Lenzing AG: Expanding in Indonesia SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Lenzing AG: Expanding in Indonesia
In 1994, Lenzing AG, the world's largest rayon manufacturer, is deciding whether to expand production in South Pacific Viscose, its Indonesian subsidiary. Indonesia is a booming market for rayon, but management still has some concerns about the expansion. First, for the plant to remain successful, Lenzing's downstream customers--textile producers--must also remain in Indonesia. Second, despite being located in an area of tropical forests, the Indonesian plant has no local access to wood pulp, its most critical input. Finally, with the expansion, Lenzing would be increasing its exposure in a country that remains politically and economically uncertain.
Authors :: Lygeia Ricciardi, Laura Bures, Debora L. Spar
Swot Analysis of "Lenzing AG: Expanding in Indonesia" written by Lygeia Ricciardi, Laura Bures, Debora L. Spar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lenzing Rayon facing as an external strategic factors. Some of the topics covered in Lenzing AG: Expanding in Indonesia case study are - Strategic Management Strategies, Emerging markets, Growth strategy, Manufacturing and Global Business.
Some of the macro environment factors that can be used to understand the Lenzing AG: Expanding in Indonesia casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, technology disruption, there is backlash against globalization,
increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Lenzing AG: Expanding in Indonesia
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lenzing AG: Expanding in Indonesia case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lenzing Rayon, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lenzing Rayon 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 Lenzing AG: Expanding in Indonesia can be done for the following purposes –
1. Strategic planning using facts provided in Lenzing AG: Expanding in Indonesia case study
2. Improving business portfolio management of Lenzing Rayon
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lenzing Rayon
Strengths Lenzing AG: Expanding in Indonesia | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lenzing Rayon in Lenzing AG: Expanding in Indonesia Harvard Business Review case study are -
Learning organization
- Lenzing Rayon is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lenzing Rayon is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lenzing AG: Expanding in Indonesia Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Lenzing Rayon digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lenzing Rayon has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Lenzing Rayon has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lenzing Rayon 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.
Ability to recruit top talent
– Lenzing Rayon is one of the leading recruiters in the industry. Managers in the Lenzing AG: Expanding in Indonesia are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Lenzing Rayon 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 Lenzing AG: Expanding in Indonesia - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Lenzing Rayon has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lenzing AG: Expanding in Indonesia 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.
Strong track record of project management
– Lenzing Rayon is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Lenzing Rayon is present in almost all the verticals within the industry. This has provided firm in Lenzing AG: Expanding in Indonesia 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.
Sustainable margins compare to other players in Global Business industry
– Lenzing AG: Expanding in Indonesia firm has clearly differentiated products in the market place. This has enabled Lenzing Rayon to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Lenzing Rayon to invest into research and development (R&D) and innovation.
Organizational Resilience of Lenzing Rayon
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lenzing Rayon does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Global Business field
– Lenzing Rayon is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lenzing Rayon in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Lenzing Rayon is one of the most innovative firm in sector. Manager in Lenzing AG: Expanding in Indonesia Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Lenzing AG: Expanding in Indonesia | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lenzing AG: Expanding in Indonesia are -
High bargaining power of channel partners
– Because of the regulatory requirements, Lygeia Ricciardi, Laura Bures, Debora L. Spar suggests that, Lenzing Rayon is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Skills based hiring
– The stress on hiring functional specialists at Lenzing Rayon 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lenzing Rayon supply chain. Even after few cautionary changes mentioned in the HBR case study - Lenzing AG: Expanding in Indonesia, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lenzing Rayon vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Lenzing Rayon has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lenzing Rayon even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lenzing AG: Expanding in Indonesia HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Lenzing Rayon has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Lenzing Rayon, firm in the HBR case study Lenzing AG: Expanding in Indonesia needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Lenzing AG: Expanding in Indonesia 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 Lenzing Rayon 's lucrative customers.
Interest costs
– Compare to the competition, Lenzing Rayon has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Products dominated business model
– Even though Lenzing Rayon has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Lenzing AG: Expanding in Indonesia should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lenzing AG: Expanding in Indonesia, is just above the industry average. Lenzing Rayon 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.
Increasing silos among functional specialists
– The organizational structure of Lenzing Rayon is dominated by functional specialists. It is not different from other players in the Global Business segment. Lenzing Rayon needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lenzing Rayon to focus more on services rather than just following the product oriented approach.
Opportunities Lenzing AG: Expanding in Indonesia | 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 Lenzing AG: Expanding in Indonesia are -
Building a culture of innovation
– managers at Lenzing Rayon can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Buying journey improvements
– Lenzing Rayon can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lenzing AG: Expanding in Indonesia 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lenzing Rayon in the consumer business. Now Lenzing Rayon can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lenzing Rayon in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lenzing Rayon can use these opportunities to build new business models that can help the communities that Lenzing Rayon operates in. Secondly it can use opportunities from government spending in Global Business sector.
Better consumer reach
– The expansion of the 5G network will help Lenzing Rayon to increase its market reach. Lenzing Rayon 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.
Developing new processes and practices
– Lenzing Rayon can develop new processes and procedures in Global Business 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lenzing Rayon can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lenzing Rayon can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lenzing Rayon can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Lenzing Rayon has opened avenues for new revenue streams for the organization in the industry. This can help Lenzing Rayon to build a more holistic ecosystem as suggested in the Lenzing AG: Expanding in Indonesia case study. Lenzing Rayon can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lenzing Rayon is facing challenges because of the dominance of functional experts in the organization. Lenzing AG: Expanding in Indonesia 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 Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lenzing Rayon 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. Lenzing Rayon 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.
Threats Lenzing AG: Expanding in Indonesia External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lenzing AG: Expanding in Indonesia are -
High dependence on third party suppliers
– Lenzing Rayon 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.
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 Lenzing Rayon.
Environmental challenges
– Lenzing Rayon 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. Lenzing Rayon can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Consumer confidence and its impact on Lenzing Rayon 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.
Increasing wage structure of Lenzing Rayon
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lenzing Rayon.
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 Lenzing Rayon in the Global Business sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lenzing Rayon can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lenzing AG: Expanding in Indonesia, Lenzing Rayon may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lenzing Rayon will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology acceleration in Forth Industrial Revolution
– Lenzing Rayon has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Lenzing Rayon needs to keep up with the evolution of technology in the Global Business 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.
Regulatory challenges
– Lenzing Rayon needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lenzing Rayon needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Lenzing AG: Expanding in Indonesia 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 Lenzing AG: Expanding in Indonesia 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 Lenzing AG: Expanding in Indonesia 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 Lenzing AG: Expanding in Indonesia 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 Lenzing AG: Expanding in Indonesia 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 Lenzing Rayon needs to make to build a sustainable competitive advantage.
