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 transportation and logistics costs, geopolitical disruptions, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, 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 -
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that CoStar 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.
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.
Analytics focus
– CoStar 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 Real Estate Operations 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.
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.
Highly skilled collaborators
– CoStar has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Real Estate Operations industry. Secondly the value chain collaborators of CoStar have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- CoStar 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 CoStar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at CoStar emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– CoStar is one of the most innovative firm in Real Estate Operations sector.
Weaknesses of CoStar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CoStar are -
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 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.
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.
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 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.
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.
Products dominated business model
– Even though CoStar has some of the most successful models in the Real Estate Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. CoStar should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of CoStar is dominated by functional specialists. It is not different from other players in the Real Estate Operations industry, but CoStar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help CoStar to focus more on services in the Real Estate Operations industry rather than just following the product 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.
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.
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.
CoStar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CoStar are -
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.
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.
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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Real Estate Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. CoStar 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. CoStar 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.
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.
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.
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.
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.
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.
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.
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.
Threats CoStar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CoStar are -
Consumer confidence and its impact on CoStar 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 Real Estate Operations industry and other sectors.
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.
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.
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 CoStar business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.