Larsen&Toubro (LARTq) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Larsen&Toubro (United Kingdom)
Based on various researches at Oak Spring University , Larsen&Toubro is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, talent flight as more people leaving formal jobs,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Larsen&Toubro can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Larsen&Toubro, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Larsen&Toubro 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 Larsen&Toubro can be done for the following purposes –
1. Strategic planning of Larsen&Toubro
2. Improving business portfolio management of Larsen&Toubro
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Larsen&Toubro
Strengths of Larsen&Toubro | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Larsen&Toubro are -
Successful track record of launching new products
– Larsen&Toubro has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Larsen&Toubro 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.
Sustainable margins compare to other players in industry
– Larsen&Toubro has clearly differentiated products in the market place. This has enabled Larsen&Toubro to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Larsen&Toubro to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Larsen&Toubro in the sector have low bargaining power. Larsen&Toubro has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Larsen&Toubro to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Larsen&Toubro in 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 Larsen&Toubro 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.
Operational resilience
– The operational resilience strategy of Larsen&Toubro comprises – understanding the underlying the factors in the 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.
Strong track record of project management in the industry
– Larsen&Toubro is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Larsen&Toubro digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Larsen&Toubro 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.
Learning organization
- Larsen&Toubro 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 Larsen&Toubro is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Larsen&Toubro emphasize – knowledge, initiative, and innovation.
Analytics focus
– Larsen&Toubro 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 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.
Highly skilled collaborators
– Larsen&Toubro has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Larsen&Toubro have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Larsen&Toubro is present in almost all the verticals within the industry. This has provided Larsen&Toubro 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.
Weaknesses of Larsen&Toubro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Larsen&Toubro are -
Aligning sales with marketing
– From the outside it seems that Larsen&Toubro needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Larsen&Toubro can leverage the sales team experience to cultivate customer relationships as Larsen&Toubro is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Larsen&Toubro is dominated by functional specialists. It is not different from other players in the industry, but Larsen&Toubro needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Larsen&Toubro to focus more on services in the industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Larsen&Toubro has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Larsen&Toubro 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.
Workers concerns about automation
– As automation is fast increasing in the industry, Larsen&Toubro 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.
Skills based hiring in industry
– The stress on hiring functional specialists at Larsen&Toubro 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.
Lack of clear differentiation of Larsen&Toubro products
– To increase the profitability and margins on the products, Larsen&Toubro needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Larsen&Toubro ‘s star products
– The top 2 products and services of Larsen&Toubro still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though Larsen&Toubro has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Larsen&Toubro, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Larsen&Toubro 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 industry
– because of the regulatory requirements in United Kingdom, Larsen&Toubro 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 industry.
Capital Spending Reduction
– Even during the low interest decade, Larsen&Toubro 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 industry using digital technology.
Larsen&Toubro Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Larsen&Toubro are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Larsen&Toubro can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Larsen&Toubro can use the latest technology developments to improve its manufacturing and designing process in 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 Larsen&Toubro 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.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Larsen&Toubro in the industry. Now Larsen&Toubro can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Larsen&Toubro can develop new processes and procedures in 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.
Better consumer reach
– The expansion of the 5G network will help Larsen&Toubro to increase its market reach. Larsen&Toubro 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
– Larsen&Toubro can improve the customer journey of consumers in the 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.
Leveraging digital technologies
– Larsen&Toubro 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.
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. Larsen&Toubro can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Larsen&Toubro 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. Larsen&Toubro 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Larsen&Toubro in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Larsen&Toubro has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Larsen&Toubro to build a competitive advantage using analytics. The analytics driven competitive advantage can help Larsen&Toubro to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Larsen&Toubro has opened avenues for new revenue streams for the organization in industry. This can help Larsen&Toubro to build a more holistic ecosystem for Larsen&Toubro products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Larsen&Toubro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Larsen&Toubro are -
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 Larsen&Toubro.
Increasing wage structure of Larsen&Toubro
– 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 Larsen&Toubro.
Stagnating economy with rate increase
– Larsen&Toubro 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 industry.
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 Larsen&Toubro in the 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, Larsen&Toubro may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High 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. Larsen&Toubro needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Larsen&Toubro 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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 Larsen&Toubro business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Larsen&Toubro is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Larsen&Toubro with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Larsen&Toubro 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 industry and other sectors.
Weighted SWOT Analysis of Larsen&Toubro Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Larsen&Toubro 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 Larsen&Toubro 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 Larsen&Toubro 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 Larsen&Toubro 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 Larsen&Toubro needs to make to build a sustainable competitive advantage.