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 – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, there is increasing trade war between United States & China,
increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, 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 -
Diverse revenue streams
– L&T Finance Hld is present in almost all the verticals within the Consumer Financial Services industry. This has provided L&T Finance Hld 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.
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.
Learning organization
- L&T Finance Hld 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 L&T Finance Hld is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at L&T Finance Hld emphasize – knowledge, initiative, and innovation.
High brand equity
– L&T Finance Hld has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled L&T Finance Hld to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of L&T Finance Hld in Consumer Financial Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– L&T Finance Hld is one of the most innovative firm in Consumer Financial Services sector.
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.
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.
Analytics focus
– L&T Finance Hld 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 Consumer Financial 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.
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.
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.
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.
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 -
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.
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.
Lack of clear differentiation of L&T Finance Hld products
– To increase the profitability and margins on the products, L&T Finance Hld needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, L&T Finance Hld has high operating costs in the Consumer Financial Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract L&T Finance Hld lucrative customers.
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.
Need for greater diversity
– L&T Finance Hld 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.
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 L&T Finance Hld supply chain. Even after few cautionary changes, L&T Finance Hld is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left L&T Finance Hld vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Consumer Financial Services industry, L&T Finance Hld 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.
Low market penetration in new markets
– Outside its home market of India, L&T Finance Hld needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Ability to respond to the competition
– As the decision making is very deliberative at L&T Finance Hld, in the dynamic environment of Consumer Financial Services industry it has struggled to respond to the nimble upstart competition. L&T Finance Hld has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 -
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help L&T Finance Hld to increase its market reach. L&T Finance Hld 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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for L&T Finance Hld 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, L&T Finance Hld is facing challenges because of the dominance of functional experts in the organization. L&T Finance Hld can utilize new technology in the field of Consumer Financial Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
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.
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.
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. L&T Finance Hld can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects L&T Finance Hld can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 -
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.
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 L&T Finance Hld.
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 L&T Finance Hld in the Consumer Financial Services sector and impact the bottomline of the organization.
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.
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, L&T Finance Hld may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Consumer Financial Services sector.
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.
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. L&T Finance Hld 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.
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.
