Based on various researches at Oak Spring University , Floor & Decor is operating in a macro-environment that has been destablized by – technology disruption, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%,
supply chains are disrupted by pandemic , geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Floor & Decor can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Floor & Decor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Floor & Decor 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 Floor & Decor can be done for the following purposes –
1. Strategic planning of Floor & Decor
2. Improving business portfolio management of Floor & Decor
3. Assessing feasibility of the new initiative in United States
4. Making a Constr. - Supplies & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Floor & Decor
Strengths of Floor & Decor | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Floor & Decor are -
Innovation driven organization
– Floor & Decor is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
Digital Transformation in Constr. - Supplies & Fixtures industry
- digital transformation varies from industry to industry. For Floor & Decor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Floor & Decor 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.
Superior customer experience
– The customer experience strategy of Floor & Decor in Constr. - Supplies & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Floor & Decor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Floor & Decor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Floor & Decor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Floor & Decor staying ahead in the Constr. - Supplies & Fixtures industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Constr. - Supplies & Fixtures industry
– Floor & Decor has clearly differentiated products in the market place. This has enabled Floor & Decor to fetch slight price premium compare to the competitors in the Constr. - Supplies & Fixtures industry. The sustainable margins have also helped Floor & Decor to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Floor & Decor is one of the leading players in the Constr. - Supplies & Fixtures 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.
Low bargaining power of suppliers
– Suppliers of Floor & Decor in the Capital Goods sector have low bargaining power. Floor & Decor has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Floor & Decor to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Constr. - Supplies & Fixtures
– Floor & Decor is one of the leading players in the Constr. - Supplies & Fixtures industry in United States. Over the years it has not only transformed the business landscape in the Constr. - Supplies & Fixtures industry in United States but also across the existing markets. The ability to lead change has enabled Floor & Decor in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Floor & Decor 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 Constr. - Supplies & Fixtures 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.
Training and development
– Floor & Decor 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.
High switching costs
– The high switching costs that Floor & Decor 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.
Weaknesses of Floor & Decor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Floor & Decor are -
Employees’ less understanding of Floor & Decor strategy
– From the outside it seems that the employees of Floor & Decor don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Workers concerns about automation
– As automation is fast increasing in the Constr. - Supplies & Fixtures industry, Floor & Decor 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.
Skills based hiring in Constr. - Supplies & Fixtures industry
– The stress on hiring functional specialists at Floor & Decor 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.
High dependence on Floor & Decor ‘s star products
– The top 2 products and services of Floor & Decor still accounts for major business revenue. This dependence on star products in Constr. - Supplies & Fixtures industry has resulted into insufficient focus on developing new products, even though Floor & Decor has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Floor & Decor needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Floor & Decor 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 Constr. - Supplies & Fixtures industry
– because of the regulatory requirements in United States, Floor & Decor 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 Constr. - Supplies & Fixtures industry.
Need for greater diversity
– Floor & Decor 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.
Products dominated business model
– Even though Floor & Decor has some of the most successful models in the Constr. - Supplies & Fixtures industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Floor & Decor should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Floor & Decor has a high cash cycle compare to other players in the Constr. - Supplies & Fixtures industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Floor & Decor, it seems that company is thinking out the frontier risks that can impact Constr. - Supplies & Fixtures 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.
Floor & Decor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Floor & Decor are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. - Supplies & Fixtures industry, but it has also influenced the consumer preferences. Floor & Decor can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Floor & Decor can improve the customer journey of consumers in the Constr. - Supplies & Fixtures 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Floor & Decor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. - Supplies & Fixtures industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Floor & Decor can use these opportunities to build new business models that can help the communities that Floor & Decor operates in. Secondly it can use opportunities from government spending in Constr. - Supplies & Fixtures sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Constr. - Supplies & Fixtures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Floor & Decor 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. Floor & Decor 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.
Building a culture of innovation
– managers at Floor & Decor 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 Constr. - Supplies & Fixtures industry.
Better consumer reach
– The expansion of the 5G network will help Floor & Decor to increase its market reach. Floor & Decor 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.
Leveraging digital technologies
– Floor & Decor 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.
Loyalty marketing
– Floor & Decor has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Floor & Decor can use the latest technology developments to improve its manufacturing and designing process in Constr. - Supplies & Fixtures 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.
Creating value in data economy
– The success of analytics program of Floor & Decor has opened avenues for new revenue streams for the organization in Constr. - Supplies & Fixtures industry. This can help Floor & Decor to build a more holistic ecosystem for Floor & Decor products in the Constr. - Supplies & Fixtures industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Floor & Decor can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Floor & Decor 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.
Threats Floor & Decor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Floor & Decor are -
Shortening product life cycle
– it is one of the major threat that Floor & Decor is facing in Constr. - Supplies & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Floor & Decor in Constr. - Supplies & Fixtures industry. The Constr. - Supplies & Fixtures 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, Floor & Decor may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Constr. - Supplies & Fixtures sector.
Increasing wage structure of Floor & Decor
– 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 Floor & Decor.
Stagnating economy with rate increase
– Floor & Decor 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 Constr. - Supplies & Fixtures 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 Floor & Decor business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Floor & Decor 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Constr. - Supplies & Fixtures industry are lowering. It can presents Floor & Decor with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. - Supplies & Fixtures sector.
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 Floor & Decor in the Constr. - Supplies & Fixtures sector and impact the bottomline of the organization.
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. Floor & Decor 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.
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 Floor & Decor.
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. Floor & Decor needs to understand the core reasons impacting the Constr. - Supplies & Fixtures industry. This will help it in building a better workplace.
Consumer confidence and its impact on Floor & Decor 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 Constr. - Supplies & Fixtures industry and other sectors.
Weighted SWOT Analysis of Floor & Decor Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Floor & Decor 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 Floor & Decor 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 Floor & Decor 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 Floor & Decor 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 Floor & Decor needs to make to build a sustainable competitive advantage.