Toll Brothers, Inc. SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Toll Brothers, Inc. is one of the leading organizatations in its industry. Toll Brothers, Inc. maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

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The SWOT Analysis framework helps 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 Toll Brothers, Inc. to develop four types of strategies:

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

Toll Brothers, Inc. swot analysis / matrix

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Toll Brothers, Inc. strengths, and eradicate its weaknesses.

Step by Step Guide to Toll Brothers, Inc. SWOT Analysis

Strengths of Toll Brothers, Inc. – Internal Strategic Factors

As one of the leading firms in its industry, Toll Brothers, Inc. 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 Toll Brothers, Inc. are –

Read - Toll Brothers, Inc. Porter 5 Forces Analysis & Industry Analysis
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Strong Brand Portfolio – Over the years Toll Brothers, Inc. has invested in building a strong brand portfolio. The SWOT analysis of Toll Brothers, Inc. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Automation of activities brought consistency of quality to Toll Brothers, Inc. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Good Returns on Capital Expenditure – Toll Brothers, Inc. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
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.
Successful track record of developing new products – product innovation.
Highly skilled workforce through successful training and learning programs. Toll Brothers, Inc. is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
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 Free Cash Flow – Toll Brothers, Inc. has strong free cash flows that provide resources in the hand of the company to expand into new projects.

Weakness of Toll Brothers, Inc. – Internal Strategic Factors

Weakness are the areas where Toll Brothers, Inc. 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.

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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. Toll Brothers, Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
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 Toll Brothers, Inc.
Limited success outside core business – Even though Toll Brothers, Inc. is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Toll Brothers, Inc. 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.
Investment in Research and Development is below the fastest growing players in the industry. Even though Toll Brothers, Inc. 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 Toll Brothers, Inc. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.

Opportunities for Toll Brothers, Inc. – External Strategic Factors

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Government green drive also opens an opportunity for procurement of Toll Brothers, Inc. products by the state as well as federal government contractors.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Toll Brothers, Inc. to increase its profitability.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Toll Brothers, Inc. to capture new customers and increase its market share.
The market development will lead to dilution of competitor’s advantage and enable Toll Brothers, Inc. to increase its competitiveness compare to the other competitors.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Toll Brothers, Inc..
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 Toll Brothers, Inc. to drive home its advantage in new technology and gain market share in the new product category.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Toll Brothers, Inc. an opportunity to enter a new emerging market.
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 Toll Brothers, Inc. in other product categories.

Threats Toll Brothers, Inc. Facing - External Strategic Factors

Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Toll Brothers, Inc.
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.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Toll Brothers, Inc. in those markets.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Imitation of the counterfeit and low quality product is also a threat to Toll Brothers, Inc.’s product especially in the emerging markets and low income 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.
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.

Limitations of SWOT Analysis for Toll Brothers, Inc.

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 Toll Brothers, Inc.
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.

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Weighted SWOT Analysis of Toll Brothers, Inc.

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 Toll Brothers, Inc. 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 Toll Brothers, Inc.

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

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

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)