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 – there is backlash against globalization, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing household debt because of falling income levels, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic ,
cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, etc
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 -
Highly skilled collaborators
– Lumber Liquidators has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Home Improvement) industry. Secondly the value chain collaborators of Lumber Liquidators have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Lumber Liquidators in the Services sector have low bargaining power. Lumber Liquidators has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lumber Liquidators to manage not only supply disruptions but also source products at highly competitive prices.
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.
High switching costs
– The high switching costs that Lumber Liquidators 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.
Learning organization
- Lumber Liquidators 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 Lumber Liquidators is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lumber Liquidators emphasize – knowledge, initiative, and innovation.
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.
Successful track record of launching new products
– Lumber Liquidators has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lumber Liquidators 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.
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.
Innovation driven organization
– Lumber Liquidators is one of the most innovative firm in Retail (Home Improvement) sector.
High brand equity
– Lumber Liquidators has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lumber Liquidators to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Lumber Liquidators is present in almost all the verticals within the Retail (Home Improvement) industry. This has provided Lumber Liquidators 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.
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.
Weaknesses of Lumber Liquidators | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lumber Liquidators are -
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.
High bargaining power of channel partners in Retail (Home Improvement) industry
– because of the regulatory requirements in United States, Lumber Liquidators 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 Retail (Home Improvement) industry.
Slow to strategic competitive environment developments
– As Lumber Liquidators is one of the leading players in the Retail (Home Improvement) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Home Improvement) 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, Lumber Liquidators is slow explore the new channels of communication. These new channels of communication can help Lumber Liquidators to provide better information regarding Retail (Home Improvement) products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Lumber Liquidators 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.
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.
Increasing silos among functional specialists
– The organizational structure of Lumber Liquidators is dominated by functional specialists. It is not different from other players in the Retail (Home Improvement) industry, but Lumber Liquidators needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lumber Liquidators to focus more on services in the Retail (Home Improvement) industry rather than just following the product oriented approach.
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.
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.
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.
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.
Lumber Liquidators Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lumber Liquidators are -
Loyalty marketing
– Lumber Liquidators 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Lumber Liquidators to increase its market reach. Lumber Liquidators 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
– 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lumber Liquidators 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lumber Liquidators is facing challenges because of the dominance of functional experts in the organization. Lumber Liquidators can utilize new technology in the field of Retail (Home Improvement) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Lumber Liquidators 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.
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.
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.
Threats Lumber Liquidators External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lumber Liquidators are -
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Lumber Liquidators has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Lumber Liquidators needs to keep up with the evolution of technology in the Retail (Home Improvement) 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.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Home Improvement) industry are lowering. It can presents Lumber Liquidators with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Home Improvement) sector.
Shortening product life cycle
– it is one of the major threat that Lumber Liquidators is facing in Retail (Home Improvement) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lumber Liquidators may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Home Improvement) sector.
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.