Lennar (LEN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lennar (United States)

Based on various researches at Oak Spring University , Lennar 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 energy prices, increasing commodity prices, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Lennar

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

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

The strengths of Lennar are -

Low bargaining power of suppliers

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

High brand equity

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

Ability to recruit top talent

– Lennar 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.

Strong track record of project management in the Construction Services industry

– Lennar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Training and development

– Lennar 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.

Highly skilled collaborators

– Lennar 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 Lennar have helped the firm to develop new products and bring them quickly to the marketplace.

Innovation driven organization

– Lennar is one of the most innovative firm in Construction Services sector.

High switching costs

– The high switching costs that Lennar 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.

Ability to lead change in Construction Services

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

Diverse revenue streams

– Lennar is present in almost all the verticals within the Construction Services industry. This has provided Lennar 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.

Analytics focus

– Lennar 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.

Effective Research and Development (R&D)

– Lennar has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lennar 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.

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

The weaknesses of Lennar are -

Low market penetration in new markets

– Outside its home market of United States, Lennar needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Lack of clear differentiation of Lennar products

– To increase the profitability and margins on the products, Lennar needs to provide more differentiated products than what it is currently offering in the marketplace.

Interest costs

– Compare to the competition, Lennar 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 Construction Services industry

– because of the regulatory requirements in United States, Lennar 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.

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

High dependence on Lennar ‘s star products

– The top 2 products and services of Lennar 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 Lennar has relatively successful track record of launching new products.

Ability to respond to the competition

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

High operating costs

– Compare to the competitors, Lennar 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 Lennar lucrative customers.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Lennar 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 cash cycle compare to competitors

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

Capital Spending Reduction

– Even during the low interest decade, Lennar 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 Construction Services industry using digital technology.

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

The opportunities of Lennar are -

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. Lennar 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. Lennar 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.

Low interest rates

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

Loyalty marketing

– Lennar 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.

Building a culture of innovation

– managers at Lennar 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 Construction Services industry.

Creating value in data economy

– The success of analytics program of Lennar has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Lennar to build a more holistic ecosystem for Lennar 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, Lennar can use these opportunities to build new business models that can help the communities that Lennar operates in. Secondly it can use opportunities from government spending in Construction Services sector.

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. Lennar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Lennar 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 Lennar to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 Lennar in the Construction Services industry. Now Lennar can target international markets with far fewer capital restrictions requirements than the existing system.

Developing new processes and practices

– Lennar can develop new processes and procedures in Construction Services 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.

Using analytics as competitive advantage

– Lennar 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 Lennar to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lennar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Lennar 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.

Learning at scale

– Online learning technologies has now opened space for Lennar 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.

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

The threats of Lennar are -

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. Lennar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Technology acceleration in Forth Industrial Revolution

– Lennar has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Lennar needs to keep up with the evolution of technology in the Construction Services 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.

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

Environmental challenges

– Lennar 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. Lennar can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

Consumer confidence and its impact on Lennar 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.

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.

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.

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 Lennar.

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 Lennar in the Construction Services 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 Lennar 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.

Barriers of entry lowering

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

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Lennar 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.

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Weighted SWOT Analysis of Lennar Template, Example

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

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