Ducommun (DCO) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Ducommun (United States)

Based on various researches at Oak Spring University , Ducommun is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Ducommun

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ducommun can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ducommun, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ducommun 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Ducommun can be done for the following purposes –
1. Strategic planning of Ducommun
2. Improving business portfolio management of Ducommun
3. Assessing feasibility of the new initiative in United States
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ducommun

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Strengths of Ducommun | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Ducommun are -

Training and development

– Ducommun has one of the best training and development program in Capital Goods 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.

Innovation driven organization

– Ducommun is one of the most innovative firm in Aerospace & Defense sector.

Operational resilience

– The operational resilience strategy of Ducommun comprises – understanding the underlying the factors in the Aerospace & Defense 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.

Organizational Resilience of Ducommun

– The covid-19 pandemic has put organizational resilience at the centre of everthing Ducommun does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High switching costs

– The high switching costs that Ducommun 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

– Ducommun has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ducommun 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.

High brand equity

– Ducommun has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ducommun to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to recruit top talent

– Ducommun is one of the leading players in the Aerospace & Defense 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.

Superior customer experience

– The customer experience strategy of Ducommun in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Low bargaining power of suppliers

– Suppliers of Ducommun in the Capital Goods sector have low bargaining power. Ducommun has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ducommun to manage not only supply disruptions but also source products at highly competitive prices.

Ability to lead change in Aerospace & Defense

– Ducommun is one of the leading players in the Aerospace & Defense industry in United States. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in United States but also across the existing markets. The ability to lead change has enabled Ducommun in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Cross disciplinary teams

– Horizontal connected teams at the Ducommun 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.

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Weaknesses of Ducommun | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Ducommun are -

Ability to respond to the competition

– As the decision making is very deliberative at Ducommun, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. Ducommun 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 Aerospace & Defense industry

– because of the regulatory requirements in United States, Ducommun 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 Aerospace & Defense industry.

High operating costs

– Compare to the competitors, Ducommun has high operating costs in the Aerospace & Defense industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ducommun lucrative customers.

Interest costs

– Compare to the competition, Ducommun 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 dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Ducommun supply chain. Even after few cautionary changes, Ducommun is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ducommun vulnerable to further global disruptions in South East Asia.

Capital Spending Reduction

– Even during the low interest decade, Ducommun 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 Aerospace & Defense industry using digital technology.

Slow to strategic competitive environment developments

– As Ducommun is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.

Products dominated business model

– Even though Ducommun has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Ducommun should strive to include more intangible value offerings along with its core products and services.

High dependence on Ducommun ‘s star products

– The top 2 products and services of Ducommun still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though Ducommun has relatively successful track record of launching new products.

High cash cycle compare to competitors

Ducommun has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Skills based hiring in Aerospace & Defense industry

– The stress on hiring functional specialists at Ducommun 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.

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Ducommun Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Ducommun are -

Using analytics as competitive advantage

– Ducommun has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled Ducommun to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ducommun to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Buying journey improvements

– Ducommun can improve the customer journey of consumers in the Aerospace & Defense 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ducommun 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. Ducommun 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.

Leveraging digital technologies

– Ducommun 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.

Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ducommun in the Aerospace & Defense industry. Now Ducommun can target international markets with far fewer capital restrictions requirements than the existing system.

Developing new processes and practices

– Ducommun can develop new processes and procedures in Aerospace & Defense 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Ducommun can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Learning at scale

– Online learning technologies has now opened space for Ducommun 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.

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 Ducommun 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Ducommun in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Better consumer reach

– The expansion of the 5G network will help Ducommun to increase its market reach. Ducommun 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.

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. Ducommun 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 Ducommun has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Ducommun to build a more holistic ecosystem for Ducommun products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats Ducommun External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Ducommun are -

Increasing wage structure of Ducommun

– 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 Ducommun.

Consumer confidence and its impact on Ducommun 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 Aerospace & Defense industry and other sectors.

High dependence on third party suppliers

– Ducommun 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.

Regulatory challenges

– Ducommun 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 Aerospace & Defense industry regulations.

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 Ducommun business can come under increasing regulations regarding data privacy, data security, etc.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Ducommun with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Ducommun may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.

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 Ducommun.

Easy access to finance

– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ducommun can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Stagnating economy with rate increase

– Ducommun 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 Aerospace & Defense industry.

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 Ducommun in the Aerospace & Defense sector and impact the bottomline 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 Ducommun in Aerospace & Defense industry. The Aerospace & Defense 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.

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.

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Weighted SWOT Analysis of Ducommun Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Ducommun 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 Ducommun 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 Ducommun 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 Ducommun 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 Ducommun needs to make to build a sustainable competitive advantage.

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