LGI Homes (LGIH) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for LGI Homes (United States)

Based on various researches at Oak Spring University , LGI Homes is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, technology disruption, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of LGI Homes

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

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

The strengths of LGI Homes are -

Ability to recruit top talent

– LGI Homes 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

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

Superior customer experience

– The customer experience strategy of LGI Homes in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

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

Low bargaining power of suppliers

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

Innovation driven organization

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

Highly skilled collaborators

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

Cross disciplinary teams

– Horizontal connected teams at the LGI Homes 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.

Operational resilience

– The operational resilience strategy of LGI Homes 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.

Digital Transformation in Construction Services industry

- digital transformation varies from industry to industry. For LGI Homes digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. LGI Homes 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.

Training and development

– LGI Homes 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.

Effective Research and Development (R&D)

– LGI Homes has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – LGI Homes 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 LGI Homes | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of LGI Homes are -

Workers concerns about automation

– As automation is fast increasing in the Construction Services industry, LGI Homes 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.

High operating costs

– Compare to the competitors, LGI Homes 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 LGI Homes lucrative customers.

Slow to harness new channels of communication

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

Capital Spending Reduction

– Even during the low interest decade, LGI Homes 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.

Compensation and incentives

– The revenue per employee of LGI Homes 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.

Aligning sales with marketing

– From the outside it seems that LGI Homes 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 LGI Homes can leverage the sales team experience to cultivate customer relationships as LGI Homes is planning to shift buying processes online.

No frontier risks strategy

– From the 10K / annual statement of LGI Homes, 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.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at LGI Homes 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 to strategic competitive environment developments

– As LGI Homes 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.

Increasing silos among functional specialists

– The organizational structure of LGI Homes is dominated by functional specialists. It is not different from other players in the Construction Services industry, but LGI Homes needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help LGI Homes to focus more on services in the Construction Services industry rather than just following the product oriented approach.

Products dominated business model

– Even though LGI Homes 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. LGI Homes should strive to include more intangible value offerings along with its core products and services.

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

The opportunities of LGI Homes are -

Developing new processes and practices

– LGI Homes 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.

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. LGI Homes 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. LGI Homes 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, LGI Homes 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.

Reforming the budgeting process

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

Learning at scale

– Online learning technologies has now opened space for LGI Homes 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.

Loyalty marketing

– LGI Homes 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.

Creating value in data economy

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

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 LGI Homes 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.

Buying journey improvements

– LGI Homes 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.

Harnessing reconfiguration of the global supply chains

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

Increase in government spending

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

Better consumer reach

– The expansion of the 5G network will help LGI Homes to increase its market reach. LGI Homes 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.

Using analytics as competitive advantage

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

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

The threats of LGI Homes are -

Barriers of entry lowering

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

Shortening product life cycle

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

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.

Increasing wage structure of LGI Homes

– 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 LGI Homes.

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

Regulatory challenges

– LGI Homes needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Construction Services industry regulations.

Technology acceleration in Forth Industrial Revolution

– LGI Homes has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, LGI Homes 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 LGI Homes business can come under increasing regulations regarding data privacy, data security, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for LGI Homes 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.

Stagnating economy with rate increase

– LGI Homes 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 LGI Homes.

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

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Weighted SWOT Analysis of LGI Homes Template, Example

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

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