SWOT Analysis / TOWS Matrix for LKS Holding (Hong Kong)
Based on various researches at Oak Spring University , LKS Holding is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, central banks are concerned over increasing inflation, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing energy prices, technology disruption,
there is increasing trade war between United States & China, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that LKS Holding can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the LKS Holding, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which LKS Holding 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 LKS Holding can be done for the following purposes –
1. Strategic planning of LKS Holding
2. Improving business portfolio management of LKS Holding
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of LKS Holding
Strengths of LKS Holding | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of LKS Holding are -
Digital Transformation in Business Services industry
- digital transformation varies from industry to industry. For LKS Holding digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. LKS Holding 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
– LKS Holding has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. LKS Holding 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.
Highly skilled collaborators
– LKS Holding has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Business Services industry. Secondly the value chain collaborators of LKS Holding have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Business Services industry
– LKS Holding is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– LKS Holding has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – LKS Holding staying ahead in the Business Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– LKS Holding is present in almost all the verticals within the Business Services industry. This has provided LKS Holding 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.
Learning organization
- LKS Holding 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 LKS Holding is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at LKS Holding emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of LKS Holding comprises – understanding the underlying the factors in the Business Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High switching costs
– The high switching costs that LKS Holding 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.
Ability to recruit top talent
– LKS Holding is one of the leading players in the Business Services industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– LKS Holding is one of the most innovative firm in Business Services sector.
Sustainable margins compare to other players in Business Services industry
– LKS Holding has clearly differentiated products in the market place. This has enabled LKS Holding to fetch slight price premium compare to the competitors in the Business Services industry. The sustainable margins have also helped LKS Holding to invest into research and development (R&D) and innovation.
Weaknesses of LKS Holding | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LKS Holding are -
Need for greater diversity
– LKS Holding has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the Business Services industry, LKS Holding 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.
Compensation and incentives
– The revenue per employee of LKS Holding is just above the Business Services industry average. It 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.
No frontier risks strategy
– From the 10K / annual statement of LKS Holding, it seems that company is thinking out the frontier risks that can impact Business Services industry. 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.
High cash cycle compare to competitors
LKS Holding has a high cash cycle compare to other players in the Business Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of LKS Holding products
– To increase the profitability and margins on the products, LKS Holding needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, LKS Holding 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.
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 LKS Holding supply chain. Even after few cautionary changes, LKS Holding is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left LKS Holding vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at LKS Holding, in the dynamic environment of Business Services industry it has struggled to respond to the nimble upstart competition. LKS Holding has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on LKS Holding ‘s star products
– The top 2 products and services of LKS Holding still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though LKS Holding has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, LKS Holding has high operating costs in the Business Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract LKS Holding lucrative customers.
LKS Holding Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LKS Holding are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Business Services industry, but it has also influenced the consumer preferences. LKS Holding can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, LKS Holding 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.
Creating value in data economy
– The success of analytics program of LKS Holding has opened avenues for new revenue streams for the organization in Business Services industry. This can help LKS Holding to build a more holistic ecosystem for LKS Holding products in the Business Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 LKS Holding 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.
Buying journey improvements
– LKS Holding can improve the customer journey of consumers in the Business Services industry by using analytics and artificial intelligence. It 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.
Leveraging digital technologies
– LKS Holding 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.
Better consumer reach
– The expansion of the 5G network will help LKS Holding to increase its market reach. LKS Holding 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.
Building a culture of innovation
– managers at LKS Holding 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 Business Services industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects LKS Holding can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for LKS Holding in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for LKS Holding 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.
Manufacturing automation
– LKS Holding can use the latest technology developments to improve its manufacturing and designing process in Business Services sector. 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, LKS Holding 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 LKS Holding to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats LKS Holding External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LKS Holding are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents LKS Holding with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.
Stagnating economy with rate increase
– LKS Holding 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 Business Services industry.
Technology acceleration in Forth Industrial Revolution
– LKS Holding has witnessed rapid integration of technology during Covid-19 in the Business Services industry. As one of the leading players in the industry, LKS Holding needs to keep up with the evolution of technology in the Business Services 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.
Shortening product life cycle
– it is one of the major threat that LKS Holding is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– LKS Holding 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 Business Services industry regulations.
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, LKS Holding 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 LKS Holding prominent markets.
Consumer confidence and its impact on LKS Holding 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 Business Services industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, LKS Holding may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Business Services sector.
Increasing wage structure of LKS Holding
– 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 LKS Holding.
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. LKS Holding 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.
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 LKS Holding in the Business Services sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for LKS Holding in Business Services industry. The Business Services 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.
Weighted SWOT Analysis of LKS Holding Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at LKS Holding 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 LKS Holding 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 LKS Holding 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 LKS Holding 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 LKS Holding needs to make to build a sustainable competitive advantage.