SWOT Analysis / TOWS Matrix for Luxchem Corp (Malaysia)
Based on various researches at Oak Spring University , Luxchem Corp is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models,
technology disruption, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Luxchem Corp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Luxchem Corp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Luxchem Corp 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 Luxchem Corp can be done for the following purposes –
1. Strategic planning of Luxchem Corp
2. Improving business portfolio management of Luxchem Corp
3. Assessing feasibility of the new initiative in Malaysia
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Luxchem Corp
Strengths of Luxchem Corp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Luxchem Corp are -
Analytics focus
– Luxchem Corp 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 Malaysia 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.
High switching costs
– The high switching costs that Luxchem Corp 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.
High brand equity
– Luxchem Corp has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Luxchem Corp to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Chemical Manufacturing
– Luxchem Corp is one of the leading players in the Chemical Manufacturing industry in Malaysia. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Malaysia but also across the existing markets. The ability to lead change has enabled Luxchem Corp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Luxchem Corp has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Luxchem Corp have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Luxchem Corp in the Basic Materials sector have low bargaining power. Luxchem Corp has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Luxchem Corp to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Luxchem Corp is one of the most innovative firm in Chemical Manufacturing sector.
Learning organization
- Luxchem Corp 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 Luxchem Corp is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Luxchem Corp emphasize – knowledge, initiative, and innovation.
Digital Transformation in Chemical Manufacturing industry
- digital transformation varies from industry to industry. For Luxchem Corp digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Luxchem Corp 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.
Organizational Resilience of Luxchem Corp
– The covid-19 pandemic has put organizational resilience at the centre of everthing Luxchem Corp does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Chemical Manufacturing industry
– Luxchem Corp has clearly differentiated products in the market place. This has enabled Luxchem Corp to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Luxchem Corp to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Luxchem Corp is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Luxchem Corp 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 Luxchem Corp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Luxchem Corp are -
High cash cycle compare to competitors
Luxchem Corp 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.
Lack of clear differentiation of Luxchem Corp products
– To increase the profitability and margins on the products, Luxchem Corp needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Luxchem Corp is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.
Skills based hiring in Chemical Manufacturing industry
– The stress on hiring functional specialists at Luxchem Corp 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.
Employees’ less understanding of Luxchem Corp strategy
– From the outside it seems that the employees of Luxchem Corp 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.
Compensation and incentives
– The revenue per employee of Luxchem Corp is just above the Chemical Manufacturing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– From the 10K / annual statement of Luxchem Corp, 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.
Interest costs
– Compare to the competition, Luxchem Corp 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.
Ability to respond to the competition
– As the decision making is very deliberative at Luxchem Corp, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Luxchem Corp has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Chemical Manufacturing industry, Luxchem Corp 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 operating costs
– Compare to the competitors, Luxchem Corp has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Luxchem Corp lucrative customers.
Luxchem Corp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Luxchem Corp are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Luxchem Corp 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Luxchem Corp 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 Luxchem Corp to hire the very best people irrespective of their geographical location.
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 Luxchem Corp in the Chemical Manufacturing industry. Now Luxchem Corp can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Luxchem Corp has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Luxchem Corp to build a more holistic ecosystem for Luxchem Corp products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Luxchem Corp 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.
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. Luxchem Corp can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Luxchem Corp to increase its market reach. Luxchem Corp 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.
Developing new processes and practices
– Luxchem Corp can develop new processes and procedures in Chemical Manufacturing 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.
Loyalty marketing
– Luxchem Corp has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Chemical Manufacturing industry, but it has also influenced the consumer preferences. Luxchem Corp can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Luxchem Corp 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.
Using analytics as competitive advantage
– Luxchem Corp 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 Luxchem Corp to build a competitive advantage using analytics. The analytics driven competitive advantage can help Luxchem Corp to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Luxchem Corp can use these opportunities to build new business models that can help the communities that Luxchem Corp operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.
Threats Luxchem Corp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Luxchem Corp are -
High dependence on third party suppliers
– Luxchem Corp 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
– Luxchem Corp 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. Luxchem Corp 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 Luxchem Corp with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
Technology acceleration in Forth Industrial Revolution
– Luxchem Corp has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Luxchem Corp needs to keep up with the evolution of technology in the Chemical Manufacturing 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Luxchem Corp 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 Luxchem Corp prominent markets.
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.
Consumer confidence and its impact on Luxchem Corp 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 Chemical Manufacturing industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Luxchem Corp 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.
Shortening product life cycle
– it is one of the major threat that Luxchem Corp is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Luxchem Corp 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. Luxchem Corp needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.
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 Luxchem Corp business can come under increasing regulations regarding data privacy, data security, etc.
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. Luxchem Corp 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.
Weighted SWOT Analysis of Luxchem Corp Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Luxchem Corp 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 Luxchem Corp 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 Luxchem Corp 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 Luxchem Corp 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 Luxchem Corp needs to make to build a sustainable competitive advantage.
