SWOT Analysis / TOWS Matrix for Larsen & Toubro (India)
Based on various researches at Oak Spring University , Larsen & Toubro is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy,
competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Larsen & Toubro can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Larsen & Toubro, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Larsen & Toubro 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 & Toubro can be done for the following purposes –
1. Strategic planning of Larsen & Toubro
2. Improving business portfolio management of Larsen & Toubro
3. Assessing feasibility of the new initiative in India
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Larsen & Toubro
Strengths of Larsen & Toubro | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Larsen & Toubro are -
Successful track record of launching new products
– Larsen & Toubro has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Larsen & Toubro 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.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Larsen & Toubro digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Larsen & Toubro 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.
Learning organization
- Larsen & Toubro 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 Larsen & Toubro is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Larsen & Toubro emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Larsen & Toubro 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.
Innovation driven organization
– Larsen & Toubro is one of the most innovative firm in Construction Services sector.
Ability to recruit top talent
– Larsen & Toubro is one of the leading players in the Construction Services industry in India. It is in a position to attract the best talent available in India. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Construction Services industry
– Larsen & Toubro is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Larsen & Toubro has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Larsen & Toubro have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Larsen & Toubro is present in almost all the verticals within the Construction Services industry. This has provided Larsen & Toubro 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.
Operational resilience
– The operational resilience strategy of Larsen & Toubro comprises – understanding the underlying the factors in the Construction 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.
Low bargaining power of suppliers
– Suppliers of Larsen & Toubro in the Capital Goods sector have low bargaining power. Larsen & Toubro has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Larsen & Toubro to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Larsen & Toubro in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Larsen & Toubro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Larsen & Toubro are -
Employees’ less understanding of Larsen & Toubro strategy
– From the outside it seems that the employees of Larsen & Toubro 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.
Workers concerns about automation
– As automation is fast increasing in the Construction Services industry, Larsen & Toubro 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.
High dependence on Larsen & Toubro ‘s star products
– The top 2 products and services of Larsen & Toubro still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Larsen & Toubro has relatively successful track record of launching new products.
Need for greater diversity
– Larsen & Toubro 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.
Compensation and incentives
– The revenue per employee of Larsen & Toubro is just above the Construction 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.
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 Larsen & Toubro supply chain. Even after few cautionary changes, Larsen & Toubro is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Larsen & Toubro vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Larsen & Toubro, it seems that company is thinking out the frontier risks that can impact Construction 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Larsen & Toubro is slow explore the new channels of communication. These new channels of communication can help Larsen & Toubro to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Larsen & Toubro has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Larsen & Toubro should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of India, Larsen & Toubro needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Larsen & Toubro is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.
Larsen & Toubro Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Larsen & Toubro are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Larsen & Toubro 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 Larsen & Toubro to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Larsen & Toubro in the Construction Services industry. Now Larsen & Toubro can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Larsen & Toubro 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Larsen & Toubro 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 Larsen & Toubro to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Larsen & Toubro can use these opportunities to build new business models that can help the communities that Larsen & Toubro operates in. Secondly it can use opportunities from government spending in Construction Services sector.
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. Larsen & Toubro can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Larsen & Toubro is facing challenges because of the dominance of functional experts in the organization. Larsen & Toubro can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Larsen & Toubro can improve the customer journey of consumers in the Construction 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.
Better consumer reach
– The expansion of the 5G network will help Larsen & Toubro to increase its market reach. Larsen & Toubro 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Larsen & Toubro in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Larsen & Toubro 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.
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 Larsen & Toubro 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.
Manufacturing automation
– Larsen & Toubro can use the latest technology developments to improve its manufacturing and designing process in Construction 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.
Threats Larsen & Toubro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Larsen & Toubro are -
Environmental challenges
– Larsen & Toubro 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. Larsen & Toubro can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Larsen & Toubro business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Larsen & Toubro may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.
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 to Construction Services industry are lowering. It can presents Larsen & Toubro with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
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 Larsen & Toubro.
Shortening product life cycle
– it is one of the major threat that Larsen & Toubro is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Larsen & Toubro in the Construction Services sector and impact the bottomline of the organization.
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. Larsen & Toubro needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Larsen & Toubro 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 Construction Services industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Larsen & Toubro in Construction Services industry. The Construction 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.
Regulatory challenges
– Larsen & Toubro 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 Construction Services industry regulations.
Weighted SWOT Analysis of Larsen & Toubro Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Larsen & Toubro 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 Larsen & Toubro 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 Larsen & Toubro 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 & Toubro 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 Larsen & Toubro needs to make to build a sustainable competitive advantage.