SWOT Analysis / TOWS Matrix for Churchill Downs (United States)
Based on various researches at Oak Spring University , Churchill Downs is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, there is increasing trade war between United States & China, technology disruption, increasing commodity prices, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%,
central banks are concerned over increasing inflation, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Churchill Downs can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Churchill Downs, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Churchill Downs 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 Churchill Downs can be done for the following purposes –
1. Strategic planning of Churchill Downs
2. Improving business portfolio management of Churchill Downs
3. Assessing feasibility of the new initiative in United States
4. Making a Recreational Activities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Churchill Downs
Strengths of Churchill Downs | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Churchill Downs are -
Organizational Resilience of Churchill Downs
– The covid-19 pandemic has put organizational resilience at the centre of everthing Churchill Downs does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Churchill Downs comprises – understanding the underlying the factors in the Recreational Activities industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Churchill Downs 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.
High switching costs
– The high switching costs that Churchill Downs 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.
Ability to recruit top talent
– Churchill Downs is one of the leading players in the Recreational Activities 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.
Diverse revenue streams
– Churchill Downs is present in almost all the verticals within the Recreational Activities industry. This has provided Churchill Downs a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Churchill Downs has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Churchill Downs to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Recreational Activities
– Churchill Downs is one of the leading players in the Recreational Activities industry in United States. Over the years it has not only transformed the business landscape in the Recreational Activities industry in United States but also across the existing markets. The ability to lead change has enabled Churchill Downs in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Recreational Activities industry
- digital transformation varies from industry to industry. For Churchill Downs digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Churchill Downs 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.
Sustainable margins compare to other players in Recreational Activities industry
– Churchill Downs has clearly differentiated products in the market place. This has enabled Churchill Downs to fetch slight price premium compare to the competitors in the Recreational Activities industry. The sustainable margins have also helped Churchill Downs to invest into research and development (R&D) and innovation.
Strong track record of project management in the Recreational Activities industry
– Churchill Downs is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Churchill Downs has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Recreational Activities industry. Secondly the value chain collaborators of Churchill Downs have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Churchill Downs | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Churchill Downs are -
Workers concerns about automation
– As automation is fast increasing in the Recreational Activities industry, Churchill Downs 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.
Need for greater diversity
– Churchill Downs 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, Churchill Downs is slow explore the new channels of communication. These new channels of communication can help Churchill Downs to provide better information regarding Recreational Activities products and services. It can also build an online community to further reach out to potential customers.
High dependence on Churchill Downs ‘s star products
– The top 2 products and services of Churchill Downs still accounts for major business revenue. This dependence on star products in Recreational Activities industry has resulted into insufficient focus on developing new products, even though Churchill Downs has relatively successful track record of launching new products.
Skills based hiring in Recreational Activities industry
– The stress on hiring functional specialists at Churchill Downs 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.
High bargaining power of channel partners in Recreational Activities industry
– because of the regulatory requirements in United States, Churchill Downs 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 Recreational Activities industry.
High cash cycle compare to competitors
Churchill Downs has a high cash cycle compare to other players in the Recreational Activities industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Churchill Downs has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Recreational Activities industry over the last five years. Churchill Downs 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.
Interest costs
– Compare to the competition, Churchill Downs 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.
Capital Spending Reduction
– Even during the low interest decade, Churchill Downs 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 Recreational Activities industry using digital technology.
No frontier risks strategy
– From the 10K / annual statement of Churchill Downs, it seems that company is thinking out the frontier risks that can impact Recreational Activities 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.
Churchill Downs Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Churchill Downs are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Recreational Activities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Churchill Downs 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. Churchill Downs 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Churchill Downs can use these opportunities to build new business models that can help the communities that Churchill Downs operates in. Secondly it can use opportunities from government spending in Recreational Activities sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Churchill Downs in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Recreational Activities industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Churchill Downs 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Churchill Downs 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Churchill Downs 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 Churchill Downs to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Churchill Downs has opened avenues for new revenue streams for the organization in Recreational Activities industry. This can help Churchill Downs to build a more holistic ecosystem for Churchill Downs products in the Recreational Activities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Churchill Downs can improve the customer journey of consumers in the Recreational Activities 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.
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. Churchill Downs can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Churchill Downs can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Churchill Downs can develop new processes and procedures in Recreational Activities industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Churchill Downs can use the latest technology developments to improve its manufacturing and designing process in Recreational Activities 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Churchill Downs is facing challenges because of the dominance of functional experts in the organization. Churchill Downs can utilize new technology in the field of Recreational Activities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Churchill Downs External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Churchill Downs are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Churchill Downs 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 Churchill Downs prominent markets.
Consumer confidence and its impact on Churchill Downs 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 Recreational Activities industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Churchill Downs is facing in Recreational Activities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Churchill Downs 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 Recreational Activities industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Churchill Downs in Recreational Activities industry. The Recreational Activities 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.
Environmental challenges
– Churchill Downs 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. Churchill Downs can take advantage of this fund but it will also bring new competitors in the Recreational Activities 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. Churchill Downs 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.
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 Churchill Downs business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Recreational Activities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Churchill Downs 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 Churchill Downs
– 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 Churchill Downs.
Technology acceleration in Forth Industrial Revolution
– Churchill Downs has witnessed rapid integration of technology during Covid-19 in the Recreational Activities industry. As one of the leading players in the industry, Churchill Downs needs to keep up with the evolution of technology in the Recreational Activities 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.
Stagnating economy with rate increase
– Churchill Downs 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 Recreational Activities industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Recreational Activities industry are lowering. It can presents Churchill Downs with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Recreational Activities sector.
Weighted SWOT Analysis of Churchill Downs Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Churchill Downs 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 Churchill Downs 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 Churchill Downs 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 Churchill Downs 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 Churchill Downs needs to make to build a sustainable competitive advantage.