Clarkson Lumber Co SWOT Analysis
Posted by Jessica Byrne on Apr-24-2018
What is SWOT analysis?
A SWOT Analysis is a powerful tool to develop business strategies for start-up firms as well as for existing companies. This simple framework is used to evaluate the positioning of a firm in a competitive market. SWOT analysis of Clarkson Lumber Co can lead the company towards making effective and wise business strategies.
The SWOT stands for-
The internal environmental analysis can help an organisation to identify its core strengths and weaknesses. Whereas, external environmental analysis can help the organisation to identify opportunities and threats that must be considered to ensure long-term business survival. Clarkson Lumber Co can adapt and control its strengths and weaknesses (internal factors), but it cannot control the external factors (opportunities and threats):
- Some examples of internal factors (strengths/weaknesses) are- leadership competencies, intellectual property rights, locational advantages and geographic presence.
- Some examples of external factors (opportunities/threats) are- customers’ changing tastes and interests, competitive trends, inflation and population growth.
Clarkson Lumber Co can use the SWOT matrix to exploit the opportunities and minimise the threats by leveraging its strengths and overcoming its weaknesses. Usually, it is presented in the two-by-two grid form. The framework is based on developing four types of strategies, including-
- Leveraging strengths to exploit external opportunities.
- Overcoming weaknesses to exploit external opportunities.
- Leveraging strengths to minimise the threats.
- Overcoming weaknesses to minimise the threats.
How to conduct SWOT analysis?
SWOT analysis is a subjective approach, and there is no standardised way to conduct the analysis. Usually, the SWOT analysis involves three steps as given below:
- Step one involves gathering the right people to take the input from them. The right people may involve from employees, managers, customers and other important stakeholders that have detailed know how of organisation's internal and/or external environment.
- Step two includes arranging the brainstorming session with the identified people and asking them to identify the strengths, weaknesses, opportunities and threats. It is better to make small teams and ask all team members to make the lists individually.
- After getting the bulk of information and a long list of identified internal and external factors, it is important to fill the gaps, avoid repetition and provide an additional explanation where required.
SWOT Analysis of Clarkson Lumber Co
SWOT analysis of Clarkson Lumber Co can be based to make important strategic decisions and accomplish the business objectives. The four components of Clarkson Lumber Co SWOT analysis are given below.
Strengths of Clarkson Lumber Co
Strengths of Clarkson Lumber Co is the first element of the SWOT matrix.
- The geographic presence in different regions can act as one of the major strength of the organisation. It determines the business’s reach to the target market and ensures the easy accessibility.
- The wide product portfolio can allow the organisation to expand the customer base and offset the losses from one product category with benefits obtained from the other.
- Strong online presence on different social networking sites and efficient social media management can enhance the effect of positive e-WOM and develop strong relationships with customers.
- Strong financial position and health can allow the firm to make further investments.
- Access to the suppliers that offer raw material at a lower cost can improve the overall business efficiency.
- The locational advantage can improve the competitive positioning of the firm in various ways, such as- lower cost, improved accessibility or enhanced brand image.
- The well-developed and efficiently integrated IT infrastructure can improve the operational efficiency and increase knowledge of the latest market trends.
- Competent and committed human capital can act as a powerful source of competitive advantage, particularly when business is service oriented in nature.
- High product quality increases brand loyalty and improves Clarkson Lumber Co's performance in a competitive market.
- Workplace diversity can also act as a major business strength, particularly when the organisation intends to operate in the international market.
- The horizontal and/or vertical integration can increase the control over whole value chain, result in improved access to raw material and quick product delivery to the final customer.
- An organisation may own different intellectual property rights that can make the product offerings unique and exclusive, making it difficult for competitors to imitate.
Weaknesses of Clarkson Lumber Co
Weaknesses of Clarkson Lumber Co is the second element of the SWOT matrix.
- The organisation can draw the criticism from the environmentalists for its poor waste management practices and inability to integrate sustainability in business operations.
- The company may lose efficiency due to poor inventory management practices. The shortage or excessive inventory can either result into
- The cash shortage or insufficient current assets negatively affect the liquidity position and harms the overall business performance.
- Insufficient budget for the marketing and promotion activities weakens the firms’ ability to expand the customer base and encourage repeat purchase.
- Less expenditure on the research and development activities can weaken the company performance due to poor local/international market knowledge.
- The inability to understand customers’ needs and expectations lead to an ineffective strategic decision-making process. With this weakness, the organisation may not be able to identify the potential improvement seeking areas in product/service mix.
- The prices charged by the business may not be perceived as justified when compared to the product/service characteristics. It indicates the need to revise the pricing strategy.
- The poor customer service (such as inefficient customer complaint handling) can trigger the negative word of mouth about the business and affect business growth.
- The decision making in the Clarkson Lumber Co takes too much time, causing expensive delays in introducing new products in the market.
- Poor project management practices can internally weaken the ability of the organisation to successfully open new branches or expand the product line.
- Lack of organisational commitment and high employee turnover can increase recruitment costs and reduce organisational productivity.
- High job stress and consequent low workers’ morale makes the workforce less productive.
- The misalignment between the organisation's leadership style and its core strategic objectives can make the business organisation directionless.
- Organisational culture also becomes a big internal weakness when it does not align with the strategic/business objectives. For example, the main strategic objective of the chosen business organisation is to launch innovative and new products in the market. But there exists a risk averse attitude prevailing in organisational culture, which discourages employees from thinking creatively.
Opportunities of Clarkson Lumber Co
Opportunities of Clarkson Lumber Co comes into the third column of SWOT matrix. Clarkson Lumber Co. The organisation currently has the following opportunities available in the market:
- The exponential growth in the population, and particularly in the existing or potential customer segments is a great growth opportunity for the business organisation.
- The changing customer needs, tastes and preferences can act as an opportunity if the business organisation has good market knowledge.
- The development of new technologies to assist the product/service production and delivery process can be exploited to embed the innovation in business operations. The advanced technological integration can decrease costs, improve efficiency and result in the quick introduction of innovative products.
- Rise in the customers’ disposable income and increase in the affluent customer base can be taken as an opportunity to introduce more high-end products.
- Reduction in the interest rates makes the fund raising and financing at lower cost easier for the business organisation.
- Customers may start preferring new and creative products/services as a result of changing tastes.
- The emergence of e-commerce and social media marketing as a trend can be a great opportunity for Clarkson Lumber Co if it can ensure strong online presence on different social networking sites.
- The emergence of new market segments and new niches provide business and product line expansion opportunities.
- The diminishing boundaries and rising global interconnectedness allow the organisation to get into the international market; target geographically dispersed customer base and increased profitability.
- The subsidies provided by the government and other policies to make the business environment more friendly is a positive external environmental factor for Clarkson Lumber Co.
- Improvement in the customers- lifestyle and standards mean more consumption on consumer goods and services, and more opportunities to encourage the purchase.
Clarkson Lumber Co can improve its performance by exploiting the above-mentioned opportunities. However, it must also recognise the threats presented in the next section.
Threats of Clarkson Lumber Co
Threats of Clarkson Lumber Co comes into the fourth column of the SWOT matrix. Clarkson Lumber Co. Besides different opportunities offered by external business environment, the organisation also faces some threats as presented below:
- The changing regulatory framework and introduction of new stricter regulations impose a major threat to the Clarkson Lumber Co. It makes compliance with legal standards more complex and challenging for the business organisation. Inability to comply with changed regulations raises the risk of expensive law suits.
- Shortage of skilled labour in the market can make it difficult for the organisation to attract talent with the right skills set.
- The increasing number of direct and/or indirect competitors affects the organisation's ability to sustain and expand the customer base.
- The deteriorating economic conditions affect business performance when they directly influence the customers' spending patterns and purchasing power.
- The rise in inflation increases the cost of production and affects the business profitability.
- The growing environmental sustainability trends act as a major threat when offered products/services are not environment friendly. It draws the negative publicity and criticism from the environmentalists and affects the brand image in a competitive market.
- The globalisation pushes the organisation to cross national boundaries and deal with cultural diversity, which may have a detrimental impact if the organisation lacks the cultural intelligence.
The Clarkson Lumber Co SWOT Analysis requires Clarkson Lumber Co to differentiate between threats having short-term or long-term implications. Threats with immediate implications need to be addressed on a priority basis to avoid any possible harm. While threats with long-term implications can be tackled after addressing the immediate threatening factors.
Advantages and Limitations of SWOT analysis for Clarkson Lumber Co
The detailed SWOT analysis can help the Clarkson Lumber Co to exploit the opportunities by leveraging internal strengths quicker than competitors. SWOT analysis offers various advantages to the Clarkson Lumber Co as explained below:
- It can provide useful information for developing wise business strategies.
- It enables the Clarkson Lumber Co to maximise its strengths, overcome the weaknesses, reduce threats and exploit opportunities.
- Clarkson Lumber Co can identify the core competencies, do market projections and do future planning.
However, SWOT analysis of Clarkson Lumber Co has certain limitations that the company must consider to achieve its strategic objectives.
- Sometimes, it is difficult to recognise the difference between opportunities and threats as the same opportunity can act as a major threat if the firm is unable to exploit it in a timely manner.
- It oversimplifies the process of identifying strengths, weaknesses, opportunities and threats. The identified factors are not ranked according to their importance and urgency, due to which SWOT provides only limited information.
- The complex interdependency between the internal (strengths/weaknesses) and external (opportunities/threats) environmental factors make the analysis more difficult.
- SWOT analysis does not consider the dynamic nature of a quickly changing environment.
- The SWOT analysis does not offer solutions or provide alternative strategies.
- The identification of strengths, weaknesses, opportunities and threats generates a bulk of information which may only be useful to a limited extent.
The above-mentioned Limitations of SWOT Analysis for Clarkson Lumber Co indicate the need to adopt a holistic view. Recognising and understanding these limitations can further improve the strategic decision-making process.
Weighted SWOT analysis
- Weighted approach to Clarkson Lumber Co SWOT Analysis is used to assign weights after identifying strengths, weaknesses, opportunities and threats.
- The decision-making based on weighted SWOT analysis can strengthen the Strategic competitiveness of Clarkson Lumber Co and lead towards more informative strategic analysis.
- The weights are assigned by considering the probability of occurrence, intensity and impact on the environment.
- The weight assigning allows Clarkson Lumber Co to determine which areas need to be focused, which areas can be avoided for short-term and which areas can be avoided for long-term due to low importance
Although, weighted SWOT analysis is a better approach than the traditional, un-weighted SWOT analysis. However, weighted SWOT analysis is also not without limitations. For example, this approach does not offer a broader overview of how internal and external environmental factors collectively influence the business in the short and long-run.
Advanced SWOT analysis
Clarkson Lumber Co SWOT Analysis can be further enhanced by adopting the advanced SWOT analysis technique. The application of advanced SWOT analysis can enhance the Strategic competitiveness of Clarkson Lumber Co by providing more useful and detailed information. To do this, Clarkson Lumber Co combines the strengths-opportunities, weaknesses-opportunities, strengths-threats, weaknesses-threats.
- Using strengths to exploit opportunities- SO.
- Reducing weaknesses to exploit opportunities- WO.
- Using strengths to reduce the threats- ST.
- Reducing weaknesses to reduce threats- WT.
The table given below provides some examples of each combination:
The geographic presence of Clarkson Lumber Co in different regions can help the organisation to get into the international market and target the geographically dispersed customer base (S1, O7).
Project management practices can be improved to exploit the opportunities offered by emerging market segments. It will allow the organisation to successfully handle new product development projects (W10, O7).
Strong online presence on different social networking sites of Clarkson Lumber Co can allow the organisation to exploit opportunities offered by growing e-commerce trend (S3, O6).
Clarkson Lumber Co can reduce the job stress and increase workers’ morale to launch new and creative products by exploiting creative thinking capabilities of its workforce (W12, O6).
The well-developed and efficiently integrated IT infrastructure of Clarkson Lumber Co allow it to take advantage of emerging innovative technologies (S7, O3).
Clarkson Lumber Co can improve the customer service to generate the positive word of mouth on different social networking sites (W8, O6).
Clarkson Lumber Co's access to the suppliers that offer raw material at a lower cost can help it overcome the threat imposed by rising inflation (S5, T4).
An organisation may increase the expenditure on the research and development activities to cope the competitive pressure due to the rising number of indirect and direct competitors (W5, T3).
Competent and committed human capital of Clarkson Lumber Co can overcome the labour shortage problem in the market (S8, T2).
The organisation can improve waste management practices and integrate sustainability in business operations. It will help the organisation to effectively handle environmental pressure (W1, T6).
Workplace diversity can help an organisation to take the globalisation as an opportunity instead of threat due to high cross-cultural intelligence (S10, T7).
The pricing strategy can be resettled and realigned to maximise the value for money and overcome challenges imposed by deteriorating economic conditions (W7, T4).
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