Patrick Industries SWOT Analysis

The purpose of this paper is perform a SWOT analysis (strengths, weaknesses, opportunities, threats) on the company Patrick Industries, INC. This company is primarily known for being a household/business supplies distributor that is headquartered in northern Indiana with many other distribution facilities. After a brief introduction to the company, we will dive into the SWOT analysis on Patrick Industries. This SWOT analysis list many internal and external forces that are at work within the company. Some of the most prominent strengths being Patrick Industries’ extensive supplier network and their ability to bounce back from difficult financial situations. In contrast to these strengths, Patrick Industries’ weaknesses hit on some marketing issues as well as quite a few other things. To begin discussing the external forces, Patrick Industries has a lot of opportunities available to make their company even more successful. These opportunities primarily focus on online channels and possibly adding a service to their product based company. The final external force is threats to the company, and the main one of those is the fluctuating economic company (minimum wage debates, more foreign laws, etc). After Patrick Industries SWOT analysis, their competitive advantage is stated. Patrick Industries really has two major distinctive competencies but only one real competitive advantage. The distinctive competencies include their innovative CEO, Todd Cleveland, and their strong relationship with suppliers. However, their supplier relationships is the only one that qualifies as a competitive advantage. This is due to the fact that these contracts make these relationships sustainable. Finally, an overview of Patrick Industries financials shows that they are in a good spot and will most likely continue to be. They are above industry averages (links back to competitive advantage) and have a positive outlook for the future. 

Introduction

Patrick Industries, Inc. was founded in 1959 by Mervin Lung. Lung was a hardworking entrepreneur that had already dappled in several industries before starting Patrick Industries. Patrick Industries started as a small building supply store in Northern Indiana and is now a worldwide distributor of many miscellaneous household building products. These building products include office and household furniture, kitchen cabinets, vinyl and laminated peels, hardwood furniture, and much more. Along with this, they are also a major manufacturer for the Recreational Vehicle, Manufacturing Housing, and Marine Industries. Patrick Industries has manufacturing plants in the United States, the Netherlands, and China and these manufacturing plants add up to over 110 facilities.

SWOT Analysis

Patrick Industries is one of the leading companies in their market and it is no accident that they continue to rise and prosper. The managers and strategist of Patrick Industries constantly analyze their SWOT matrix to see what can be approved on. They then contact multiple departments within the company (marketing, finance, operations, MIS, strategic planning) and use all of the departments inputs to develop in depth strategies. Some of the main strengths, weaknesses, opportunities, and threats of Patrick Industries are discussed below.

Strengths

Patrick Industries has several strong internal strengths. These internal strengths include reliable suppliers, efficient training programs, ability to bounce back from failures, success when entering new markets, success with go to market strategies for products, consistency, innovative products, and a strong distribution network. Due to being in the market for almost sixty years, Patrick Industries has developed a huge network of suppliers, as well as consumers. This large network of raw material suppliers allows them to overcome any bottleneck situation that newer companies may face. Another strength that Patrick Industries has over competitors is their ability to gain control in new markets. This gain has allowed them to excel when introducing products to new markets, as well as allowed them to build up new revenue streams.

Weaknesses

Despite their strengths, Patrick Industries does also have several weak points in their company. These weaknesses include the fact that their marketing is lackluster, they have lost small amounts of their market share to new entrants, days inventory is high compared to others, and they need to take advantage of new technology. Even though Patrick Industries’ products sell well, they are not marketed well at all. Their marketing campaigns leaves a lot to be desired in their positioning and unique selling proposition. Patrick Industries really needs to focus on their marketing techniques because it is not beneficial to have a boring unique selling proposition when trying to establish a strong distinctive competency over competitors. Along with this, Patrick Industries days inventory length is also a disadvantage. Their days inventory length being longer than other companies is forcing them to put more money into that channel in order to hold and distribute inventory at a longer turnover rate. Whereas, the money being used in that channel could be used somewhere else to benefit the company. This wasting of money could possibly affect their long term growth.

Opportunities

The weaknesses and threats of Patrick Industries shows them that there are a lot of opportunities for growth that they could advance on. These external opportunity factors include new technology, government agreement is opening up more new markets, online channel bringing in new customers, and investment opportunities are rising. These opportunities bring many solutions to some of their problems. Some of these solutions include experimenting with making their products with different materials, possibly adding a service to their business model, developing better marketing campaigns with all of the new technology, and focusing on the core needs of customers.

Threats

The external threats include rising pay level, continuous economic fluctuations, rising raw material costs, local distributors gaining footing in the industry, and shortage of skilled workers. The continuous economic fluctuations is Patrick industries main threat; this is due to the fact that they can now face different laws in varying markets concerning their products. Rising pay levels is another significant threat, with the $15 minimum wage debate and increasing pay rate in China; Patrick Industries may eventually be forced to up their wages which would lower their profitability.

Competitive Advantage

Patrick Industries competitive advantage largely has to do with their current CEO, Todd Cleveland, and their positive brand recognition/supplier network. Most companies in the same industry have not performed as well as Patrick Industries and Todd Cleveland is to thank for that. Cleveland was thrown into the CEO position in 2009, which just so happened to be Patrick Industries’ worst financial year to date. However, Cleveland was able to use his innovative ideas and skillset to turn Patrick Industries into a billion dollar company while still remaining one of the “cheaper” companies in the industry. Along with Cleveland being a major asset, Patrick Industries’ extensive supplier network is also a large advantage. As mentioned earlier, due to being in business over sixty years, Patrick Industries has managed to form strong relationships with multiple suppliers. These supplier relationships are an advantage because some of the relationships have contracts to ensure that the agreement cannot be severed. Along with this, some of the suppliers also offer Patrick Industries discounts for working with them for so long; these discounts are not offered to newer companies.

Does Patrick Industries have a competitive Advantage?

To answer this question, yes Patrick Industries does have a competitive advantage. The primary one being the reliable relationships they have established with suppliers. These supplier relationships give them a step up from other competitors because they get better rates and quicker/more efficient products.

Is it sustainable?

Patrick Industries’ competitive advantage is sustainable because quite a few of the relationships have contracts that both parties have agreed to. These contracts makes it sustainable because it acts as a way to ensure that both parties will stay true to the contract and cannot easily be forfeited without legal issues.

Is Patrick Industries earning above normal profits?

Patrick Industries is earning above normal profits; their gross profit, net profit, and share prices are all above the industry average. Their gross profit and profit have fluctuated the past few years but have managed to be constant the last few years. In contrast to this, their stock share prices have stayed above competitor’s prices easily.

Financial Overview

Along with earning above normal profits and having an 11.4% growth of expected annual earnings, Patrick Industries also has a very good position of debt ratio. Their total debt ratio is 29% which more than covers their current debts. In relation to their 11.4% expected growth rate, Patrick Industries has more than quadrupled their annual revenue since 2015.

Conclusion

To conclude, Patrick Industries is a very strong, profitable company that is expected to be around for many more years. So far, this company has done a fascinating job of staying on top and rebounding from failures (such as the recession that lead to their terrible financial year in 2009.) If Patrick Industries jumps on all of the opportunities they have for expansion and bettering their company, then there is no reason that this company will not continue to be a leader in their industry.

Resources

• D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
• About Us – Patrick Industries. (n.d.). Retrieved October 18, 2018 from http://patrickind.com/about-us/
• M. E. Porter, Competitive Strategy (New York: Free Press, 1980)
• Patrick Industries: Don't Bet Against Best In Class Management. (2018). Retrieved October 19, 2018 from https://seekingalpha.com/article/4066717-patrick-industries-bet-best-class-management
• Rankin, K. (2018, October 04). What You Must Know About Patrick Industries Inc's(NASDAQ:PATK) Financial Strength. Retrieved October 20, 2018, from                            https://simplywall.st/stocks/us/capital-goods/nasdaq-patk/patrick-              industries/news/what-you-must-know-about-patrick-industries-incs-nasdaqpatk-financial-strength/
• R. E. White, Generic Business Strategies, Organizational Context and Performance: An               Empirical Investigation, Strategic Management Journal7 (1986)