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BlueLinx Holdings SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by BlueLinx Holdings managers to do a situational analysis of the organization . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) BlueLinx Holdings is facing in its current business environment.
The BlueLinx Holdings is one of the leading organizatations in its industry. BlueLinx Holdings maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly 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 facilitates 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 BlueLinx Holdings 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 primary purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect BlueLinx Holdings strengths, and eradicate its weaknesses.
Step by Step Guide to BlueLinx Holdings SWOT Analysis
Strengths of BlueLinx Holdings – Internal Strategic Factors
As one of the leading companies in its industry, BlueLinx Holdings has numerous strengths that enable 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 BlueLinx Holdings are –
- Successful track record of developing new products – product innovation.
- Automation of activities brought consistency of quality to BlueLinx Holdings products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong distribution network – Over the years BlueLinx Holdings has built a reliable distribution network that can reach majority of its potential market.
- Strong Brand Portfolio – Over the years BlueLinx Holdings has invested in building a strong brand portfolio. The SWOT analysis of BlueLinx Holdings just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – BlueLinx Holdings 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.
- 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.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Good Returns on Capital Expenditure – BlueLinx Holdings is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Weakness of BlueLinx Holdings – Internal Strategic Factors
Weakness are the areas where BlueLinx Holdings can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Investment in Research and Development is below the fastest growing players in the industry. Even though BlueLinx Holdings is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- 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 BlueLinx Holdings is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- High attrition rate in work force – compare to other organizations in the industry BlueLinx Holdings has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- The profitability ratio and Net Contribution % of BlueLinx Holdings are below the industry average.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- 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. BlueLinx Holdings has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
Opportunities for BlueLinx Holdings – External Strategic Factors
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of BlueLinx Holdings.
- Government green drive also opens an opportunity for procurement of BlueLinx Holdings products by the state as well as federal government contractors.
- The new technology provides an opportunity to BlueLinx Holdings 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.
- The market development will lead to dilution of competitor’s advantage and enable BlueLinx Holdings to increase its competitiveness compare to the other competitors.
- 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 BlueLinx Holdings to drive home its advantage in new technology and gain market share in the new product category.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of BlueLinx Holdings’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.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as BlueLinx Holdings to increase its profitability.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for BlueLinx Holdings. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Threats BlueLinx Holdings Facing - External Strategic Factors
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of BlueLinx Holdings
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Imitation of the counterfeit and low quality product is also a threat to BlueLinx Holdings’s product especially in the emerging markets and low income markets.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Rising raw material can pose a threat to the BlueLinx Holdings profitability.
- 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 BlueLinx Holdings
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 BlueLinx Holdings
- 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 BlueLinx Holdings
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 BlueLinx Holdings 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 BlueLinx Holdings
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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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)
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