ABC XYZ Asphalt Paving: SWOT Analysis

Final Project Milestone Two: SWOT Analysis 2

ABC-XYZ Asphalt Paving is a commercial construction paving company located in western Massachusetts. It is a relatively small, fully licensed and insured owner-operated company. The company has been around for two generations since 1952 and a local landmark in its hometown. There are three locations, each with a truck depot and onsite aggregate and hot asphalt mix readily available. ABC-XYZ Asphalt Paving paves highways, on and off ramps and bike paths on state government bids, additionally they provide businesses with services for their parking lots, and private homeowners and real estate firms use them for driveway paving and sealing services.

Their motto is “No job is too big or too small. We’ve got you covered, ABC through XYZ!”

This SWOT analysis will analyze the internal strength and weaknesses of the company and the direction it is going. A close look will be taken at any external opportunities for growth while attempting to mitigate any threats to successful, continued growth. Let’s look at the SWOT quadrants and (4) strengths, (4) weaknesses, (4) opportunities and (4) threats as they apply both positively and negatively to the future of ABC-XYZ Asphalt Paving.

Strengths

Weakness

•  Versatile market
•  Experienced owner
•  High profitability
•  Able to promote online
•  Competitors can offer comparable product
•  Relying on a niche market
•  Limited price flexibility
•  High transportation costs

External

Opportunities

Threats

•  Continued online expansion
•  Development of proprietary products
•  Development of wholesale distribution relationships
•  Diversify services in off season
•  Economic downturn
•  Changes in regulations
•  Increase in prices of resources
•  Competitive products

(Mind Tools, 2020)

ABC-XYZ Asphalt Paving: Prioritized List

Strengths

Versatile market: ABC-XYZ Asphalt Paving has been diversifying their clientele base for many years. Their paving and sealcoating services are utilized by industrial, commercial and residential clientele. It is a strength because when there is an economic downturn and residential clients might hold off on those upgrades and repairs they were hoping to do, there is still an opportunity for a government paving bid. Highway infrastructure still needs to be maintained regardless of cost of living increases, stock market fluctuations and fear of the unknown. And vice versa, if a competing paving company underbids them for a government contract, they still have their commercial and residential paving jobs to keep them in business.

Experienced owner: ABC-XYZ Asphalt Paving has been a family run business since 1952 when they opened their doors. They have shown consistency, and generational growth through a variety of economies; financial depressions, recessions, and economic expansions (Business Dictionary, 2020). This experience is something a new up and coming asphalt company may not have.

High profitability: ABC-XYZ Asphalt Paving has been diversifying their clientele base across industrial, commercial and residential clients and showing signs of continued growth both financially and as a name in the community. This results in a profitable venture and a good reputation.

Able to promote online: ABC-XYZ Asphalt Paving, while a community icon, is able to reach out beyond its backyard and venture into new territory with its ability to advertise its services online to new communities therefore expanding its growth. What started out as a one location business has expanded and grown to three locations, due to their ability to promote their business and utilize their solid reputation which they earned from the beginning.

Weaknesses

Competitors can offer comparable products: In a competitive business market, a company runs the risk of losing business to another establishment vying for the same customer base. ABC-XYZ Asphalt Paving is no stranger to this weakness. They have to be ever aware of their environment, their competitors, their client’s needs and market their product in a way that their product and services stand out.

Relying on a niche market: ABC-XYZ Asphalt Paving offers a product and service that can be limited by weather conditions. Their location in Massachusetts can impact their business production due to extreme cold, or snowfall and ice accumulation. While their marketing is not a niche market (they diversify their market), their paving service could be considered so due to the limitations set by seasonal weather. An especially hard season can put the business out of work for a while. This impacts employee wages, overhead and business payables. An offseason use for their equipment and workforce would be of great use at this time. The addition of snow removal services would absorb some of the impact of lost revenue.

Limited price flexibility: Price flexibility is a business in which the final price is open to negotiation (Market Business News, 2020). This is limited due to the competitive nature of the business. This is a business weakness because a business cannot afford to lose money on a contract. In order to account for this ABC-XYZ Asphalt Paving has used their reputation for exemplary customer service and accommodation to win over and acquire some of their contracts.

High transportation costs: A weakness that cannot be avoided by ABC-XYZ Asphalt Paving (or any other paving company in the area) is that of transportation costs. Fuel, highway permits and tolls are a standard cost of business and out of the control of the business. Well thought out trips, and taking one truck instead of two if possible, and no excess waste of fuel driving around will help to keep financial waste to a minimum, but it cannot always be avoided.

Opportunities

Continued online expansion: ABC-XYZ Asphalt Paving uses online promotion of their business as a strength. This is also a strong opportunity to continue promoting their business. They can not only promote their business through their website and search engines, they can advertise through targeted marketing on social media bringing their business for the forefront of everyone who even “thought” the words paving or driveway.

Development of proprietary products: The development of proprietary products will also be an opportunity for ABC-XYZ Asphalt Paving to stand out from the masses. The development of something that will benefit their clientele and is legally patented to them will be beneficial, such as a driveway sealer with a heat melt property in winter weather that melts snow and ice from the radiation of the sun.

Development of wholesale distribution relationships: ABC-XYZ Asphalt Paving has an opportunity to increase profit by developing wholesale distributor relationships. This will offer ABC-XYZ Asphalt Paving the best pricing and quality products (Gil, 2020).

Diversify services in off season: Concerns about off season income during inclement weather could be offset by adding plows to their heavy equipment and contracting for snow and ice removal with city and state highways departments. The equipment already owned could be used to bring in additional revenue and the workers who would otherwise be home would still be bringing in a paycheck.

Threats

Economic downturn: Economic downturns such as recessions, depressions and stock plummets can be a real threat to businesses including ABC-XYZ Asphalt Paving. Clients will put off repairs they otherwise would have done because they may not have available funds or due to financial anxiety. This could be alleviated by a state government contract for highway repair. State infrastructure always has to be taken care of regardless of the state of the economy.

Changes in regulations: Changes in state regulations are a threat to ABC-XYZ Asphalt Paving because it results in a change to paperwork processes and time allotments for projects, any deviation in the new regulations will cost the company financial sanctions. This threat can be mitigated through careful analysis of changes in regulations and appropriate accounting for the new implementations.

Increase in prices of resources: Increases in the price of resources will require an increase on the client’s end. This could become problematic as a competitor may have a different supplier whose prices have yet to change. ABC-XYZ Asphalt Paving will have to assess whether they can afford to absorb the cost or hope their stellar reputation will be worth the extra cost to the client.

Competitive products: Competitive products to a new client may all look the same. This could cause the client to jump on the lowest price. ABC-XYZ Asphalt Paving will have to prove their product stands out and give a valid layman’s rationale in order to stand out to the uneducated buyer.

ABC-XYZ Asphalt Paving: Readiness

ABC-XYZ Asphalt Paving has taken its strength of experience in business as a lucrative business owner since 1952 with a well established reputation in the community and expanded their business to three various locations. They have an innate ability to promote their products and services online reaching even more people than their reputation brings in by word of mouth and they diversify their clientele across multiple client bases.

ABC-XYZ Asphalt Paving faces potential weaknesses when facing competitive products and a seasonal window of suspended business due to inclement weather. Limited price flexibility and high transportation costs are also potential issues. These weaknesses can be mitigated through a thorough analysis of their clientele, their competition, their products and how to sell themselves as the go-to people for the products and services needed. The key is to really know your market and sell strong. Suspended service due to inclement weather can be offset by working during inclement weather; using the equipment they already own to pull in money when the equipment would otherwise be sitting idle. There really isn’t much that can be done about high transportation costs. It could be said it’s just the cost of doing business.

ABC-XYZ Asphalt Paving has some opportunities they can take advantage of. They can continue to be an online presence by marketing their products through social media ads. Snow removal in the off season will bring in additional revenue to the company and employees. Developing wholesale distributor relationships would help them acquire the best pricing on quality products and developing proprietary products would open a whole new realm of specialty for the company.

Several threats analyzed can be rerouted with diligence and sound marketing. Increased in prices in business resources is not a good thing to happen, but it isn’t insurmountable. The business can absorb some of the cost in order to keep their clients but should also use their stellar reputation to maintain the current business clientele. It is worth paying a little bit more for the peace of mind of guaranteed work from a reputable provider. Regulatory changes should be watched closely and complied with in order to offset any financial sanctions. This is where diligence comes into play; paperwork, due dates, etc. must be followed to the new standard. Threats of competition can be addressed by sound marketing. Know your client. Speak to them in language they understand. When and if the economy takes a downward turn and people are tightening their purse strings, turn toward your industrial contracts and subcontract for city and or state highway departments.

Overall, ABC-XYZ Asphalt Paving is in a good position financially and has solid recourse to any weaknesses or threats that present themselves. It will just take a diligent manager to oversee the management of the business and great marketing to keep selling to the public.

References

1. Business Dictionary. (2020, February 16). Economic Expansion. Retrieved from Business Dictionary: http://www.businessdictionary.com/definition/economic-expansion.html
2. Gil, G. (2020, February 16). How to Develop Relationships with Wholesalers. Retrieved from Ecommerce University: https://www.3dcart.com/ecommerce-university/how-to-develop-relationships-with-wholesalers.html
3. Market Business News. (2020, February 16). What is flexible pricing? Definition and examples. Retrieved from Market Business News: https://marketbusinessnews.com/financial-glossary/flexible-pricing/
4. Mind Tools. (2020, Februarry 16). SWOT Analysis. Retrieved from Mind Tools: https://www.mindtools.com/pages/article/newTMC_05.htm

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