SWOT Analysis / TOWS Matrix for Lovisa Holdings Ltd (Australia)
Based on various researches at Oak Spring University , Lovisa Holdings Ltd is operating in a macro-environment that has been destablized by – wage bills are increasing, there is increasing trade war between United States & China, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing commodity prices, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Lovisa Holdings Ltd
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lovisa Holdings Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lovisa Holdings Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lovisa Holdings Ltd 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 Lovisa Holdings Ltd can be done for the following purposes –
1. Strategic planning of Lovisa Holdings Ltd
2. Improving business portfolio management of Lovisa Holdings Ltd
3. Assessing feasibility of the new initiative in Australia
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lovisa Holdings Ltd
Strengths of Lovisa Holdings Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lovisa Holdings Ltd are -
Effective Research and Development (R&D)
– Lovisa Holdings Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lovisa Holdings Ltd staying ahead in the Retail (Specialty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Lovisa Holdings Ltd comprises – understanding the underlying the factors in the Retail (Specialty) 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.
Analytics focus
– Lovisa Holdings Ltd 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 Retail (Specialty) industry. The technology infrastructure of Australia 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.
Low bargaining power of suppliers
– Suppliers of Lovisa Holdings Ltd in the Services sector have low bargaining power. Lovisa Holdings Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lovisa Holdings Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Retail (Specialty) industry
– Lovisa Holdings Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Lovisa Holdings Ltd is one of the most innovative firm in Retail (Specialty) sector.
Digital Transformation in Retail (Specialty) industry
- digital transformation varies from industry to industry. For Lovisa Holdings Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lovisa Holdings Ltd 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
- Lovisa Holdings Ltd 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 Lovisa Holdings Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lovisa Holdings Ltd emphasize – knowledge, initiative, and innovation.
High brand equity
– Lovisa Holdings Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lovisa Holdings Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Lovisa Holdings Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lovisa Holdings Ltd 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.
Ability to recruit top talent
– Lovisa Holdings Ltd is one of the leading players in the Retail (Specialty) industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Lovisa Holdings Ltd
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lovisa Holdings Ltd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Lovisa Holdings Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lovisa Holdings Ltd are -
Increasing silos among functional specialists
– The organizational structure of Lovisa Holdings Ltd is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but Lovisa Holdings Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lovisa Holdings Ltd to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Lovisa Holdings Ltd has a high cash cycle compare to other players in the Retail (Specialty) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Lovisa Holdings Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Specialty) industry have deep experience in developing customer relationships. Marketing department at Lovisa Holdings Ltd can leverage the sales team experience to cultivate customer relationships as Lovisa Holdings Ltd is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Lovisa Holdings Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Specialty) industry over the last five years. Lovisa Holdings Ltd 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 bargaining power of channel partners in Retail (Specialty) industry
– because of the regulatory requirements in Australia, Lovisa Holdings Ltd 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 Retail (Specialty) industry.
High operating costs
– Compare to the competitors, Lovisa Holdings Ltd has high operating costs in the Retail (Specialty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lovisa Holdings Ltd lucrative customers.
Low market penetration in new markets
– Outside its home market of Australia, Lovisa Holdings Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Retail (Specialty) industry, Lovisa Holdings Ltd 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lovisa Holdings Ltd is slow explore the new channels of communication. These new channels of communication can help Lovisa Holdings Ltd to provide better information regarding Retail (Specialty) products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of Lovisa Holdings Ltd, it seems that company is thinking out the frontier risks that can impact Retail (Specialty) 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.
Slow to strategic competitive environment developments
– As Lovisa Holdings Ltd is one of the leading players in the Retail (Specialty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Specialty) industry in last five years.
Lovisa Holdings Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lovisa Holdings Ltd are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lovisa Holdings Ltd can use these opportunities to build new business models that can help the communities that Lovisa Holdings Ltd operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.
Manufacturing automation
– Lovisa Holdings Ltd can use the latest technology developments to improve its manufacturing and designing process in Retail (Specialty) 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.
Leveraging digital technologies
– Lovisa Holdings Ltd 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. Lovisa Holdings Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lovisa Holdings Ltd is facing challenges because of the dominance of functional experts in the organization. Lovisa Holdings Ltd can utilize new technology in the field of Retail (Specialty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Lovisa Holdings Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled Lovisa Holdings Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lovisa Holdings Ltd 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 Lovisa Holdings Ltd to increase its market reach. Lovisa Holdings Ltd 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 Lovisa Holdings Ltd 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 Lovisa Holdings Ltd to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lovisa Holdings Ltd 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. Lovisa Holdings Ltd 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.
Building a culture of innovation
– managers at Lovisa Holdings Ltd 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 Retail (Specialty) industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lovisa Holdings Ltd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Specialty) industry, and it will provide faster access to the consumers.
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 Lovisa Holdings Ltd 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.
Developing new processes and practices
– Lovisa Holdings Ltd can develop new processes and procedures in Retail (Specialty) 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.
Threats Lovisa Holdings Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lovisa Holdings Ltd are -
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. Lovisa Holdings Ltd 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.
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 Lovisa Holdings Ltd in the Retail (Specialty) sector and impact the bottomline of the organization.
Consumer confidence and its impact on Lovisa Holdings Ltd 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 Retail (Specialty) industry and other sectors.
Regulatory challenges
– Lovisa Holdings Ltd 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 Retail (Specialty) industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Specialty) industry are lowering. It can presents Lovisa Holdings Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Specialty) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lovisa Holdings Ltd in Retail (Specialty) industry. The Retail (Specialty) 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.
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 Lovisa Holdings Ltd.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lovisa Holdings Ltd 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 Lovisa Holdings Ltd prominent markets.
High dependence on third party suppliers
– Lovisa Holdings Ltd 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.
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
– Lovisa Holdings Ltd has witnessed rapid integration of technology during Covid-19 in the Retail (Specialty) industry. As one of the leading players in the industry, Lovisa Holdings Ltd needs to keep up with the evolution of technology in the Retail (Specialty) 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.
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 Lovisa Holdings Ltd business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Lovisa Holdings Ltd
– 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 Lovisa Holdings Ltd.
Weighted SWOT Analysis of Lovisa Holdings Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lovisa Holdings Ltd 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 Lovisa Holdings Ltd 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 Lovisa Holdings Ltd 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 Lovisa Holdings Ltd 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 Lovisa Holdings Ltd needs to make to build a sustainable competitive advantage.