EssilorLuxottica (ESSI) SWOT Analysis / TOWS Matrix / MBA Resources
Medical Equipment & Supplies
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for EssilorLuxottica (Italy)
Based on various researches at Oak Spring University , EssilorLuxottica is operating in a macro-environment that has been destablized by – wage bills are increasing, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that EssilorLuxottica can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the EssilorLuxottica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which EssilorLuxottica 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 EssilorLuxottica can be done for the following purposes –
1. Strategic planning of EssilorLuxottica
2. Improving business portfolio management of EssilorLuxottica
3. Assessing feasibility of the new initiative in Italy
4. Making a Medical Equipment & Supplies sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of EssilorLuxottica
Strengths of EssilorLuxottica | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of EssilorLuxottica are -
Successful track record of launching new products
– EssilorLuxottica has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. EssilorLuxottica 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.
Organizational Resilience of EssilorLuxottica
– The covid-19 pandemic has put organizational resilience at the centre of everthing EssilorLuxottica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- EssilorLuxottica 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 EssilorLuxottica is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at EssilorLuxottica emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– EssilorLuxottica is present in almost all the verticals within the Medical Equipment & Supplies industry. This has provided EssilorLuxottica 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.
Training and development
– EssilorLuxottica has one of the best training and development program in Healthcare 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.
Innovation driven organization
– EssilorLuxottica is one of the most innovative firm in Medical Equipment & Supplies sector.
Analytics focus
– EssilorLuxottica 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 Medical Equipment & Supplies industry. The technology infrastructure of Italy 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.
Digital Transformation in Medical Equipment & Supplies industry
- digital transformation varies from industry to industry. For EssilorLuxottica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. EssilorLuxottica 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.
Ability to lead change in Medical Equipment & Supplies
– EssilorLuxottica is one of the leading players in the Medical Equipment & Supplies industry in Italy. Over the years it has not only transformed the business landscape in the Medical Equipment & Supplies industry in Italy but also across the existing markets. The ability to lead change has enabled EssilorLuxottica in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– EssilorLuxottica has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – EssilorLuxottica staying ahead in the Medical Equipment & Supplies industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– EssilorLuxottica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Medical Equipment & Supplies industry. Secondly the value chain collaborators of EssilorLuxottica have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Medical Equipment & Supplies industry
– EssilorLuxottica has clearly differentiated products in the market place. This has enabled EssilorLuxottica to fetch slight price premium compare to the competitors in the Medical Equipment & Supplies industry. The sustainable margins have also helped EssilorLuxottica to invest into research and development (R&D) and innovation.
Weaknesses of EssilorLuxottica | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of EssilorLuxottica are -
Slow to strategic competitive environment developments
– As EssilorLuxottica is one of the leading players in the Medical Equipment & Supplies industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Medical Equipment & Supplies industry in last five years.
Slow decision making process
– As mentioned earlier in the report, EssilorLuxottica has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Medical Equipment & Supplies industry over the last five years. EssilorLuxottica 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.
No frontier risks strategy
– From the 10K / annual statement of EssilorLuxottica, it seems that company is thinking out the frontier risks that can impact Medical Equipment & Supplies 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.
Need for greater diversity
– EssilorLuxottica 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.
Lack of clear differentiation of EssilorLuxottica products
– To increase the profitability and margins on the products, EssilorLuxottica needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at EssilorLuxottica, in the dynamic environment of Medical Equipment & Supplies industry it has struggled to respond to the nimble upstart competition. EssilorLuxottica 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 EssilorLuxottica is just above the Medical Equipment & Supplies 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.
Aligning sales with marketing
– From the outside it seems that EssilorLuxottica needs to have more collaboration between its sales team and marketing team. Sales professionals in the Medical Equipment & Supplies industry have deep experience in developing customer relationships. Marketing department at EssilorLuxottica can leverage the sales team experience to cultivate customer relationships as EssilorLuxottica is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, EssilorLuxottica 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 Medical Equipment & Supplies industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, EssilorLuxottica is slow explore the new channels of communication. These new channels of communication can help EssilorLuxottica to provide better information regarding Medical Equipment & Supplies products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Italy, EssilorLuxottica needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
EssilorLuxottica Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of EssilorLuxottica are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, EssilorLuxottica is facing challenges because of the dominance of functional experts in the organization. EssilorLuxottica can utilize new technology in the field of Medical Equipment & Supplies industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of EssilorLuxottica has opened avenues for new revenue streams for the organization in Medical Equipment & Supplies industry. This can help EssilorLuxottica to build a more holistic ecosystem for EssilorLuxottica products in the Medical Equipment & Supplies industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for EssilorLuxottica in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Medical Equipment & Supplies industry, and it will provide faster access to the consumers.
Manufacturing automation
– EssilorLuxottica can use the latest technology developments to improve its manufacturing and designing process in Medical Equipment & Supplies 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, EssilorLuxottica 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Medical Equipment & Supplies industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. EssilorLuxottica 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. EssilorLuxottica 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects EssilorLuxottica can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 EssilorLuxottica 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.
Leveraging digital technologies
– EssilorLuxottica 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Medical Equipment & Supplies industry, but it has also influenced the consumer preferences. EssilorLuxottica can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at EssilorLuxottica 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 Medical Equipment & Supplies industry.
Better consumer reach
– The expansion of the 5G network will help EssilorLuxottica to increase its market reach. EssilorLuxottica 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.
Using analytics as competitive advantage
– EssilorLuxottica has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Medical Equipment & Supplies sector. This continuous investment in analytics has enabled EssilorLuxottica to build a competitive advantage using analytics. The analytics driven competitive advantage can help EssilorLuxottica to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats EssilorLuxottica External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of EssilorLuxottica are -
Easy access to finance
– Easy access to finance in Medical Equipment & Supplies industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. EssilorLuxottica can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 EssilorLuxottica in the Medical Equipment & Supplies sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of EssilorLuxottica.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, EssilorLuxottica may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Medical Equipment & Supplies sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for EssilorLuxottica in Medical Equipment & Supplies industry. The Medical Equipment & Supplies 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.
High dependence on third party suppliers
– EssilorLuxottica 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 EssilorLuxottica business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– EssilorLuxottica has witnessed rapid integration of technology during Covid-19 in the Medical Equipment & Supplies industry. As one of the leading players in the industry, EssilorLuxottica needs to keep up with the evolution of technology in the Medical Equipment & Supplies 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
– EssilorLuxottica 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 Medical Equipment & Supplies industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– EssilorLuxottica 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 Medical Equipment & Supplies industry.
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. EssilorLuxottica 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 EssilorLuxottica Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica needs to make to build a sustainable competitive advantage.