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 – there is increasing trade war between United States & China, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, 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 -
Ability to lead change in Retail (Specialty)
– Lovisa Holdings Ltd is one of the leading players in the Retail (Specialty) industry in Australia. Over the years it has not only transformed the business landscape in the Retail (Specialty) industry in Australia but also across the existing markets. The ability to lead change has enabled Lovisa Holdings Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Sustainable margins compare to other players in Retail (Specialty) industry
– Lovisa Holdings Ltd has clearly differentiated products in the market place. This has enabled Lovisa Holdings Ltd to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped Lovisa Holdings Ltd to invest into research and development (R&D) and innovation.
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.
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 switching costs
– The high switching costs that Lovisa Holdings Ltd 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.
Diverse revenue streams
– Lovisa Holdings Ltd is present in almost all the verticals within the Retail (Specialty) industry. This has provided Lovisa Holdings Ltd 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.
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.
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.
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.
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.
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.
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 -
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.
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.
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 Lovisa Holdings Ltd supply chain. Even after few cautionary changes, Lovisa Holdings Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lovisa Holdings Ltd vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Lovisa Holdings Ltd strategy
– From the outside it seems that the employees of Lovisa Holdings Ltd 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.
Capital Spending Reduction
– Even during the low interest decade, Lovisa Holdings Ltd 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 Retail (Specialty) industry using digital technology.
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.
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.
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.
Products dominated business model
– Even though Lovisa Holdings Ltd has some of the most successful models in the Retail (Specialty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lovisa Holdings Ltd should strive to include more intangible value offerings along with its core products and services.
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 -
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.
Learning at scale
– Online learning technologies has now opened space for Lovisa Holdings Ltd 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.
Loyalty marketing
– Lovisa Holdings Ltd 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.
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.
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.
Creating value in data economy
– The success of analytics program of Lovisa Holdings Ltd has opened avenues for new revenue streams for the organization in Retail (Specialty) industry. This can help Lovisa Holdings Ltd to build a more holistic ecosystem for Lovisa Holdings Ltd products in the Retail (Specialty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Retail (Specialty) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lovisa Holdings Ltd in the Retail (Specialty) industry. Now Lovisa Holdings Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lovisa Holdings Ltd can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Lovisa Holdings Ltd to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Buying journey improvements
– Lovisa Holdings Ltd can improve the customer journey of consumers in the Retail (Specialty) 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
– 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.
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.
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 -
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.
Easy access to finance
– Easy access to finance in Retail (Specialty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lovisa Holdings Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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. Lovisa Holdings Ltd needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lovisa Holdings Ltd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Specialty) sector.
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.
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.
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.
