SWOT Analysis / TOWS Matrix for Compass Diversified (United States)
Based on various researches at Oak Spring University , Compass Diversified is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing commodity prices, geopolitical disruptions, increasing energy prices, cloud computing is disrupting traditional business models, 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 household debt because of falling income levels, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Compass Diversified
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Compass Diversified can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Compass Diversified, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Compass Diversified 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 Compass Diversified can be done for the following purposes –
1. Strategic planning of Compass Diversified
2. Improving business portfolio management of Compass Diversified
3. Assessing feasibility of the new initiative in United States
4. Making a Misc. Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Compass Diversified
Strengths of Compass Diversified | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Compass Diversified are -
Strong track record of project management in the Misc. Financial Services industry
– Compass Diversified is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Misc. Financial Services
– Compass Diversified is one of the leading players in the Misc. Financial Services industry in United States. Over the years it has not only transformed the business landscape in the Misc. Financial Services industry in United States but also across the existing markets. The ability to lead change has enabled Compass Diversified in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Compass Diversified
– The covid-19 pandemic has put organizational resilience at the centre of everthing Compass Diversified does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Compass Diversified 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 Misc. Financial Services 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.
Highly skilled collaborators
– Compass Diversified has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Financial Services industry. Secondly the value chain collaborators of Compass Diversified have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Compass Diversified comprises – understanding the underlying the factors in the Misc. Financial Services 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.
Low bargaining power of suppliers
– Suppliers of Compass Diversified in the Financial sector have low bargaining power. Compass Diversified has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Compass Diversified to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Compass Diversified has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Compass Diversified to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Compass Diversified 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.
Ability to recruit top talent
– Compass Diversified is one of the leading players in the Misc. Financial Services 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.
Learning organization
- Compass Diversified 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 Compass Diversified is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Compass Diversified emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Compass Diversified is one of the most innovative firm in Misc. Financial Services sector.
Weaknesses of Compass Diversified | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Compass Diversified are -
Workers concerns about automation
– As automation is fast increasing in the Misc. Financial Services industry, Compass Diversified 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.
Skills based hiring in Misc. Financial Services industry
– The stress on hiring functional specialists at Compass Diversified 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.
Compensation and incentives
– The revenue per employee of Compass Diversified is just above the Misc. Financial Services 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.
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 Compass Diversified supply chain. Even after few cautionary changes, Compass Diversified is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Compass Diversified vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Compass Diversified needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Financial Services industry have deep experience in developing customer relationships. Marketing department at Compass Diversified can leverage the sales team experience to cultivate customer relationships as Compass Diversified is planning to shift buying processes online.
High bargaining power of channel partners in Misc. Financial Services industry
– because of the regulatory requirements in United States, Compass Diversified 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 Misc. Financial Services industry.
No frontier risks strategy
– From the 10K / annual statement of Compass Diversified, it seems that company is thinking out the frontier risks that can impact Misc. Financial Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Compass Diversified products
– To increase the profitability and margins on the products, Compass Diversified needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Compass Diversified is slow explore the new channels of communication. These new channels of communication can help Compass Diversified to provide better information regarding Misc. Financial Services products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative at Compass Diversified, in the dynamic environment of Misc. Financial Services industry it has struggled to respond to the nimble upstart competition. Compass Diversified has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, Compass Diversified has high operating costs in the Misc. Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Compass Diversified lucrative customers.
Compass Diversified Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Compass Diversified are -
Developing new processes and practices
– Compass Diversified can develop new processes and procedures in Misc. Financial Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Compass Diversified can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Compass Diversified 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.
Building a culture of innovation
– managers at Compass Diversified 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 Misc. Financial Services industry.
Creating value in data economy
– The success of analytics program of Compass Diversified has opened avenues for new revenue streams for the organization in Misc. Financial Services industry. This can help Compass Diversified to build a more holistic ecosystem for Compass Diversified products in the Misc. Financial Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Compass Diversified 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 Compass Diversified to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Compass Diversified is facing challenges because of the dominance of functional experts in the organization. Compass Diversified can utilize new technology in the field of Misc. Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Compass Diversified can improve the customer journey of consumers in the Misc. Financial Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Financial Services industry, but it has also influenced the consumer preferences. Compass Diversified can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Compass Diversified 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, Compass Diversified 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 Compass Diversified to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Misc. Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Compass Diversified in the Misc. Financial Services industry. Now Compass Diversified can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Compass Diversified 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. Compass Diversified 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.
Threats Compass Diversified External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Compass Diversified are -
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 Compass Diversified business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Compass Diversified may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Financial Services sector.
Technology acceleration in Forth Industrial Revolution
– Compass Diversified has witnessed rapid integration of technology during Covid-19 in the Misc. Financial Services industry. As one of the leading players in the industry, Compass Diversified needs to keep up with the evolution of technology in the Misc. Financial Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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. Compass Diversified needs to understand the core reasons impacting the Misc. Financial Services industry. This will help it in building a better workplace.
Environmental challenges
– Compass Diversified 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. Compass Diversified can take advantage of this fund but it will also bring new competitors in the Misc. Financial Services industry.
Shortening product life cycle
– it is one of the major threat that Compass Diversified is facing in Misc. Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Financial Services industry are lowering. It can presents Compass Diversified with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Financial Services sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Compass Diversified in Misc. Financial Services industry. The Misc. Financial Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Compass Diversified
– 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 Compass Diversified.
Stagnating economy with rate increase
– Compass Diversified 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 Misc. Financial Services industry.
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 Compass Diversified.
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. Compass Diversified 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.
Consumer confidence and its impact on Compass Diversified 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 Misc. Financial Services industry and other sectors.
Weighted SWOT Analysis of Compass Diversified Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Compass Diversified 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 Compass Diversified 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 Compass Diversified 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 Compass Diversified 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 Compass Diversified needs to make to build a sustainable competitive advantage.