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 – increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, 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 -
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.
High brand equity
– CoStar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled CoStar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Digital Transformation in Real Estate Operations industry
- digital transformation varies from industry to industry. For CoStar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. CoStar 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.
Ability to lead change in Real Estate Operations
– CoStar is one of the leading players in the Real Estate Operations industry in United States. Over the years it has not only transformed the business landscape in the Real Estate Operations industry in United States but also across the existing markets. The ability to lead change has enabled CoStar in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
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.
Weaknesses of CoStar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CoStar are -
Ability to respond to the competition
– As the decision making is very deliberative at CoStar, in the dynamic environment of Real Estate Operations industry it has struggled to respond to the nimble upstart competition. CoStar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on CoStar ‘s star products
– The top 2 products and services of CoStar still accounts for major business revenue. This dependence on star products in Real Estate Operations industry has resulted into insufficient focus on developing new products, even though CoStar has relatively successful track record of launching new products.
High cash cycle compare to competitors
CoStar has a high cash cycle compare to other players in the Real Estate Operations industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that CoStar needs to have more collaboration between its sales team and marketing team. Sales professionals in the Real Estate Operations industry have deep experience in developing customer relationships. Marketing department at CoStar can leverage the sales team experience to cultivate customer relationships as CoStar is planning to shift buying processes online.
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.
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.
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.
High bargaining power of channel partners in Real Estate Operations industry
– because of the regulatory requirements in United States, CoStar 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 Real Estate Operations industry.
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.
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.
CoStar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CoStar are -
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.
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.
Buying journey improvements
– CoStar can improve the customer journey of consumers in the Real Estate Operations 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, CoStar 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.
Leveraging digital technologies
– CoStar 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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, CoStar is facing challenges because of the dominance of functional experts in the organization. CoStar can utilize new technology in the field of Real Estate Operations industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
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.
Use of Bitcoin and other crypto currencies for transactions in Real Estate Operations industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for CoStar in the Real Estate Operations industry. Now CoStar can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, CoStar 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 CoStar to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats CoStar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CoStar are -
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.
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.
High dependence on third party suppliers
– CoStar 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.
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.
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. CoStar needs to understand the core reasons impacting the Real Estate Operations industry. This will help it in building a better workplace.
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.
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.
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 CoStar.
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.
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 CoStar in the Real Estate Operations sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that CoStar is facing in Real Estate Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
