London Stock Exchange (LSE) SWOT Analysis / TOWS Matrix / MBA Resources
Investment Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for London Stock Exchange (United Kingdom)
Based on various researches at Oak Spring University , London Stock Exchange is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, technology disruption, supply chains are disrupted by pandemic ,
increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of London Stock Exchange
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that London Stock Exchange can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the London Stock Exchange, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which London Stock Exchange 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 London Stock Exchange can be done for the following purposes –
1. Strategic planning of London Stock Exchange
2. Improving business portfolio management of London Stock Exchange
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of London Stock Exchange
Strengths of London Stock Exchange | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of London Stock Exchange are -
Organizational Resilience of London Stock Exchange
– The covid-19 pandemic has put organizational resilience at the centre of everthing London Stock Exchange does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– London Stock Exchange has one of the best training and development program in Financial 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.
Operational resilience
– The operational resilience strategy of London Stock Exchange comprises – understanding the underlying the factors in the Investment 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.
Superior customer experience
– The customer experience strategy of London Stock Exchange in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the London Stock Exchange 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 Investment Services industry
– London Stock Exchange has clearly differentiated products in the market place. This has enabled London Stock Exchange to fetch slight price premium compare to the competitors in the Investment Services industry. The sustainable margins have also helped London Stock Exchange to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– London Stock Exchange has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of London Stock Exchange have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– London Stock Exchange 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 Investment Services industry. The technology infrastructure of United Kingdom 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.
Effective Research and Development (R&D)
– London Stock Exchange has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – London Stock Exchange staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– London Stock Exchange is one of the leading players in the Investment Services industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of London Stock Exchange in the Financial sector have low bargaining power. London Stock Exchange has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps London Stock Exchange to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- London Stock Exchange 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 London Stock Exchange is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at London Stock Exchange emphasize – knowledge, initiative, and innovation.
Weaknesses of London Stock Exchange | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of London Stock Exchange are -
Ability to respond to the competition
– As the decision making is very deliberative at London Stock Exchange, in the dynamic environment of Investment Services industry it has struggled to respond to the nimble upstart competition. London Stock Exchange has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Investment Services industry
– because of the regulatory requirements in United Kingdom, London Stock Exchange 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 Investment Services industry.
Low market penetration in new markets
– Outside its home market of United Kingdom, London Stock Exchange needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though London Stock Exchange has some of the most successful models in the Investment Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. London Stock Exchange should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– London Stock Exchange 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, London Stock Exchange is slow explore the new channels of communication. These new channels of communication can help London Stock Exchange to provide better information regarding Investment Services products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, London Stock Exchange has high operating costs in the Investment Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract London Stock Exchange lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, London Stock Exchange 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 Investment Services industry using digital technology.
Employees’ less understanding of London Stock Exchange strategy
– From the outside it seems that the employees of London Stock Exchange 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.
Interest costs
– Compare to the competition, London Stock Exchange 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.
Lack of clear differentiation of London Stock Exchange products
– To increase the profitability and margins on the products, London Stock Exchange needs to provide more differentiated products than what it is currently offering in the marketplace.
London Stock Exchange Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of London Stock Exchange are -
Better consumer reach
– The expansion of the 5G network will help London Stock Exchange to increase its market reach. London Stock Exchange 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.
Buying journey improvements
– London Stock Exchange can improve the customer journey of consumers in the Investment Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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. London Stock Exchange can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– London Stock Exchange can develop new processes and procedures in Investment 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.
Creating value in data economy
– The success of analytics program of London Stock Exchange has opened avenues for new revenue streams for the organization in Investment Services industry. This can help London Stock Exchange to build a more holistic ecosystem for London Stock Exchange products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– London Stock Exchange has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled London Stock Exchange to build a competitive advantage using analytics. The analytics driven competitive advantage can help London Stock Exchange to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– London Stock Exchange 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 Investment Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for London Stock Exchange in the Investment Services industry. Now London Stock Exchange can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– London Stock Exchange can use the latest technology developments to improve its manufacturing and designing process in Investment 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.
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 London Stock Exchange 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for London Stock Exchange in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for London Stock Exchange 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.
Building a culture of innovation
– managers at London Stock Exchange 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 Investment Services industry.
Threats London Stock Exchange External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of London Stock Exchange are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, London Stock Exchange may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, London Stock Exchange 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 London Stock Exchange prominent markets.
Technology acceleration in Forth Industrial Revolution
– London Stock Exchange has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, London Stock Exchange needs to keep up with the evolution of technology in the Investment Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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 London Stock Exchange.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents London Stock Exchange with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.
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 London Stock Exchange business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– London Stock Exchange 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. London Stock Exchange can take advantage of this fund but it will also bring new competitors in the Investment Services 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. London Stock Exchange 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.
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.
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 London Stock Exchange in the Investment Services sector and impact the bottomline of the organization.
High dependence on third party suppliers
– London Stock Exchange 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.
Consumer confidence and its impact on London Stock Exchange 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 Investment Services industry and other sectors.
Shortening product life cycle
– it is one of the major threat that London Stock Exchange is facing in Investment Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of London Stock Exchange Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at London Stock Exchange 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 London Stock Exchange 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 London Stock Exchange 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 London Stock Exchange 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 London Stock Exchange needs to make to build a sustainable competitive advantage.
