Sterling Construction (STRL) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sterling Construction (United States)

Based on various researches at Oak Spring University , Sterling Construction is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing commodity prices, increasing energy prices, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, there is backlash against globalization, 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%, increasing transportation and logistics costs, etc

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Introduction to SWOT Analysis of Sterling Construction

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

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Strengths of Sterling Construction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Sterling Construction are -

Successful track record of launching new products

– Sterling Construction has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sterling Construction 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.

Innovation driven organization

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

Training and development

– Sterling Construction 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.

Operational resilience

– The operational resilience strategy of Sterling Construction 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.

High switching costs

– The high switching costs that Sterling Construction 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.

High brand equity

– Sterling Construction has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sterling Construction to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to recruit top talent

– Sterling Construction 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.

Diverse revenue streams

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

Sustainable margins compare to other players in Construction Services industry

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

Cross disciplinary teams

– Horizontal connected teams at the Sterling Construction 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.

Low bargaining power of suppliers

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

Strong track record of project management in the Construction Services industry

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

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Weaknesses of Sterling Construction | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Sterling Construction are -

Employees’ less understanding of Sterling Construction strategy

– From the outside it seems that the employees of Sterling Construction 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.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Sterling Construction 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.

High bargaining power of channel partners in Construction Services industry

– because of the regulatory requirements in United States, Sterling Construction 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 Construction Services industry.

Capital Spending Reduction

– Even during the low interest decade, Sterling Construction 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.

Workers concerns about automation

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

Slow to harness new channels of communication

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

High dependence on Sterling Construction ‘s star products

– The top 2 products and services of Sterling Construction still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Sterling Construction has relatively successful track record of launching new products.

Need for greater diversity

– Sterling Construction 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.

Interest costs

– Compare to the competition, Sterling Construction 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.

Slow to strategic competitive environment developments

– As Sterling Construction 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.

Low market penetration in new markets

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

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Sterling Construction Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Sterling Construction are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, Sterling Construction is facing challenges because of the dominance of functional experts in the organization. Sterling Construction can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Using analytics as competitive advantage

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

Manufacturing automation

– Sterling Construction can use the latest technology developments to improve its manufacturing and designing process in Construction Services 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.

Building a culture of innovation

– managers at Sterling Construction 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 Construction Services industry.

Increase in government spending

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

Harnessing reconfiguration of the global supply chains

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

Reforming the budgeting process

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Sterling Construction can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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. Sterling Construction can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– Sterling Construction 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.

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. Sterling Construction 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. Sterling Construction 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sterling Construction in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services 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 Sterling Construction 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.

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Threats Sterling Construction External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Sterling Construction are -

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 Sterling Construction.

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 Sterling Construction business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– Sterling Construction 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 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.

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. Sterling Construction 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.

Environmental challenges

– Sterling Construction 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. Sterling Construction can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

Stagnating economy with rate increase

– Sterling Construction 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.

Consumer confidence and its impact on Sterling Construction 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 Construction Services industry and other sectors.

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

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

Increasing wage structure of Sterling Construction

– 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 Sterling Construction.

Shortening product life cycle

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

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Weighted SWOT Analysis of Sterling Construction Template, Example

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

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