Deluxe Family (600503) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Deluxe Family (China)

Based on various researches at Oak Spring University , Deluxe Family is operating in a macro-environment that has been destablized by – technology disruption, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Deluxe Family

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

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Strengths of Deluxe Family | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Deluxe Family are -

Innovation driven organization

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

Operational resilience

– The operational resilience strategy of Deluxe Family 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 brand equity

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

Ability to lead change in Construction Services

– Deluxe Family is one of the leading players in the Construction Services industry in China. Over the years it has not only transformed the business landscape in the Construction Services industry in China but also across the existing markets. The ability to lead change has enabled Deluxe Family in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Digital Transformation in Construction Services industry

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

Diverse revenue streams

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

Strong track record of project management in the Construction Services industry

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

Sustainable margins compare to other players in Construction Services industry

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

Cross disciplinary teams

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

High switching costs

– The high switching costs that Deluxe Family 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.

Training and development

– Deluxe Family 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.

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Weaknesses of Deluxe Family | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Deluxe Family are -

Increasing silos among functional specialists

– The organizational structure of Deluxe Family is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Deluxe Family needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Deluxe Family to focus more on services in the Construction Services industry rather than just following the product oriented approach.

Products dominated business model

– Even though Deluxe Family has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Deluxe Family should strive to include more intangible value offerings along with its core products and services.

Compensation and incentives

– The revenue per employee of Deluxe Family is just above the Construction Services 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.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Deluxe Family 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.

Need for greater diversity

– Deluxe Family 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 Deluxe Family strategy

– From the outside it seems that the employees of Deluxe Family 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 cash cycle compare to competitors

Deluxe Family has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Lack of clear differentiation of Deluxe Family products

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

Ability to respond to the competition

– As the decision making is very deliberative at Deluxe Family, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Deluxe Family has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Slow to strategic competitive environment developments

– As Deluxe Family 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 China, Deluxe Family needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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Deluxe Family Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Deluxe Family are -

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. Deluxe Family 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. Deluxe Family 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.

Developing new processes and practices

– Deluxe Family can develop new processes and procedures in Construction Services 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.

Remote work and new talent hiring opportunities

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

Harnessing reconfiguration of the global supply chains

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

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 Deluxe Family 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.

Buying journey improvements

– Deluxe Family can improve the customer journey of consumers in the Construction Services 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.

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. Deluxe Family can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Deluxe Family is facing challenges because of the dominance of functional experts in the organization. Deluxe Family 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.

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. Deluxe Family can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Building a culture of innovation

– managers at Deluxe Family 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.

Creating value in data economy

– The success of analytics program of Deluxe Family has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Deluxe Family to build a more holistic ecosystem for Deluxe Family products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Deluxe Family 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

– Deluxe Family 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.

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Threats Deluxe Family External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Deluxe Family are -

Environmental challenges

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

Technology acceleration in Forth Industrial Revolution

– Deluxe Family has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Deluxe Family needs to keep up with the evolution of technology in the Construction Services 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Deluxe Family 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 Deluxe Family prominent markets.

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 Deluxe Family.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Deluxe Family with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.

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 Deluxe Family business can come under increasing regulations regarding data privacy, data security, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Deluxe Family in Construction Services industry. The Construction Services 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.

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

Shortening product life cycle

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

Regulatory challenges

– Deluxe Family 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.

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 dependence on third party suppliers

– Deluxe Family 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.

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Weighted SWOT Analysis of Deluxe Family Template, Example

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

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