CoStar (CSGP) SWOT Analysis / TOWS Matrix / MBA Resources
Real Estate Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for CoStar (United States)
Based on various researches at Oak Spring University , CoStar is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing commodity prices, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies,
increasing energy prices, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that CoStar can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the CoStar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which CoStar 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 CoStar can be done for the following purposes –
1. Strategic planning of CoStar
2. Improving business portfolio management of CoStar
3. Assessing feasibility of the new initiative in United States
4. Making a Real Estate Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of CoStar
Strengths of CoStar | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of CoStar are -
Strong track record of project management in the Real Estate Operations industry
– CoStar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of CoStar
– The covid-19 pandemic has put organizational resilience at the centre of everthing CoStar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the CoStar 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.
Superior customer experience
– The customer experience strategy of CoStar in Real Estate Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– CoStar 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.
Low bargaining power of suppliers
– Suppliers of CoStar in the Services sector have low bargaining power. CoStar has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps CoStar to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– CoStar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. CoStar 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.
Sustainable margins compare to other players in Real Estate Operations industry
– CoStar has clearly differentiated products in the market place. This has enabled CoStar to fetch slight price premium compare to the competitors in the Real Estate Operations industry. The sustainable margins have also helped CoStar to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– CoStar is one of the leading players in the Real Estate Operations 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
– CoStar is present in almost all the verticals within the Real Estate Operations industry. This has provided CoStar 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.
Innovation driven organization
– CoStar is one of the most innovative firm in Real Estate Operations sector.
Operational resilience
– The operational resilience strategy of CoStar comprises – understanding the underlying the factors in the Real Estate Operations 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.
Weaknesses of CoStar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CoStar are -
High operating costs
– Compare to the competitors, CoStar has high operating costs in the Real Estate Operations industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract CoStar lucrative customers.
Lack of clear differentiation of CoStar products
– To increase the profitability and margins on the products, CoStar needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– CoStar 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 strategic competitive environment developments
– As CoStar is one of the leading players in the Real Estate Operations industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Real Estate Operations industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of CoStar, it seems that company is thinking out the frontier risks that can impact Real Estate Operations 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.
Slow decision making process
– As mentioned earlier in the report, CoStar has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Real Estate Operations industry over the last five years. CoStar 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.
Compensation and incentives
– The revenue per employee of CoStar is just above the Real Estate Operations 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, CoStar is slow explore the new channels of communication. These new channels of communication can help CoStar to provide better information regarding Real Estate Operations products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring in Real Estate Operations industry
– The stress on hiring functional specialists at CoStar 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.
Low market penetration in new markets
– Outside its home market of United States, CoStar needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, CoStar 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.
CoStar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CoStar are -
Manufacturing automation
– CoStar can use the latest technology developments to improve its manufacturing and designing process in Real Estate Operations 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects CoStar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for CoStar in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Real Estate Operations industry, and it will provide faster access to the consumers.
Developing new processes and practices
– CoStar can develop new processes and procedures in Real Estate Operations 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.
Better consumer reach
– The expansion of the 5G network will help CoStar to increase its market reach. CoStar 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.
Using analytics as competitive advantage
– CoStar has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Real Estate Operations sector. This continuous investment in analytics has enabled CoStar to build a competitive advantage using analytics. The analytics driven competitive advantage can help CoStar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for CoStar 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 CoStar to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Real Estate Operations industry, but it has also influenced the consumer preferences. CoStar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for CoStar 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.
Creating value in data economy
– The success of analytics program of CoStar has opened avenues for new revenue streams for the organization in Real Estate Operations industry. This can help CoStar to build a more holistic ecosystem for CoStar products in the Real Estate Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at CoStar 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 Real Estate Operations industry.
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 CoStar 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. CoStar can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats CoStar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CoStar are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, CoStar 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 CoStar prominent markets.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for CoStar in Real Estate Operations industry. The Real Estate Operations 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 CoStar
– 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 CoStar.
Regulatory challenges
– CoStar 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 Real Estate Operations industry regulations.
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. CoStar 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Real Estate Operations industry are lowering. It can presents CoStar with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Real Estate Operations sector.
Stagnating economy with rate increase
– CoStar 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 Real Estate Operations industry.
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, CoStar may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Real Estate Operations sector.
Easy access to finance
– Easy access to finance in Real Estate Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. CoStar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– CoStar 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. CoStar can take advantage of this fund but it will also bring new competitors in the Real Estate Operations industry.
Technology acceleration in Forth Industrial Revolution
– CoStar has witnessed rapid integration of technology during Covid-19 in the Real Estate Operations industry. As one of the leading players in the industry, CoStar needs to keep up with the evolution of technology in the Real Estate Operations 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.
Weighted SWOT Analysis of CoStar Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at CoStar 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 CoStar 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 CoStar 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 CoStar 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 CoStar needs to make to build a sustainable competitive advantage.