Air Liquide (AIRP) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Air Liquide (Italy)

Based on various researches at Oak Spring University , Air Liquide is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Air Liquide

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Air Liquide can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Air Liquide, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Air Liquide 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Air Liquide can be done for the following purposes –
1. Strategic planning of Air Liquide
2. Improving business portfolio management of Air Liquide
3. Assessing feasibility of the new initiative in Italy
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Air Liquide

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Strengths of Air Liquide | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Air Liquide are -

High brand equity

– Air Liquide has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Air Liquide to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Analytics focus

– Air Liquide 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 Chemical Manufacturing 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.

Learning organization

- Air Liquide 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 Air Liquide is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Air Liquide emphasize – knowledge, initiative, and innovation.

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For Air Liquide digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Air Liquide 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.

Strong track record of project management in the Chemical Manufacturing industry

– Air Liquide is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Ability to lead change in Chemical Manufacturing

– Air Liquide is one of the leading players in the Chemical Manufacturing industry in Italy. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Italy but also across the existing markets. The ability to lead change has enabled Air Liquide in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

High switching costs

– The high switching costs that Air Liquide 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.

Low bargaining power of suppliers

– Suppliers of Air Liquide in the Basic Materials sector have low bargaining power. Air Liquide has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Air Liquide to manage not only supply disruptions but also source products at highly competitive prices.

Successful track record of launching new products

– Air Liquide has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Air Liquide 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 Air Liquide

– The covid-19 pandemic has put organizational resilience at the centre of everthing Air Liquide does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Diverse revenue streams

– Air Liquide is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Air Liquide 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.

Innovation driven organization

– Air Liquide is one of the most innovative firm in Chemical Manufacturing sector.

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Weaknesses of Air Liquide | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Air Liquide are -

Increasing silos among functional specialists

– The organizational structure of Air Liquide is dominated by functional specialists. It is not different from other players in the Chemical Manufacturing industry, but Air Liquide needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Air Liquide to focus more on services in the Chemical Manufacturing industry rather than just following the product oriented approach.

Interest costs

– Compare to the competition, Air Liquide 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 Air Liquide needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Air Liquide can leverage the sales team experience to cultivate customer relationships as Air Liquide is planning to shift buying processes online.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Air Liquide is slow explore the new channels of communication. These new channels of communication can help Air Liquide to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.

No frontier risks strategy

– From the 10K / annual statement of Air Liquide, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.

High cash cycle compare to competitors

Air Liquide has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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 Air Liquide supply chain. Even after few cautionary changes, Air Liquide is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Air Liquide vulnerable to further global disruptions in South East Asia.

Employees’ less understanding of Air Liquide strategy

– From the outside it seems that the employees of Air Liquide 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.

Products dominated business model

– Even though Air Liquide has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Air Liquide should strive to include more intangible value offerings along with its core products and services.

High dependence on Air Liquide ‘s star products

– The top 2 products and services of Air Liquide still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Air Liquide has relatively successful track record of launching new products.

Ability to respond to the competition

– As the decision making is very deliberative at Air Liquide, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Air Liquide has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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Air Liquide Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Air Liquide are -

Leveraging digital technologies

– Air Liquide 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.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Air Liquide in the Chemical Manufacturing industry. Now Air Liquide can target international markets with far fewer capital restrictions requirements than the existing system.

Low interest rates

– Even though inflation is raising its head in most developed economies, Air Liquide 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.

Using analytics as competitive advantage

– Air Liquide has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Air Liquide to build a competitive advantage using analytics. The analytics driven competitive advantage can help Air Liquide to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Manufacturing automation

– Air Liquide can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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 Air Liquide 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.

Better consumer reach

– The expansion of the 5G network will help Air Liquide to increase its market reach. Air Liquide 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Air Liquide 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 Air Liquide to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Air Liquide in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

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. Air Liquide can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Air Liquide can use these opportunities to build new business models that can help the communities that Air Liquide operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.

Buying journey improvements

– Air Liquide can improve the customer journey of consumers in the Chemical Manufacturing 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Air Liquide can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats Air Liquide External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Air Liquide 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. Air Liquide needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

Increasing wage structure of Air Liquide

– 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 Air Liquide.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Air Liquide in Chemical Manufacturing industry. The Chemical Manufacturing 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 Air Liquide.

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 Air Liquide in the Chemical Manufacturing sector and impact the bottomline 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.

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. Air Liquide 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.

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Air Liquide can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Shortening product life cycle

– it is one of the major threat that Air Liquide is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Stagnating economy with rate increase

– Air Liquide 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 Chemical Manufacturing industry.

High dependence on third party suppliers

– Air Liquide 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.

Environmental challenges

– Air Liquide 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. Air Liquide can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Air Liquide with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.

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Weighted SWOT Analysis of Air Liquide Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Air Liquide 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 Air Liquide 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 Air Liquide 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 Air Liquide 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 Air Liquide needs to make to build a sustainable competitive advantage.

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