SWOT Analysis / TOWS Matrix for Builders FirstSource (United States)
Based on various researches at Oak Spring University , Builders FirstSource is operating in a macro-environment that has been destablized by – 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%, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, there is backlash against globalization, etc
Introduction to SWOT Analysis of Builders FirstSource
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Builders FirstSource can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Builders FirstSource, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Builders FirstSource 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 Builders FirstSource can be done for the following purposes –
1. Strategic planning of Builders FirstSource
2. Improving business portfolio management of Builders FirstSource
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Home Improvement) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Builders FirstSource
Strengths of Builders FirstSource | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Builders FirstSource are -
Training and development
– Builders FirstSource 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.
Ability to recruit top talent
– Builders FirstSource is one of the leading players in the Retail (Home Improvement) 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 Retail (Home Improvement) industry
– Builders FirstSource is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Retail (Home Improvement) industry
- digital transformation varies from industry to industry. For Builders FirstSource digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Builders FirstSource 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.
Successful track record of launching new products
– Builders FirstSource has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Builders FirstSource has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Builders FirstSource 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
– Builders FirstSource has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Builders FirstSource to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Builders FirstSource 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 Retail (Home Improvement) industry. The technology infrastructure of United States 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.
Ability to lead change in Retail (Home Improvement)
– Builders FirstSource is one of the leading players in the Retail (Home Improvement) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Home Improvement) industry in United States but also across the existing markets. The ability to lead change has enabled Builders FirstSource in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Builders FirstSource 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.
Diverse revenue streams
– Builders FirstSource is present in almost all the verticals within the Retail (Home Improvement) industry. This has provided Builders FirstSource 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.
Learning organization
- Builders FirstSource 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 Builders FirstSource is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Builders FirstSource emphasize – knowledge, initiative, and innovation.
Weaknesses of Builders FirstSource | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Builders FirstSource are -
Lack of clear differentiation of Builders FirstSource products
– To increase the profitability and margins on the products, Builders FirstSource needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at Builders FirstSource, in the dynamic environment of Retail (Home Improvement) industry it has struggled to respond to the nimble upstart competition. Builders FirstSource has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Builders FirstSource has a high cash cycle compare to other players in the Retail (Home Improvement) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Builders FirstSource, it seems that company is thinking out the frontier risks that can impact Retail (Home Improvement) 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.
Skills based hiring in Retail (Home Improvement) industry
– The stress on hiring functional specialists at Builders FirstSource 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 Builders FirstSource strategy
– From the outside it seems that the employees of Builders FirstSource 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.
High dependence on Builders FirstSource ‘s star products
– The top 2 products and services of Builders FirstSource still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Builders FirstSource has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Builders FirstSource 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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Home Improvement) industry, Builders FirstSource 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.
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 Builders FirstSource supply chain. Even after few cautionary changes, Builders FirstSource is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Builders FirstSource vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Builders FirstSource is just above the Retail (Home Improvement) 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.
Builders FirstSource Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Builders FirstSource are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Builders FirstSource is facing challenges because of the dominance of functional experts in the organization. Builders FirstSource can utilize new technology in the field of Retail (Home Improvement) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Builders FirstSource 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.
Better consumer reach
– The expansion of the 5G network will help Builders FirstSource to increase its market reach. Builders FirstSource 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
– Builders FirstSource can improve the customer journey of consumers in the Retail (Home Improvement) 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.
Loyalty marketing
– Builders FirstSource 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.
Learning at scale
– Online learning technologies has now opened space for Builders FirstSource 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 Builders FirstSource can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Builders FirstSource 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. Builders FirstSource can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Builders FirstSource 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 Builders FirstSource to hire the very best people irrespective of their geographical location.
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 Builders FirstSource 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Builders FirstSource in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Home Improvement) industry, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Builders FirstSource 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 Builders FirstSource to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Builders FirstSource External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Builders FirstSource are -
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.
High dependence on third party suppliers
– Builders FirstSource 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Builders FirstSource in Retail (Home Improvement) industry. The Retail (Home Improvement) 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.
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. Builders FirstSource 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.
Shortening product life cycle
– it is one of the major threat that Builders FirstSource is facing in Retail (Home Improvement) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Builders FirstSource 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 Retail (Home Improvement) industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Home Improvement) industry are lowering. It can presents Builders FirstSource with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Home Improvement) sector.
Increasing wage structure of Builders FirstSource
– 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 Builders FirstSource.
Technology acceleration in Forth Industrial Revolution
– Builders FirstSource has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Builders FirstSource needs to keep up with the evolution of technology in the Retail (Home Improvement) 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.
Environmental challenges
– Builders FirstSource 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. Builders FirstSource can take advantage of this fund but it will also bring new competitors in the Retail (Home Improvement) industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Builders FirstSource 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 Builders FirstSource prominent markets.
Easy access to finance
– Easy access to finance in Retail (Home Improvement) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Builders FirstSource can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Builders FirstSource 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 Retail (Home Improvement) industry.
Weighted SWOT Analysis of Builders FirstSource Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Builders FirstSource 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 Builders FirstSource 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 Builders FirstSource 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 Builders FirstSource 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 Builders FirstSource needs to make to build a sustainable competitive advantage.