Universal Forest Products SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Universal Forest Products managers to do a situational analysis of the firm . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Universal Forest Products is facing in its current business environment.

The Universal Forest Products is one of the leading companies in its industry. Universal Forest Products maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Universal Forest Products to develop four types of strategies:

• SO (strengths-opportunities) Strategies
• WO (weaknesses-opportunities) Strategies
• ST (strengths-threats) Strategies
•  WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Universal Forest Products strengths, and eradicate its weaknesses.

Step by Step Guide to Universal Forest Products SWOT Analysis

Strengths of Universal Forest Products – Internal Strategic Factors

As one of the leading companies in its industry, Universal Forest Products has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Universal Forest Products are –

• Good Returns on Capital Expenditure – Universal Forest Products is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
• Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
• Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
• Strong distribution network – Over the years Universal Forest Products has built a reliable distribution network that can reach majority of its potential market.
• Highly successful at Go To Market strategies for its products.
• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
• Superb Performance in New Markets – Universal Forest Products has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
• Automation of activities brought consistency of quality to Universal Forest Products products and has enabled the company to scale up and scale down based on the demand conditions in the market.

Weakness of Universal Forest Products – Internal Strategic Factors

Weakness are the areas where Universal Forest Products can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

• Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Universal Forest Products
• The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Universal Forest Products has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
• Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Universal Forest Products needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
• Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Universal Forest Products is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• Not highly successful at integrating firms with different work culture. As mentioned earlier even though Universal Forest Products is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
• There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.

Opportunities for Universal Forest Products – External Strategic Factors

• New trends in the consumer behavior can open up new market for the Universal Forest Products . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• The new technology provides an opportunity to Universal Forest Products to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Universal Forest Products to capture new customers and increase its market share.
• Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Universal Forest Products’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
• Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
• New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Universal Forest Products to drive home its advantage in new technology and gain market share in the new product category.
• Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Universal Forest Products in other product categories.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Universal Forest Products an opportunity to enter a new emerging market.

Threats Universal Forest Products Facing - External Strategic Factors

• New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
• Rising raw material can pose a threat to the Universal Forest Products profitability.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
• Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Universal Forest Products   in those markets.
• As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
• Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
• Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.

Limitations of SWOT Analysis for Universal Forest Products

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

• Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
• SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
• The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Universal Forest Products
• SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
• SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Universal Forest Products

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Universal Forest Products managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Universal Forest Products

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

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References / Citations & Bibliography

• M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
• A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
• O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
• L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
• R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)