SWOT Analysis / TOWS Matrix for Hovnanian Enterprises (United States)
Based on various researches at Oak Spring University , Hovnanian Enterprises is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Hovnanian Enterprises
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hovnanian Enterprises can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hovnanian Enterprises, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hovnanian Enterprises 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 Hovnanian Enterprises can be done for the following purposes –
1. Strategic planning of Hovnanian Enterprises
2. Improving business portfolio management of Hovnanian Enterprises
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 Hovnanian Enterprises
Strengths of Hovnanian Enterprises | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hovnanian Enterprises are -
Organizational Resilience of Hovnanian Enterprises
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hovnanian Enterprises does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Construction Services industry
– Hovnanian Enterprises has clearly differentiated products in the market place. This has enabled Hovnanian Enterprises to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Hovnanian Enterprises to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Hovnanian Enterprises 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 Hovnanian Enterprises have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Hovnanian Enterprises in the Capital Goods sector have low bargaining power. Hovnanian Enterprises has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hovnanian Enterprises to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Hovnanian Enterprises 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.
Training and development
– Hovnanian Enterprises 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 Hovnanian Enterprises 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.
Analytics focus
– Hovnanian Enterprises 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.
Operational resilience
– The operational resilience strategy of Hovnanian Enterprises 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.
Ability to recruit top talent
– Hovnanian Enterprises 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.
Successful track record of launching new products
– Hovnanian Enterprises has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hovnanian Enterprises 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
– Hovnanian Enterprises has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hovnanian Enterprises to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Hovnanian Enterprises | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hovnanian Enterprises are -
Aligning sales with marketing
– From the outside it seems that Hovnanian Enterprises 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 Hovnanian Enterprises can leverage the sales team experience to cultivate customer relationships as Hovnanian Enterprises is planning to shift buying processes online.
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Hovnanian Enterprises 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 Hovnanian Enterprises has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hovnanian Enterprises should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Hovnanian Enterprises is just above the Construction Services 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.
No frontier risks strategy
– From the 10K / annual statement of Hovnanian Enterprises, 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.
Low market penetration in new markets
– Outside its home market of United States, Hovnanian Enterprises needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hovnanian Enterprises is slow explore the new channels of communication. These new channels of communication can help Hovnanian Enterprises to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Hovnanian Enterprises products
– To increase the profitability and margins on the products, Hovnanian Enterprises needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Hovnanian Enterprises supply chain. Even after few cautionary changes, Hovnanian Enterprises is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hovnanian Enterprises vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Hovnanian Enterprises 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 Hovnanian Enterprises ‘s star products
– The top 2 products and services of Hovnanian Enterprises 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 Hovnanian Enterprises has relatively successful track record of launching new products.
Hovnanian Enterprises Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hovnanian Enterprises are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hovnanian Enterprises can use these opportunities to build new business models that can help the communities that Hovnanian Enterprises operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hovnanian Enterprises in the Construction Services industry. Now Hovnanian Enterprises can target international markets with far fewer capital restrictions requirements than the existing system.
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 Hovnanian Enterprises 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.
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. Hovnanian Enterprises can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Hovnanian Enterprises 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.
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. Hovnanian Enterprises 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. Hovnanian Enterprises 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.
Loyalty marketing
– Hovnanian Enterprises 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hovnanian Enterprises 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 Hovnanian Enterprises to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Hovnanian Enterprises 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 Hovnanian Enterprises to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hovnanian Enterprises to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Hovnanian Enterprises 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hovnanian Enterprises 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hovnanian Enterprises is facing challenges because of the dominance of functional experts in the organization. Hovnanian Enterprises 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hovnanian Enterprises can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Hovnanian Enterprises to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Hovnanian Enterprises External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hovnanian Enterprises are -
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. Hovnanian Enterprises needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Hovnanian Enterprises 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.
Shortening product life cycle
– it is one of the major threat that Hovnanian Enterprises is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hovnanian Enterprises 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 Hovnanian Enterprises prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Hovnanian Enterprises with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hovnanian Enterprises in Construction Services industry. The Construction Services 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.
Environmental challenges
– Hovnanian Enterprises 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. Hovnanian Enterprises can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Stagnating economy with rate increase
– Hovnanian Enterprises 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.
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 Hovnanian Enterprises in the Construction Services sector and impact the bottomline of the organization.
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 Hovnanian Enterprises.
Consumer confidence and its impact on Hovnanian Enterprises 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hovnanian Enterprises may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.
Weighted SWOT Analysis of Hovnanian Enterprises Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hovnanian Enterprises 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 Hovnanian Enterprises 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 Hovnanian Enterprises 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 Hovnanian Enterprises 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 Hovnanian Enterprises needs to make to build a sustainable competitive advantage.
