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 – geopolitical disruptions, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing commodity prices, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, 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 -
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.
Sustainable margins compare to other players in Retail (Home Improvement) industry
– Builders FirstSource has clearly differentiated products in the market place. This has enabled Builders FirstSource to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Builders FirstSource to invest into research and development (R&D) and innovation.
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.
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.
Low bargaining power of suppliers
– Suppliers of Builders FirstSource in the Services sector have low bargaining power. Builders FirstSource has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Builders FirstSource to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Builders FirstSource
– The covid-19 pandemic has put organizational resilience at the centre of everthing Builders FirstSource does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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 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.
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.
Highly skilled collaborators
– Builders FirstSource has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Home Improvement) industry. Secondly the value chain collaborators of Builders FirstSource have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Builders FirstSource | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Builders FirstSource are -
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.
Aligning sales with marketing
– From the outside it seems that Builders FirstSource needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Home Improvement) industry have deep experience in developing customer relationships. Marketing department at Builders FirstSource can leverage the sales team experience to cultivate customer relationships as Builders FirstSource is planning to shift buying processes online.
Need for greater diversity
– Builders FirstSource 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Builders FirstSource is slow explore the new channels of communication. These new channels of communication can help Builders FirstSource to provide better information regarding Retail (Home Improvement) products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Builders FirstSource is one of the leading players in the Retail (Home Improvement) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Home Improvement) industry in last five years.
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.
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.
Products dominated business model
– Even though Builders FirstSource has some of the most successful models in the Retail (Home Improvement) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Builders FirstSource should strive to include more intangible value offerings along with its core products and services.
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.
Builders FirstSource Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Builders FirstSource are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Home Improvement) industry, but it has also influenced the consumer preferences. Builders FirstSource can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Home Improvement) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Builders FirstSource 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. Builders FirstSource 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.
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.
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.
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.
Building a culture of innovation
– managers at Builders FirstSource can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Home Improvement) industry.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Builders FirstSource can use these opportunities to build new business models that can help the communities that Builders FirstSource operates in. Secondly it can use opportunities from government spending in Retail (Home Improvement) sector.
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.
Using analytics as competitive advantage
– Builders FirstSource has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Home Improvement) sector. This continuous investment in analytics has enabled Builders FirstSource to build a competitive advantage using analytics. The analytics driven competitive advantage can help Builders FirstSource to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Builders FirstSource has opened avenues for new revenue streams for the organization in Retail (Home Improvement) industry. This can help Builders FirstSource to build a more holistic ecosystem for Builders FirstSource products in the Retail (Home Improvement) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Builders FirstSource can use the latest technology developments to improve its manufacturing and designing process in Retail (Home Improvement) 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.
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.
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.
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 Builders FirstSource business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Builders FirstSource may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Home Improvement) sector.
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.
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. Builders FirstSource needs to understand the core reasons impacting the Retail (Home Improvement) industry. This will help it in building a better workplace.
Consumer confidence and its impact on Builders FirstSource 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 Retail (Home Improvement) industry and other sectors.
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.
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 Builders FirstSource in the Retail (Home Improvement) sector and impact the bottomline of the organization.
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.