Realty Income (O) SWOT Analysis / TOWS Matrix / MBA Resources
Real Estate Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Realty Income (United States)
Based on various researches at Oak Spring University , Realty Income is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, increasing energy prices, wage bills are increasing,
customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Realty Income can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Realty Income, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Realty Income 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 Realty Income can be done for the following purposes –
1. Strategic planning of Realty Income
2. Improving business portfolio management of Realty Income
3. Assessing feasibility of the new initiative in United States
4. Making a Real Estate Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Realty Income
Strengths of Realty Income | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Realty Income are -
Organizational Resilience of Realty Income
– The covid-19 pandemic has put organizational resilience at the centre of everthing Realty Income does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Real Estate Operations
– Realty Income is one of the leading players in the Real Estate Operations industry in United States. Over the years it has not only transformed the business landscape in the Real Estate Operations industry in United States but also across the existing markets. The ability to lead change has enabled Realty Income in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Real Estate Operations industry
– Realty Income is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Realty Income is one of the most innovative firm in Real Estate Operations sector.
Cross disciplinary teams
– Horizontal connected teams at the Realty Income 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.
Digital Transformation in Real Estate Operations industry
- digital transformation varies from industry to industry. For Realty Income digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Realty Income 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.
Sustainable margins compare to other players in Real Estate Operations industry
– Realty Income has clearly differentiated products in the market place. This has enabled Realty Income to fetch slight price premium compare to the competitors in the Real Estate Operations industry. The sustainable margins have also helped Realty Income to invest into research and development (R&D) and innovation.
Learning organization
- Realty Income 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 Realty Income is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Realty Income emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Realty Income is present in almost all the verticals within the Real Estate Operations industry. This has provided Realty Income 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
– Realty Income 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 Real Estate Operations 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.
Successful track record of launching new products
– Realty Income has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Realty Income 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.
Training and development
– Realty Income has one of the best training and development program in Services 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.
Weaknesses of Realty Income | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Realty Income are -
Interest costs
– Compare to the competition, Realty Income 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 operating costs
– Compare to the competitors, Realty Income has high operating costs in the Real Estate Operations industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Realty Income lucrative customers.
Skills based hiring in Real Estate Operations industry
– The stress on hiring functional specialists at Realty Income 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 decision making process
– As mentioned earlier in the report, Realty Income has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Real Estate Operations industry over the last five years. Realty Income 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.
Aligning sales with marketing
– From the outside it seems that Realty Income needs to have more collaboration between its sales team and marketing team. Sales professionals in the Real Estate Operations industry have deep experience in developing customer relationships. Marketing department at Realty Income can leverage the sales team experience to cultivate customer relationships as Realty Income is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Realty Income is slow explore the new channels of communication. These new channels of communication can help Realty Income to provide better information regarding Real Estate Operations products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Realty Income has a high cash cycle compare to other players in the Real Estate Operations industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Realty Income strategy
– From the outside it seems that the employees of Realty Income 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.
Workers concerns about automation
– As automation is fast increasing in the Real Estate Operations industry, Realty Income 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.
Low market penetration in new markets
– Outside its home market of United States, Realty Income needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Realty Income products
– To increase the profitability and margins on the products, Realty Income needs to provide more differentiated products than what it is currently offering in the marketplace.
Realty Income Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Realty Income are -
Use of Bitcoin and other crypto currencies for transactions in Real Estate Operations industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Realty Income in the Real Estate Operations industry. Now Realty Income can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Real Estate Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Realty Income 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. Realty Income 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
– Realty Income 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Realty Income can use these opportunities to build new business models that can help the communities that Realty Income operates in. Secondly it can use opportunities from government spending in Real Estate Operations sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Realty Income 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 Realty Income to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Realty Income has opened avenues for new revenue streams for the organization in Real Estate Operations industry. This can help Realty Income to build a more holistic ecosystem for Realty Income products in the Real Estate Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Realty Income 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.
Developing new processes and practices
– Realty Income can develop new processes and procedures in Real Estate Operations 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Realty Income is facing challenges because of the dominance of functional experts in the organization. Realty Income can utilize new technology in the field of Real Estate Operations 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 Realty Income 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.
Using analytics as competitive advantage
– Realty Income has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Real Estate Operations sector. This continuous investment in analytics has enabled Realty Income to build a competitive advantage using analytics. The analytics driven competitive advantage can help Realty Income 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 Realty Income in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Real Estate Operations industry, and it will provide faster access to the consumers.
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 Realty Income 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.
Threats Realty Income External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Realty Income are -
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 Realty Income business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Realty Income 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.
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.
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. Realty Income needs to understand the core reasons impacting the Real Estate Operations industry. This will help it in building a better workplace.
Environmental challenges
– Realty Income 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. Realty Income can take advantage of this fund but it will also bring new competitors in the Real Estate Operations industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Realty Income in Real Estate Operations industry. The Real Estate Operations 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.
Shortening product life cycle
– it is one of the major threat that Realty Income is facing in Real Estate Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Realty Income has witnessed rapid integration of technology during Covid-19 in the Real Estate Operations industry. As one of the leading players in the industry, Realty Income needs to keep up with the evolution of technology in the Real Estate Operations 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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Realty Income will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Realty Income
– 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 Realty Income.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Real Estate Operations industry are lowering. It can presents Realty Income with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Real Estate Operations sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Realty Income may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Real Estate Operations sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Realty Income 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 Realty Income prominent markets.
Weighted SWOT Analysis of Realty Income Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Realty Income 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 Realty Income 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 Realty Income 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 Realty Income 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 Realty Income needs to make to build a sustainable competitive advantage.