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 - – digital marketing is dominated by two big players Facebook and Google, technology disruption, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion,
banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, 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 -
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.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Spare Forecasting are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Spare Forecasting has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Spare Forecasting to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Learning organization
- Spare Forecasting 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 Spare Forecasting is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Larsen and Toubro: Spare Parts Forecasting Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Spare Forecasting is present in almost all the verticals within the industry. This has provided firm in Larsen and Toubro: Spare Parts Forecasting 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.
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.
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 -
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.
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.
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.
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.
Aligning sales with marketing
– It come across in the case study Larsen and Toubro: Spare Parts Forecasting that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Larsen and Toubro: Spare Parts Forecasting can leverage the sales team experience to cultivate customer relationships as Spare Forecasting is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Larsen and Toubro: Spare Parts Forecasting, it seems that the employees of Spare Forecasting 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.
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.
Low market penetration in new markets
– Outside its home market of Spare Forecasting, firm in the HBR case study Larsen and Toubro: Spare Parts Forecasting needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Spare Forecasting products
– To increase the profitability and margins on the products, Spare Forecasting needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Suhruta Kulkarni, Prakash Hegde, Ruchi Jaiswal, Dinesh Kumar Unnikrishnan suggests that, Spare Forecasting 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.
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.
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 -
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.
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.
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.
Using analytics as competitive advantage
– Spare Forecasting 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 Larsen and Toubro: Spare Parts Forecasting - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spare Forecasting to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Spare Forecasting can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Larsen and Toubro: Spare Parts Forecasting, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Spare Forecasting can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Larsen and Toubro: Spare Parts Forecasting 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.
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.
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 Spare Forecasting in the consumer business. Now Spare Forecasting can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Spare Forecasting 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 Leadership & Managing People segment.
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.
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.
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.
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. Spare Forecasting can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 -
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Larsen and Toubro: Spare Parts Forecasting, Spare Forecasting may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Shortening product life cycle
– it is one of the major threat that Spare Forecasting is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Spare Forecasting 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. Spare Forecasting can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
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.
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 Spare Forecasting in the Leadership & Managing People sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Spare Forecasting 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.
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.
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.
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.
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 .
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.
