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 government debt because of Covid-19 spendings, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies,
cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
High switching costs
– The high switching costs that Compass Diversified 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.
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.
Successful track record of launching new products
– Compass Diversified has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Compass Diversified 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.
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.
Sustainable margins compare to other players in Misc. Financial Services industry
– Compass Diversified has clearly differentiated products in the market place. This has enabled Compass Diversified to fetch slight price premium compare to the competitors in the Misc. Financial Services industry. The sustainable margins have also helped Compass Diversified to invest into research and development (R&D) 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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
Compass Diversified Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Compass Diversified are -
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.
Loyalty marketing
– Compass Diversified 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.
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.
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.
Manufacturing automation
– Compass Diversified can use the latest technology developments to improve its manufacturing and designing process in Misc. Financial Services 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, 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.
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.
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.
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.
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.
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.
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.
Threats Compass Diversified External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Compass Diversified are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
High dependence on third party suppliers
– Compass Diversified high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
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.