Larsen and Toubro: Spare Parts Forecasting SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Larsen and Toubro: Spare Parts Forecasting
Larsen and Toubro (L&T) was India's largest technology, engineering, construction and manufacturing company. Construction and Mining Business (CMB) sold equipment such as Dozer Shovels, Dozers, Dumpers, Hydraulic Excavators, Motor Graders, Pipe Layers, Surface Miners, Tipper Trucks, Wheel Dozers and Wheel Loaders. CMB also provided the services of equipment installation and commissioning and other maintenance services. Supply of spare parts was critical, since the customer faced severe losses in case of equipment unavailability. Forecasting was done on an ad hoc basis based on the experience of the planning personnel. The value of each spare part ranged from INR 10 to INR 8 Million. It was critical to maintain a correct balance for the spare-parts inventories, since unavailability led to loss of revenues, decreased profitability, customer dissatisfaction and also gave rise to the fake products industry. Excess inventory led to high inventory carrying costs, working capital lock-in and also a possibility of spare parts becoming obsolete. Vijaya Kumar, Deputy General Manager of CMB, had to arrive at a forecasting methodology with an error of less than 10% for the 20,000 odd spare-parts. This warranted for 20,000 forecasting models, however this was not only very time consuming but also very expensive to develop and manage. Kumar wanted to build the forecasting model quickly so that he could roll out the forecasting strategy on a pan-India basis within a few weeks.
Swot Analysis of "Larsen and Toubro: Spare Parts Forecasting" written by Suhruta Kulkarni, Prakash Hegde, Ruchi Jaiswal, Dinesh Kumar Unnikrishnan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Spare Forecasting facing as an external strategic factors. Some of the topics covered in Larsen and Toubro: Spare Parts Forecasting case study are - Strategic Management Strategies, Operations management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Larsen and Toubro: Spare Parts Forecasting casestudy better are - – technology disruption, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, supply chains are disrupted by pandemic ,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Larsen and Toubro: Spare Parts Forecasting
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Larsen and Toubro: Spare Parts Forecasting case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spare Forecasting, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spare Forecasting 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 Larsen and Toubro: Spare Parts Forecasting can be done for the following purposes –
1. Strategic planning using facts provided in Larsen and Toubro: Spare Parts Forecasting case study
2. Improving business portfolio management of Spare Forecasting
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Spare Forecasting
Strengths Larsen and Toubro: Spare Parts Forecasting | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spare Forecasting in Larsen and Toubro: Spare Parts Forecasting Harvard Business Review case study are -
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Spare Forecasting digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Spare Forecasting 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.
Innovation driven organization
– Spare Forecasting is one of the most innovative firm in sector. Manager in Larsen and Toubro: Spare Parts Forecasting Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Spare Forecasting in the sector have low bargaining power. Larsen and Toubro: Spare Parts Forecasting has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Spare Forecasting to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Spare Forecasting 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 Suhruta Kulkarni, Prakash Hegde, Ruchi Jaiswal, Dinesh Kumar Unnikrishnan 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.
Training and development
– Spare Forecasting has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Larsen and Toubro: Spare Parts Forecasting 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.
Highly skilled collaborators
– Spare Forecasting has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Larsen and Toubro: Spare Parts Forecasting HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Spare Forecasting
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Spare Forecasting does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Spare Forecasting in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Spare Forecasting 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 Larsen and Toubro: Spare Parts Forecasting - 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
– Spare Forecasting is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Leadership & Managing People industry
– Larsen and Toubro: Spare Parts Forecasting firm has clearly differentiated products in the market place. This has enabled Spare Forecasting to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Spare Forecasting to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Spare Forecasting 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.
Weaknesses Larsen and Toubro: Spare Parts Forecasting | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Larsen and Toubro: Spare Parts Forecasting are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Larsen and Toubro: Spare Parts Forecasting 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 Spare Forecasting has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Spare Forecasting 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.
No frontier risks strategy
– After analyzing the HBR case study Larsen and Toubro: Spare Parts Forecasting, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Spare Forecasting 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 - Larsen and Toubro: Spare Parts Forecasting should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Larsen and Toubro: Spare Parts Forecasting 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 Spare Forecasting 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Spare Forecasting 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.
High cash cycle compare to competitors
Spare Forecasting 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Larsen and Toubro: Spare Parts Forecasting, is just above the industry average. Spare Forecasting 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 Spare Forecasting is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Spare Forecasting needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Spare Forecasting to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Spare Forecasting needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Spare Forecasting 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. Spare Forecasting 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.
Opportunities Larsen and Toubro: Spare Parts Forecasting | 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 Larsen and Toubro: Spare Parts Forecasting are -
Creating value in data economy
– The success of analytics program of Spare Forecasting has opened avenues for new revenue streams for the organization in the industry. This can help Spare Forecasting to build a more holistic ecosystem as suggested in the Larsen and Toubro: Spare Parts Forecasting case study. Spare Forecasting can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Spare Forecasting 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Spare Forecasting can use these opportunities to build new business models that can help the communities that Spare Forecasting operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Learning at scale
– Online learning technologies has now opened space for Spare Forecasting 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Spare Forecasting in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Spare Forecasting can develop new processes and procedures in Leadership & Managing People 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, Spare Forecasting 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Spare Forecasting to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Spare Forecasting to hire the very best people irrespective of their geographical location.
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 Spare Forecasting 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Spare Forecasting 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. Spare Forecasting 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Spare Forecasting can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Spare Forecasting can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Spare Forecasting is facing challenges because of the dominance of functional experts in the organization. Larsen and Toubro: Spare Parts Forecasting 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.
Threats Larsen and Toubro: Spare Parts Forecasting External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Larsen and Toubro: Spare Parts Forecasting are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Spare Forecasting with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Spare Forecasting 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 Leadership & Managing People industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Spare Forecasting 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 Larsen and Toubro: Spare Parts Forecasting .
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Spare Forecasting can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Spare Forecasting has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Spare Forecasting needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Spare Forecasting in the Leadership & Managing People industry. The Leadership & Managing People 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.
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.
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 Spare Forecasting.
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. Spare Forecasting needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Spare Forecasting 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.
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. Spare Forecasting 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.
Increasing wage structure of Spare Forecasting
– 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 Spare Forecasting.
Weighted SWOT Analysis of Larsen and Toubro: Spare Parts Forecasting 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 Larsen and Toubro: Spare Parts Forecasting 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 Larsen and Toubro: Spare Parts Forecasting 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 Larsen and Toubro: Spare Parts Forecasting 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 Larsen and Toubro: Spare Parts Forecasting 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 Spare Forecasting needs to make to build a sustainable competitive advantage.