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 – increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , technology disruption, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion,
central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Lippo Cikarang 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.
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.
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.
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.
High switching costs
– The high switching costs that Lippo Cikarang 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.
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.
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.
Analytics focus
– Lippo Cikarang 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 Indonesia 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.
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.
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.
Weaknesses of Lippo Cikarang | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lippo Cikarang are -
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Lippo Cikarang 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.
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.
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.
Compensation and incentives
– The revenue per employee of Lippo Cikarang 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.
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.
Capital Spending Reduction
– Even during the low interest decade, Lippo Cikarang 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.
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.
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.
Aligning sales with marketing
– From the outside it seems that Lippo Cikarang 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 Lippo Cikarang can leverage the sales team experience to cultivate customer relationships as Lippo Cikarang is planning to shift buying processes online.
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.
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 Lippo Cikarang supply chain. Even after few cautionary changes, Lippo Cikarang is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lippo Cikarang vulnerable to further global disruptions in South East Asia.
Lippo Cikarang Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lippo Cikarang are -
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.
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 Lippo Cikarang in the Construction Services industry. Now Lippo Cikarang can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lippo Cikarang 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 Lippo Cikarang to hire the very best people irrespective of their geographical location.
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.
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. Lippo Cikarang can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lippo Cikarang can use these opportunities to build new business models that can help the communities that Lippo Cikarang operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Developing new processes and practices
– Lippo Cikarang 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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lippo Cikarang 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 Lippo Cikarang to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Lippo Cikarang External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lippo Cikarang are -
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. Lippo Cikarang needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.
Increasing wage structure of Lippo Cikarang
– 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 Lippo Cikarang.
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 Lippo Cikarang business can come under increasing regulations regarding data privacy, data security, 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. 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 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.
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.
High dependence on third party suppliers
– Lippo Cikarang 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lippo Cikarang 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 Lippo Cikarang prominent markets.
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.
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.
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.
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.
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.
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.
