SWOT Analysis / TOWS Matrix for L&T Finance Hld (India)
Based on various researches at Oak Spring University , L&T Finance Hld is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing energy prices, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices,
there is increasing trade war between United States & China, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that L&T Finance Hld can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L&T Finance Hld, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L&T Finance Hld 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 L&T Finance Hld can be done for the following purposes –
1. Strategic planning of L&T Finance Hld
2. Improving business portfolio management of L&T Finance Hld
3. Assessing feasibility of the new initiative in India
4. Making a Consumer Financial Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of L&T Finance Hld
Strengths of L&T Finance Hld | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of L&T Finance Hld are -
High switching costs
– The high switching costs that L&T Finance Hld 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.
Highly skilled collaborators
– L&T Finance Hld has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Consumer Financial Services industry. Secondly the value chain collaborators of L&T Finance Hld have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Consumer Financial Services industry
– L&T Finance Hld is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of L&T Finance Hld comprises – understanding the underlying the factors in the Consumer Financial 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.
Ability to lead change in Consumer Financial Services
– L&T Finance Hld is one of the leading players in the Consumer Financial Services industry in India. Over the years it has not only transformed the business landscape in the Consumer Financial Services industry in India but also across the existing markets. The ability to lead change has enabled L&T Finance Hld in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– L&T Finance Hld has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– L&T Finance Hld is one of the leading players in the Consumer Financial 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.
Low bargaining power of suppliers
– Suppliers of L&T Finance Hld in the Financial sector have low bargaining power. L&T Finance Hld has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps L&T Finance Hld to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Consumer Financial Services industry
- digital transformation varies from industry to industry. For L&T Finance Hld digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. L&T Finance Hld 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.
Effective Research and Development (R&D)
– L&T Finance Hld has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – L&T Finance Hld staying ahead in the Consumer Financial Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of L&T Finance Hld
– The covid-19 pandemic has put organizational resilience at the centre of everthing L&T Finance Hld does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– L&T Finance Hld is one of the most innovative firm in Consumer Financial Services sector.
Weaknesses of L&T Finance Hld | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of L&T Finance Hld are -
High bargaining power of channel partners in Consumer Financial Services industry
– because of the regulatory requirements in India, L&T Finance Hld 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 Consumer Financial Services industry.
Products dominated business model
– Even though L&T Finance Hld has some of the most successful models in the Consumer Financial Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. L&T Finance Hld should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, L&T Finance Hld 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 Consumer Financial Services industry using digital technology.
High dependence on L&T Finance Hld ‘s star products
– The top 2 products and services of L&T Finance Hld still accounts for major business revenue. This dependence on star products in Consumer Financial Services industry has resulted into insufficient focus on developing new products, even though L&T Finance Hld has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, L&T Finance Hld 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.
Slow to strategic competitive environment developments
– As L&T Finance Hld is one of the leading players in the Consumer Financial Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Consumer Financial Services industry in last five years.
Increasing silos among functional specialists
– The organizational structure of L&T Finance Hld is dominated by functional specialists. It is not different from other players in the Consumer Financial Services industry, but L&T Finance Hld needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help L&T Finance Hld to focus more on services in the Consumer Financial Services industry rather than just following the product oriented approach.
High cash cycle compare to competitors
L&T Finance Hld has a high cash cycle compare to other players in the Consumer Financial 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.
Slow decision making process
– As mentioned earlier in the report, L&T Finance Hld has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Consumer Financial Services industry over the last five years. L&T Finance Hld 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.
Skills based hiring in Consumer Financial Services industry
– The stress on hiring functional specialists at L&T Finance Hld has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Employees’ less understanding of L&T Finance Hld strategy
– From the outside it seems that the employees of L&T Finance Hld 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.
L&T Finance Hld Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of L&T Finance Hld are -
Leveraging digital technologies
– L&T Finance Hld 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.
Buying journey improvements
– L&T Finance Hld can improve the customer journey of consumers in the Consumer Financial 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Consumer Financial Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. L&T Finance Hld can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. L&T Finance Hld can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– L&T Finance Hld can use the latest technology developments to improve its manufacturing and designing process in Consumer Financial 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, L&T Finance Hld 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 L&T Finance Hld to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– L&T Finance Hld can develop new processes and procedures in Consumer Financial 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for L&T Finance Hld 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 L&T Finance Hld to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of L&T Finance Hld has opened avenues for new revenue streams for the organization in Consumer Financial Services industry. This can help L&T Finance Hld to build a more holistic ecosystem for L&T Finance Hld products in the Consumer Financial 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 L&T Finance Hld 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, L&T Finance Hld 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for L&T Finance Hld in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Consumer Financial Services industry, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at L&T Finance Hld 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 Consumer Financial Services industry.
Use of Bitcoin and other crypto currencies for transactions in Consumer Financial Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for L&T Finance Hld in the Consumer Financial Services industry. Now L&T Finance Hld can target international markets with far fewer capital restrictions requirements than the existing system.
Threats L&T Finance Hld External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of L&T Finance Hld are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, L&T Finance Hld 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 L&T Finance Hld prominent markets.
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.
Technology acceleration in Forth Industrial Revolution
– L&T Finance Hld has witnessed rapid integration of technology during Covid-19 in the Consumer Financial Services industry. As one of the leading players in the industry, L&T Finance Hld needs to keep up with the evolution of technology in the Consumer Financial 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.
Regulatory challenges
– L&T Finance Hld 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 Consumer Financial Services industry regulations.
Environmental challenges
– L&T Finance Hld 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. L&T Finance Hld can take advantage of this fund but it will also bring new competitors in the Consumer Financial Services industry.
Increasing wage structure of L&T Finance Hld
– 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 L&T Finance Hld.
High dependence on third party suppliers
– L&T Finance Hld 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.
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 L&T Finance Hld business can come under increasing regulations regarding data privacy, data security, etc.
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. L&T Finance Hld needs to understand the core reasons impacting the Consumer Financial Services industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that L&T Finance Hld is facing in Consumer Financial Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for L&T Finance Hld in Consumer Financial Services industry. The Consumer Financial 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.
Easy access to finance
– Easy access to finance in Consumer Financial Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. L&T Finance Hld can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– L&T Finance Hld 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 Consumer Financial Services industry.
Weighted SWOT Analysis of L&T Finance Hld Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at L&T Finance Hld 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 L&T Finance Hld 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 L&T Finance Hld 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 L&T Finance Hld 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 L&T Finance Hld needs to make to build a sustainable competitive advantage.