SWOT Analysis / TOWS Matrix for Lippo Cikarang (Indonesia)
Based on various researches at Oak Spring University , Lippo Cikarang is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing commodity prices, geopolitical disruptions, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google,
wage bills are increasing, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lippo Cikarang can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lippo Cikarang, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lippo Cikarang 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 Lippo Cikarang can be done for the following purposes –
1. Strategic planning of Lippo Cikarang
2. Improving business portfolio management of Lippo Cikarang
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lippo Cikarang
Strengths of Lippo Cikarang | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lippo Cikarang are -
High brand equity
– Lippo Cikarang has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lippo Cikarang to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy of Lippo Cikarang 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.
Ability to lead change in Construction Services
– Lippo Cikarang is one of the leading players in the Construction Services industry in Indonesia. Over the years it has not only transformed the business landscape in the Construction Services industry in Indonesia but also across the existing markets. The ability to lead change has enabled Lippo Cikarang in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Lippo Cikarang 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 Lippo Cikarang is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lippo Cikarang emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Lippo Cikarang in the Capital Goods sector have low bargaining power. Lippo Cikarang has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lippo Cikarang to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Lippo Cikarang
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lippo Cikarang does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Lippo Cikarang 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 Lippo Cikarang have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Lippo Cikarang digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lippo Cikarang 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.
Sustainable margins compare to other players in Construction Services industry
– Lippo Cikarang has clearly differentiated products in the market place. This has enabled Lippo Cikarang to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Lippo Cikarang to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Lippo Cikarang has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lippo Cikarang 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.
Effective Research and Development (R&D)
– Lippo Cikarang has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lippo Cikarang staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Lippo Cikarang has one of the best training and development program in Capital Goods 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.
Weaknesses of Lippo Cikarang | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lippo Cikarang are -
Increasing silos among functional specialists
– The organizational structure of Lippo Cikarang is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Lippo Cikarang needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lippo Cikarang to focus more on services in the Construction Services industry rather than just following the product oriented approach.
High dependence on Lippo Cikarang ‘s star products
– The top 2 products and services of Lippo Cikarang 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 Lippo Cikarang has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Construction Services industry, Lippo Cikarang 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 to strategic competitive environment developments
– As Lippo Cikarang 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.
High bargaining power of channel partners in Construction Services industry
– because of the regulatory requirements in Indonesia, Lippo Cikarang 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 Construction Services industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lippo Cikarang is slow explore the new channels of communication. These new channels of communication can help Lippo Cikarang to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative at Lippo Cikarang, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Lippo Cikarang has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Lippo Cikarang strategy
– From the outside it seems that the employees of Lippo Cikarang 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.
No frontier risks strategy
– From the 10K / annual statement of Lippo Cikarang, 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.
Interest costs
– Compare to the competition, Lippo Cikarang 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 cash cycle compare to competitors
Lippo Cikarang has a high cash cycle compare to other players in the Construction 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.
Lippo Cikarang Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lippo Cikarang are -
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. Lippo Cikarang can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Lippo Cikarang 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lippo Cikarang 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. Lippo Cikarang 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
– Lippo Cikarang 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.
Loyalty marketing
– Lippo Cikarang 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.
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 Lippo Cikarang 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.
Better consumer reach
– The expansion of the 5G network will help Lippo Cikarang to increase its market reach. Lippo Cikarang 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 Lippo Cikarang 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.
Building a culture of innovation
– managers at Lippo Cikarang 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lippo Cikarang can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Lippo Cikarang 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, Lippo Cikarang is facing challenges because of the dominance of functional experts in the organization. Lippo Cikarang 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.
Using analytics as competitive advantage
– Lippo Cikarang 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 Lippo Cikarang to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lippo Cikarang to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Lippo Cikarang External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lippo Cikarang are -
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. Lippo Cikarang 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.
Technology acceleration in Forth Industrial Revolution
– Lippo Cikarang has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Lippo Cikarang 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.
Stagnating economy with rate increase
– Lippo Cikarang 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 Lippo Cikarang 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.
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.
Regulatory challenges
– Lippo Cikarang 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.
Shortening product life cycle
– it is one of the major threat that Lippo Cikarang is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Lippo Cikarang with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lippo Cikarang 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.
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 Lippo Cikarang.
Consumer confidence and its impact on Lippo Cikarang 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 Construction Services industry and other sectors.
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. Lippo Cikarang can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Lippo Cikarang Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lippo Cikarang 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 Lippo Cikarang 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 Lippo Cikarang 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 Lippo Cikarang 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 Lippo Cikarang needs to make to build a sustainable competitive advantage.