmark 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 American Woodmark supply chain. Even after few cautionary changes, American Woodmark is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left American Woodmark vulnerable to further global disruptions in South East Asia.
Skills based hiring in Constr. - Supplies & Fixtures industry
– The stress on hiring functional specialists at American Woodmark 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.
Low market penetration in new markets
– Outside its home market of United States, American Woodmark needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on American Woodmark ‘s star products
– The top 2 products and services of American Woodmark still accounts for major business revenue. This dependence on star products in Constr. - Supplies & Fixtures industry has resulted into insufficient focus on developing new products, even though American Woodmark has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at American Woodmark, in the dynamic environment of Constr. - Supplies & Fixtures industry it has struggled to respond to the nimble upstart competition. American Woodmark has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, American Woodmark has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. - Supplies & Fixtures industry over the last five years. American Woodmark 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.
Capital Spending Reduction
– Even during the low interest decade, American Woodmark 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 Constr. - Supplies & Fixtures industry using digital technology.
High cash cycle compare to competitors
American Woodmark has a high cash cycle compare to other players in the Constr. - Supplies & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee of American Woodmark is just above the Constr. - Supplies & Fixtures 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.
Need for greater diversity
– American Woodmark 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 bargaining power of channel partners in Constr. - Supplies & Fixtures industry
– because of the regulatory requirements in United States, American Woodmark 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 Constr. - Supplies & Fixtures industry.
American Woodmark Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of American Woodmark 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 American Woodmark 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.
Loyalty marketing
– American Woodmark 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects American Woodmark can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. American Woodmark can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for American Woodmark in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. - Supplies & Fixtures industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. - Supplies & Fixtures industry, but it has also influenced the consumer preferences. American Woodmark can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– American Woodmark can improve the customer journey of consumers in the Constr. - Supplies & Fixtures 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for American Woodmark 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 American Woodmark to hire the very best people irrespective of their geographical location.
Manufacturing automation
– American Woodmark can use the latest technology developments to improve its manufacturing and designing process in Constr. - Supplies & Fixtures 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.
Learning at scale
– Online learning technologies has now opened space for American Woodmark 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, American Woodmark is facing challenges because of the dominance of functional experts in the organization. American Woodmark can utilize new technology in the field of Constr. - Supplies & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help American Woodmark to increase its market reach. American Woodmark 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, American Woodmark 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.
Threats American Woodmark External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of American Woodmark are -
Technology acceleration in Forth Industrial Revolution
– American Woodmark has witnessed rapid integration of technology during Covid-19 in the Constr. - Supplies & Fixtures industry. As one of the leading players in the industry, American Woodmark needs to keep up with the evolution of technology in the Constr. - Supplies & Fixtures 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, American Woodmark may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Constr. - Supplies & Fixtures sector.
Easy access to finance
– Easy access to finance in Constr. - Supplies & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. American Woodmark can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that American Woodmark is facing in Constr. - Supplies & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 American Woodmark in the Constr. - Supplies & Fixtures sector and impact the bottomline of the organization.
Environmental challenges
– American Woodmark 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. American Woodmark can take advantage of this fund but it will also bring new competitors in the Constr. - Supplies & Fixtures industry.
Consumer confidence and its impact on American Woodmark 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 Constr. - Supplies & Fixtures industry and other sectors.
Regulatory challenges
– American Woodmark 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 Constr. - Supplies & Fixtures industry regulations.
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 American Woodmark.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Constr. - Supplies & Fixtures industry are lowering. It can presents American Woodmark with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. - Supplies & Fixtures sector.
Stagnating economy with rate increase
– American Woodmark 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 Constr. - Supplies & Fixtures industry.
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. American Woodmark needs to understand the core reasons impacting the Constr. - Supplies & Fixtures industry. This will help it in building a better workplace.
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 American Woodmark business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of American Woodmark Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at American Woodmark 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 American Woodmark 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 American Woodmark 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 American Woodmark 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 American Woodmark needs to make to build a sustainable competitive advantage.
