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, central banks are concerned over increasing inflation, technology disruption, increasing energy prices, geopolitical disruptions, there is increasing trade war between United States & China, there is backlash against globalization,
increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, 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 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.
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.
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.
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 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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Real Estate Operations industry, CoStar 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.
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.
Capital Spending Reduction
– Even during the low interest decade, CoStar 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 Real Estate Operations industry using digital technology.
CoStar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CoStar are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, CoStar can use these opportunities to build new business models that can help the communities that CoStar operates in. Secondly it can use opportunities from government spending in Real Estate Operations sector.
Threats CoStar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CoStar are -
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.
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 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.
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 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.
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.
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.
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.
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.
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.
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.
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.