Forestar (FOR) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Forestar (United States)

Based on various researches at Oak Spring University , Forestar is operating in a macro-environment that has been destablized by – wage bills are increasing, supply chains are disrupted by pandemic , geopolitical disruptions, cloud computing is disrupting traditional business models, technology disruption, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing commodity prices, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Forestar

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Forestar can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Forestar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Forestar 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 Forestar can be done for the following purposes –
1. Strategic planning of Forestar
2. Improving business portfolio management of Forestar
3. Assessing feasibility of the new initiative in United States
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Forestar

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

The strengths of Forestar are -

Training and development

– Forestar 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.

Ability to recruit top talent

– Forestar is one of the leading players in the Construction Services 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.

High switching costs

– The high switching costs that Forestar 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.

High brand equity

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

Successful track record of launching new products

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

Cross disciplinary teams

– Horizontal connected teams at the Forestar 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.

Highly skilled collaborators

– Forestar has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Forestar have helped the firm to develop new products and bring them quickly to the marketplace.

Learning organization

- Forestar 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 Forestar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Forestar emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of Forestar comprises – understanding the underlying the factors in the Construction Services 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.

Effective Research and Development (R&D)

– Forestar has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Forestar staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Analytics focus

– Forestar 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 Construction Services 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.

Low bargaining power of suppliers

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

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

The weaknesses of Forestar are -

No frontier risks strategy

– From the 10K / annual statement of Forestar, it seems that company is thinking out the frontier risks that can impact Construction Services 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.

Employees’ less understanding of Forestar strategy

– From the outside it seems that the employees of Forestar 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 bargaining power of channel partners in Construction Services industry

– because of the regulatory requirements in United States, Forestar 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 Construction Services industry.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Forestar 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.

Ability to respond to the competition

– As the decision making is very deliberative at Forestar, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Forestar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Slow to strategic competitive environment developments

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Forestar is slow explore the new channels of communication. These new channels of communication can help Forestar to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.

High operating costs

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

Aligning sales with marketing

– From the outside it seems that Forestar needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction Services industry have deep experience in developing customer relationships. Marketing department at Forestar can leverage the sales team experience to cultivate customer relationships as Forestar is planning to shift buying processes online.

High dependence on Forestar ‘s star products

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

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 Forestar supply chain. Even after few cautionary changes, Forestar is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Forestar vulnerable to further global disruptions in South East Asia.

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

The opportunities of Forestar are -

Leveraging digital technologies

– Forestar 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Forestar is facing challenges because of the dominance of functional experts in the organization. Forestar can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Reforming the budgeting process

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

Lowering marketing communication costs

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

Creating value in data economy

– The success of analytics program of Forestar has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Forestar to build a more holistic ecosystem for Forestar products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Forestar can use these opportunities to build new business models that can help the communities that Forestar operates in. Secondly it can use opportunities from government spending in Construction Services sector.

Low interest rates

– Even though inflation is raising its head in most developed economies, Forestar 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Forestar 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. Forestar 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.

Buying journey improvements

– Forestar can improve the customer journey of consumers in the Construction Services 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

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Forestar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Learning at scale

– Online learning technologies has now opened space for Forestar 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Forestar to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Forestar to hire the very best people irrespective of their geographical location.

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

The threats of Forestar are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Forestar 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 Forestar prominent markets.

Shortening product life cycle

– it is one of the major threat that Forestar is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Stagnating economy with rate increase

– Forestar 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 Construction Services industry.

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 Forestar.

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.

Increasing wage structure of Forestar

– 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 Forestar.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Forestar with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services 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 Forestar in the Construction Services sector and impact the bottomline of the organization.

Environmental challenges

– Forestar 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. Forestar can take advantage of this fund but it will also bring new competitors in the Construction Services 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 Forestar business can come under increasing regulations regarding data privacy, data security, etc.

Easy access to finance

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

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. Forestar needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.

Consumer confidence and its impact on Forestar 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 Construction Services industry and other sectors.

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Weighted SWOT Analysis of Forestar Template, Example

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

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