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 – increasing energy prices, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, 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 -
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.
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.
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.
Diverse revenue streams
– Compass Diversified is present in almost all the verticals within the Misc. Financial Services industry. This has provided Compass Diversified 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.
Training and development
– Compass Diversified has one of the best training and development program in Financial 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.
Innovation driven organization
– Compass Diversified is one of the most innovative firm in Misc. Financial Services sector.
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.
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.
Superior customer experience
– The customer experience strategy of Compass Diversified in Misc. Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Effective Research and Development (R&D)
– Compass Diversified has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Compass Diversified staying ahead in the Misc. Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Weaknesses of Compass Diversified | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Compass Diversified are -
High dependence on Compass Diversified ‘s star products
– The top 2 products and services of Compass Diversified still accounts for major business revenue. This dependence on star products in Misc. Financial Services industry has resulted into insufficient focus on developing new products, even though Compass Diversified has relatively successful track record of launching new products.
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.
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.
Products dominated business model
– Even though Compass Diversified has some of the most successful models in the Misc. Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Compass Diversified should strive to include more intangible value offerings along with its core products and services.
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.
Need for greater diversity
– Compass Diversified 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.
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.
Capital Spending Reduction
– Even during the low interest decade, Compass Diversified 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 Misc. Financial Services industry using digital technology.
Slow to strategic competitive environment developments
– As Compass Diversified is one of the leading players in the Misc. Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Financial Services industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Compass Diversified has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Financial Services industry over the last five years. Compass Diversified 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.
High cash cycle compare to competitors
Compass Diversified has a high cash cycle compare to other players in the Misc. Financial Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compass Diversified Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Compass Diversified are -
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.
Leveraging digital technologies
– Compass Diversified 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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Compass Diversified 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.
Better consumer reach
– The expansion of the 5G network will help Compass Diversified to increase its market reach. Compass Diversified 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.
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. Compass Diversified can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Compass Diversified can use these opportunities to build new business models that can help the communities that Compass Diversified operates in. Secondly it can use opportunities from government spending in Misc. Financial Services sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Compass Diversified in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Financial Services industry, and it will provide faster access to the consumers.
Threats Compass Diversified External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Compass Diversified are -
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.
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.
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 Compass Diversified in the Misc. Financial Services sector and impact the bottomline of the organization.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Compass Diversified 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 Compass Diversified prominent markets.
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.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Regulatory challenges
– Compass Diversified 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 Misc. Financial Services industry regulations.
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.
