LP Laboratories Ltd.: Financing Working Capital SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of LP Laboratories Ltd.: Financing Working Capital
This case sets the context of a fast growing company; it is financing and working capital requirements and important aspects the banker should consider while extending the facilities and how the banker can structure working capital solutions. The case is intended to challenge the students and practising executives to understand the financial statements of a corporate entity from a banker's perspective, working capital loan decision process, and assessment of working capital requirements. It provides a comprehensive understanding about the types of financial products being extended by banks to a large corporate entity, especially in working capital finance. These include a demand loan of working capital, overdraft/cash credit pre- and post-sales finance against exports, and finance against instruments such as bills discounting and extending financial support on the basis of letter of credit (LC) mechanism. Students are expected to assume the position of the banker and raise various questions to the borrowing firm and utilize effectively the credit monitoring tools such as review of current account transactions, funds flow statement, financial statement analysis, and so on. This case helps in understanding the intriguing relationship between accounting profits, cash flows, operating cycle, and working capital of the company. Finally, the case concludes with structuring a working capital finance solution.
Swot Analysis of "LP Laboratories Ltd.: Financing Working Capital" written by Jayadev M includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Capital Banker facing as an external strategic factors. Some of the topics covered in LP Laboratories Ltd.: Financing Working Capital case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the LP Laboratories Ltd.: Financing Working Capital casestudy better are - – there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
cloud computing is disrupting traditional business models, geopolitical disruptions, etc
Introduction to SWOT Analysis of LP Laboratories Ltd.: Financing Working Capital
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in LP Laboratories Ltd.: Financing Working Capital case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Capital Banker, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Capital Banker operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of LP Laboratories Ltd.: Financing Working Capital can be done for the following purposes –
1. Strategic planning using facts provided in LP Laboratories Ltd.: Financing Working Capital case study
2. Improving business portfolio management of Capital Banker
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Capital Banker
Strengths LP Laboratories Ltd.: Financing Working Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Capital Banker in LP Laboratories Ltd.: Financing Working Capital Harvard Business Review case study are -
High brand equity
– Capital Banker has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Capital Banker to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Capital Banker has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Capital Banker has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Capital Banker is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jayadev M can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Capital Banker in the sector have low bargaining power. LP Laboratories Ltd.: Financing Working Capital has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Capital Banker to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Capital Banker is one of the leading recruiters in the industry. Managers in the LP Laboratories Ltd.: Financing Working Capital are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Capital Banker
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Capital Banker does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Capital Banker is present in almost all the verticals within the industry. This has provided firm in LP Laboratories Ltd.: Financing Working Capital case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Capital Banker has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study LP Laboratories Ltd.: Financing Working Capital - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Capital Banker is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Capital Banker has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Finance & Accounting industry
– LP Laboratories Ltd.: Financing Working Capital firm has clearly differentiated products in the market place. This has enabled Capital Banker to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Capital Banker to invest into research and development (R&D) and innovation.
Training and development
– Capital Banker has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in LP Laboratories Ltd.: Financing Working Capital Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses LP Laboratories Ltd.: Financing Working Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LP Laboratories Ltd.: Financing Working Capital are -
High operating costs
– Compare to the competitors, firm in the HBR case study LP Laboratories Ltd.: Financing Working Capital has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Capital Banker 's lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Capital Banker is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study LP Laboratories Ltd.: Financing Working Capital can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study LP Laboratories Ltd.: Financing Working Capital, is just above the industry average. Capital Banker needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Capital Banker has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Capital Banker is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Capital Banker needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Capital Banker to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Capital Banker products
– To increase the profitability and margins on the products, Capital Banker needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Capital Banker has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study LP Laboratories Ltd.: Financing Working Capital, in the dynamic environment Capital Banker has struggled to respond to the nimble upstart competition. Capital Banker has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Capital Banker, firm in the HBR case study LP Laboratories Ltd.: Financing Working Capital needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Capital Banker has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study LP Laboratories Ltd.: Financing Working Capital, it seems that the employees of Capital Banker don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities LP Laboratories Ltd.: Financing Working Capital | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study LP Laboratories Ltd.: Financing Working Capital are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Capital Banker to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Developing new processes and practices
– Capital Banker can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Capital Banker to increase its market reach. Capital Banker will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Capital Banker can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Using analytics as competitive advantage
– Capital Banker has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study LP Laboratories Ltd.: Financing Working Capital - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Capital Banker to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Capital Banker to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Capital Banker can use these opportunities to build new business models that can help the communities that Capital Banker operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Capital Banker can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Capital Banker is facing challenges because of the dominance of functional experts in the organization. LP Laboratories Ltd.: Financing Working Capital case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Capital Banker can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Capital Banker can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Creating value in data economy
– The success of analytics program of Capital Banker has opened avenues for new revenue streams for the organization in the industry. This can help Capital Banker to build a more holistic ecosystem as suggested in the LP Laboratories Ltd.: Financing Working Capital case study. Capital Banker can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Capital Banker has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Capital Banker can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. LP Laboratories Ltd.: Financing Working Capital suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats LP Laboratories Ltd.: Financing Working Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study LP Laboratories Ltd.: Financing Working Capital are -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Capital Banker in the Finance & Accounting sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Capital Banker high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Capital Banker can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study LP Laboratories Ltd.: Financing Working Capital .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Capital Banker can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Capital Banker needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Capital Banker can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Capital Banker in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Capital Banker.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Capital Banker has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Capital Banker needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– Capital Banker can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Capital Banker is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Capital Banker demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Capital Banker business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of LP Laboratories Ltd.: Financing Working Capital Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study LP Laboratories Ltd.: Financing Working Capital needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study LP Laboratories Ltd.: Financing Working Capital is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study LP Laboratories Ltd.: Financing Working Capital is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of LP Laboratories Ltd.: Financing Working Capital is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Capital Banker needs to make to build a sustainable competitive advantage.
