Lumber Liquidators (LL) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lumber Liquidators (United States)

Based on various researches at Oak Spring University , Lumber Liquidators is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing commodity prices, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Lumber Liquidators

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

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

The strengths of Lumber Liquidators are -

Sustainable margins compare to other players in Retail (Home Improvement) industry

– Lumber Liquidators has clearly differentiated products in the market place. This has enabled Lumber Liquidators to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Lumber Liquidators to invest into research and development (R&D) and innovation.

Strong track record of project management in the Retail (Home Improvement) industry

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

Ability to recruit top talent

– Lumber Liquidators is one of the leading players in the Retail (Home Improvement) 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.

Cross disciplinary teams

– Horizontal connected teams at the Lumber Liquidators 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.

Effective Research and Development (R&D)

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

Operational resilience

– The operational resilience strategy of Lumber Liquidators comprises – understanding the underlying the factors in the Retail (Home Improvement) 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.

Superior customer experience

– The customer experience strategy of Lumber Liquidators in Retail (Home Improvement) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Lumber Liquidators 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 Retail (Home Improvement) 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.

Digital Transformation in Retail (Home Improvement) industry

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

Ability to lead change in Retail (Home Improvement)

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

Innovation driven organization

– Lumber Liquidators is one of the most innovative firm in Retail (Home Improvement) sector.

Organizational Resilience of Lumber Liquidators

– The covid-19 pandemic has put organizational resilience at the centre of everthing Lumber Liquidators does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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

The weaknesses of Lumber Liquidators are -

High operating costs

– Compare to the competitors, Lumber Liquidators has high operating costs in the Retail (Home Improvement) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lumber Liquidators lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, Lumber Liquidators 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 Retail (Home Improvement) industry using digital technology.

Lack of clear differentiation of Lumber Liquidators products

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

High dependence on Lumber Liquidators ‘s star products

– The top 2 products and services of Lumber Liquidators still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Lumber Liquidators has relatively successful track record of launching new products.

Compensation and incentives

– The revenue per employee of Lumber Liquidators is just above the Retail (Home Improvement) 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.

Low market penetration in new markets

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

Need for greater diversity

– Lumber Liquidators 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.

Employees’ less understanding of Lumber Liquidators strategy

– From the outside it seems that the employees of Lumber Liquidators 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.

No frontier risks strategy

– From the 10K / annual statement of Lumber Liquidators, it seems that company is thinking out the frontier risks that can impact Retail (Home Improvement) 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.

Slow decision making process

– As mentioned earlier in the report, Lumber Liquidators has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Home Improvement) industry over the last five years. Lumber Liquidators 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.

Workers concerns about automation

– As automation is fast increasing in the Retail (Home Improvement) industry, Lumber Liquidators 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.

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

The opportunities of Lumber Liquidators are -

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Retail (Home Improvement) industry, but it has also influenced the consumer preferences. Lumber Liquidators 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, Lumber Liquidators 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 Lumber Liquidators to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lumber Liquidators can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Use of Bitcoin and other crypto currencies for transactions in Retail (Home Improvement) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lumber Liquidators in the Retail (Home Improvement) industry. Now Lumber Liquidators 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 Lumber Liquidators 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.

Using analytics as competitive advantage

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

Developing new processes and practices

– Lumber Liquidators can develop new processes and procedures in Retail (Home Improvement) 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.

Creating value in data economy

– The success of analytics program of Lumber Liquidators has opened avenues for new revenue streams for the organization in Retail (Home Improvement) industry. This can help Lumber Liquidators to build a more holistic ecosystem for Lumber Liquidators products in the Retail (Home Improvement) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Buying journey improvements

– Lumber Liquidators can improve the customer journey of consumers in the Retail (Home Improvement) 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.

Reforming the budgeting process

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

Manufacturing automation

– Lumber Liquidators can use the latest technology developments to improve its manufacturing and designing process in Retail (Home Improvement) 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lumber Liquidators 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 Lumber Liquidators to hire the very best people irrespective of their geographical location.

Building a culture of innovation

– managers at Lumber Liquidators 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 Retail (Home Improvement) industry.

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

The threats of Lumber Liquidators are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Lumber Liquidators in Retail (Home Improvement) industry. The Retail (Home Improvement) 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.

Regulatory challenges

– Lumber Liquidators 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 Retail (Home Improvement) industry regulations.

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.

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. Lumber Liquidators needs to understand the core reasons impacting the Retail (Home Improvement) industry. This will help it in building a better workplace.

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 Lumber Liquidators in the Retail (Home Improvement) sector and impact the bottomline of the organization.

Consumer confidence and its impact on Lumber Liquidators 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 Retail (Home Improvement) industry and other sectors.

Environmental challenges

– Lumber Liquidators 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. Lumber Liquidators can take advantage of this fund but it will also bring new competitors in the Retail (Home Improvement) industry.

Increasing wage structure of Lumber Liquidators

– 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 Lumber Liquidators.

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 Lumber Liquidators business can come under increasing regulations regarding data privacy, data security, 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.

Easy access to finance

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

High dependence on third party suppliers

– Lumber Liquidators 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.

Stagnating economy with rate increase

– Lumber Liquidators 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 Retail (Home Improvement) industry.

Weighted SWOT Analysis of Lumber Liquidators Template, Example

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

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