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 – cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, technology disruption, central banks are concerned over increasing inflation, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, 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 -
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.
Diverse revenue streams
– London Stock Exchange is present in almost all the verticals within the Investment Services industry. This has provided London Stock Exchange 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.
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.
Ability to lead change in Investment Services
– London Stock Exchange is one of the leading players in the Investment Services industry in United Kingdom. Over the years it has not only transformed the business landscape in the Investment Services industry in United Kingdom but also across the existing markets. The ability to lead change has enabled London Stock Exchange in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
High switching costs
– The high switching costs that London Stock Exchange 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.
Strong track record of project management in the Investment Services industry
– London Stock Exchange is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– London Stock Exchange has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled London Stock Exchange to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– London Stock Exchange is one of the most innovative firm in Investment Services sector.
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.
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.
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.
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 -
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.
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.
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 London Stock Exchange supply chain. Even after few cautionary changes, London Stock Exchange is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left London Stock Exchange vulnerable to further global disruptions in South East Asia.
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.
Skills based hiring in Investment Services industry
– The stress on hiring functional specialists at London Stock Exchange 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.
Aligning sales with marketing
– From the outside it seems that London Stock Exchange needs to have more collaboration between its sales team and marketing team. Sales professionals in the Investment Services industry have deep experience in developing customer relationships. Marketing department at London Stock Exchange can leverage the sales team experience to cultivate customer relationships as London Stock Exchange is planning to shift buying processes online.
High cash cycle compare to competitors
London Stock Exchange has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
Slow decision making process
– As mentioned earlier in the report, London Stock Exchange has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. London Stock Exchange 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.
High dependence on London Stock Exchange ‘s star products
– The top 2 products and services of London Stock Exchange still accounts for major business revenue. This dependence on star products in Investment Services industry has resulted into insufficient focus on developing new products, even though London Stock Exchange has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of London Stock Exchange, it seems that company is thinking out the frontier risks that can impact Investment Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 -
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. London Stock Exchange 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. London Stock Exchange 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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for London Stock Exchange 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 London Stock Exchange to hire the very best people irrespective of their geographical location.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, London Stock Exchange 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. London Stock Exchange can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, London Stock Exchange is facing challenges because of the dominance of functional experts in the organization. London Stock Exchange can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for London Stock Exchange in Investment Services industry. The Investment Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– London Stock Exchange 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 Investment Services industry regulations.
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.
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.
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.
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.
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.
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.
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. London Stock Exchange needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.
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.
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.
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.
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.
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.