Leonardo (LDOF) SWOT Analysis / TOWS Matrix / MBA Resources
Aerospace & Defense
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Leonardo (Italy)
Based on various researches at Oak Spring University , Leonardo is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, there is backlash against globalization, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion,
increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Leonardo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Leonardo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Leonardo 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 Leonardo can be done for the following purposes –
1. Strategic planning of Leonardo
2. Improving business portfolio management of Leonardo
3. Assessing feasibility of the new initiative in Italy
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Leonardo
Strengths of Leonardo | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Leonardo are -
Learning organization
- Leonardo 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 Leonardo is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Leonardo emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Leonardo is present in almost all the verticals within the Aerospace & Defense industry. This has provided Leonardo 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.
Operational resilience
– The operational resilience strategy of Leonardo comprises – understanding the underlying the factors in the Aerospace & Defense 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.
Successful track record of launching new products
– Leonardo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Leonardo 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)
– Leonardo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Leonardo staying ahead in the Aerospace & Defense industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Leonardo in the Capital Goods sector have low bargaining power. Leonardo has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Leonardo to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Leonardo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of Leonardo have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Leonardo 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 Aerospace & Defense 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.
Training and development
– Leonardo 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.
Innovation driven organization
– Leonardo is one of the most innovative firm in Aerospace & Defense sector.
Strong track record of project management in the Aerospace & Defense industry
– Leonardo 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 Aerospace & Defense
– Leonardo is one of the leading players in the Aerospace & Defense industry in Italy. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in Italy but also across the existing markets. The ability to lead change has enabled Leonardo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Leonardo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Leonardo are -
High dependence on Leonardo ‘s star products
– The top 2 products and services of Leonardo still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though Leonardo has relatively successful track record of launching new products.
Skills based hiring in Aerospace & Defense industry
– The stress on hiring functional specialists at Leonardo 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.
No frontier risks strategy
– From the 10K / annual statement of Leonardo, it seems that company is thinking out the frontier risks that can impact Aerospace & Defense 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.
Workers concerns about automation
– As automation is fast increasing in the Aerospace & Defense industry, Leonardo 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.
High bargaining power of channel partners in Aerospace & Defense industry
– because of the regulatory requirements in Italy, Leonardo 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 Aerospace & Defense industry.
Employees’ less understanding of Leonardo strategy
– From the outside it seems that the employees of Leonardo 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.
Aligning sales with marketing
– From the outside it seems that Leonardo needs to have more collaboration between its sales team and marketing team. Sales professionals in the Aerospace & Defense industry have deep experience in developing customer relationships. Marketing department at Leonardo can leverage the sales team experience to cultivate customer relationships as Leonardo is planning to shift buying processes online.
Products dominated business model
– Even though Leonardo has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Leonardo should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Leonardo 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 Aerospace & Defense industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Leonardo has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. Leonardo 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.
Slow to strategic competitive environment developments
– As Leonardo is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.
Leonardo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Leonardo are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Leonardo 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 Leonardo to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Leonardo in the Aerospace & Defense industry. Now Leonardo can target international markets with far fewer capital restrictions requirements than the existing system.
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. Leonardo can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Leonardo can develop new processes and procedures in Aerospace & Defense 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.
Building a culture of innovation
– managers at Leonardo 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 Aerospace & Defense industry.
Creating value in data economy
– The success of analytics program of Leonardo has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Leonardo to build a more holistic ecosystem for Leonardo products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. Leonardo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Leonardo 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Leonardo 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
– Leonardo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled Leonardo to build a competitive advantage using analytics. The analytics driven competitive advantage can help Leonardo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Leonardo to increase its market reach. Leonardo 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 Leonardo 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 Leonardo to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Leonardo is facing challenges because of the dominance of functional experts in the organization. Leonardo can utilize new technology in the field of Aerospace & Defense industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Leonardo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Leonardo are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Leonardo in Aerospace & Defense industry. The Aerospace & Defense 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.
Increasing wage structure of Leonardo
– 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 Leonardo.
Easy access to finance
– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Leonardo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Leonardo needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Leonardo 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 Aerospace & Defense industry.
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 Leonardo.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Leonardo 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 Leonardo prominent markets.
Technology acceleration in Forth Industrial Revolution
– Leonardo has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, Leonardo needs to keep up with the evolution of technology in the Aerospace & Defense 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.
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 Leonardo in the Aerospace & Defense sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Leonardo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Leonardo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.
Shortening product life cycle
– it is one of the major threat that Leonardo is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Leonardo 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 Aerospace & Defense industry regulations.
Weighted SWOT Analysis of Leonardo Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Leonardo 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 Leonardo 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 Leonardo 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 Leonardo 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 Leonardo needs to make to build a sustainable competitive advantage.
