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 – increasing energy prices, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
Ability to lead change in Construction Services
– Larsen & Toubro is one of the leading players in the Construction Services industry in India. Over the years it has not only transformed the business landscape in the Construction Services industry in India but also across the existing markets. The ability to lead change has enabled Larsen & Toubro in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Larsen & Toubro 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.
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.
Analytics focus
– Larsen & Toubro 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 Construction Services industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Larsen & Toubro is one of the most innovative firm in Construction Services sector.
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.
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.
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.
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.
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.
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.
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.
Weaknesses of Larsen & Toubro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Larsen & Toubro are -
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.
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.
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.
Aligning sales with marketing
– From the outside it seems that Larsen & Toubro needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction Services industry have deep experience in developing customer relationships. Marketing department at Larsen & Toubro can leverage the sales team experience to cultivate customer relationships as Larsen & Toubro is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Larsen & Toubro is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Larsen & Toubro needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Larsen & Toubro to focus more on services in the Construction Services industry rather than just following the product oriented approach.
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.
Capital Spending Reduction
– Even during the low interest decade, Larsen & Toubro 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 Construction Services industry using digital technology.
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.
Slow decision making process
– As mentioned earlier in the report, Larsen & Toubro has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. Larsen & Toubro 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.
Ability to respond to the competition
– As the decision making is very deliberative at Larsen & Toubro, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Larsen & Toubro has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Larsen & Toubro Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Larsen & Toubro are -
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.
Creating value in data economy
– The success of analytics program of Larsen & Toubro has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Larsen & Toubro to build a more holistic ecosystem for Larsen & Toubro products in the Construction Services industry by providing – 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, 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Larsen & Toubro 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.
Developing new processes and practices
– Larsen & Toubro can develop new processes and procedures in Construction Services 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.
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.
Leveraging digital technologies
– Larsen & Toubro 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.
Building a culture of innovation
– managers at Larsen & Toubro 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 Construction Services industry.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Larsen & Toubro can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Larsen & Toubro has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Larsen & Toubro to build a competitive advantage using analytics. The analytics driven competitive advantage can help Larsen & Toubro to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Larsen & Toubro can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Threats Larsen & Toubro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Larsen & Toubro are -
Increasing wage structure of Larsen & Toubro
– 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 Larsen & Toubro.
Technology acceleration in Forth Industrial Revolution
– Larsen & Toubro has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Larsen & Toubro needs to keep up with the evolution of technology in the Construction 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.
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.
High dependence on third party suppliers
– Larsen & Toubro 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. Larsen & Toubro 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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Construction Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Larsen & Toubro can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
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.