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, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, technology disruption,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
High brand equity
– Realty Income has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Realty Income to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Innovation driven organization
– Realty Income is one of the most innovative firm in Real Estate Operations sector.
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.
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.
Operational resilience
– The operational resilience strategy of Realty Income comprises – understanding the underlying the factors in the Real Estate Operations 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.
Effective Research and Development (R&D)
– Realty Income has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Realty Income staying ahead in the Real Estate Operations industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Ability to recruit top talent
– Realty Income is one of the leading players in the Real Estate Operations 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.
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.
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.
Weaknesses of Realty Income | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Realty Income are -
Ability to respond to the competition
– As the decision making is very deliberative at Realty Income, in the dynamic environment of Real Estate Operations industry it has struggled to respond to the nimble upstart competition. Realty Income has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Realty Income has some of the most successful models in the Real Estate Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Realty Income should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Realty Income 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 Real Estate Operations industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Realty Income is dominated by functional specialists. It is not different from other players in the Real Estate Operations industry, but Realty Income needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Realty Income to focus more on services in the Real Estate Operations industry rather than just following the product oriented approach.
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 dependence on Realty Income ‘s star products
– The top 2 products and services of Realty Income still accounts for major business revenue. This dependence on star products in Real Estate Operations industry has resulted into insufficient focus on developing new products, even though Realty Income has relatively successful track record of launching new products.
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 strategic competitive environment developments
– As Realty Income is one of the leading players in the Real Estate Operations industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Real Estate Operations industry in last five years.
Realty Income Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Realty Income are -
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. Realty Income can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Realty Income 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Real Estate Operations industry, but it has also influenced the consumer preferences. Realty Income can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Building a culture of innovation
– managers at Realty Income 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 Real Estate Operations industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Realty Income can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Realty Income 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 Realty Income to hire the very best people irrespective of their geographical location.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Realty Income to increase its market reach. Realty Income 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.
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.
Threats Realty Income External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Realty Income are -
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.
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.
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 Realty Income in the Real Estate Operations sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for 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.
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.
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.
Regulatory challenges
– Realty Income 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 Real Estate Operations industry regulations.
Stagnating economy with rate increase
– Realty Income 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 Real Estate Operations industry.
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.
Consumer confidence and its impact on Realty Income 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 Real Estate Operations industry and other sectors.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Easy access to finance
– Easy access to finance in Real Estate Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Realty Income can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
