Based on various researches at Oak Spring University , Floor & Decor is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions,
there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, 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 -
Highly skilled collaborators
– Floor & Decor has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. - Supplies & Fixtures industry. Secondly the value chain collaborators of Floor & Decor have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Operational resilience
– The operational resilience strategy of Floor & Decor comprises – understanding the underlying the factors in the Constr. - Supplies & Fixtures 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.
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.
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.
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.
Innovation driven organization
– Floor & Decor is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
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.
Diverse revenue streams
– Floor & Decor is present in almost all the verticals within the Constr. - Supplies & Fixtures industry. This has provided Floor & Decor 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.
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.
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.
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.
Weaknesses of Floor & Decor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Floor & Decor are -
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Floor & Decor 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 Constr. - Supplies & Fixtures industry using digital technology.
Aligning sales with marketing
– From the outside it seems that Floor & Decor needs to have more collaboration between its sales team and marketing team. Sales professionals in the Constr. - Supplies & Fixtures industry have deep experience in developing customer relationships. Marketing department at Floor & Decor can leverage the sales team experience to cultivate customer relationships as Floor & Decor is planning to shift buying processes online.
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.
Slow decision making process
– As mentioned earlier in the report, Floor & Decor has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. - Supplies & Fixtures industry over the last five years. Floor & Decor 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.
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.
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.
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.
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.
High operating costs
– Compare to the competitors, Floor & Decor has high operating costs in the Constr. - Supplies & Fixtures industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Floor & Decor lucrative customers.
Floor & Decor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Floor & Decor are -
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.
Learning at scale
– Online learning technologies has now opened space for Floor & Decor 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 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Floor & Decor is facing challenges because of the dominance of functional experts in the organization. Floor & Decor can utilize new technology in the field of Constr. - Supplies & Fixtures industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Floor & Decor can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Floor & Decor 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.
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.
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.
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.
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.
Threats Floor & Decor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Floor & Decor are -
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.
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.
Easy access to finance
– Easy access to finance in Constr. - Supplies & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Floor & Decor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Technology acceleration in Forth Industrial Revolution
– Floor & Decor has witnessed rapid integration of technology during Covid-19 in the Constr. - Supplies & Fixtures industry. As one of the leading players in the industry, Floor & Decor needs to keep up with the evolution of technology in the Constr. - Supplies & Fixtures 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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Floor & Decor 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 Floor & Decor prominent markets.
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.
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.
Environmental challenges
– Floor & Decor 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. Floor & Decor can take advantage of this fund but it will also bring new competitors in the Constr. - Supplies & Fixtures industry.
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.
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.
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.