SWOT Analysis / TOWS Matrix for L’Air Liquide (United States)
Based on various researches at Oak Spring University , L’Air Liquide is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, challanges to central banks by blockchain based private currencies,
competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that L’Air Liquide can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L’Air Liquide, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L’Air Liquide 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 L’Air Liquide can be done for the following purposes –
1. Strategic planning of L’Air Liquide
2. Improving business portfolio management of L’Air Liquide
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of L’Air Liquide
Strengths of L’Air Liquide | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of L’Air Liquide are -
Low bargaining power of suppliers
– Suppliers of L’Air Liquide in the sector have low bargaining power. L’Air Liquide has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps L’Air Liquide to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– L’Air Liquide is present in almost all the verticals within the industry. This has provided L’Air Liquide 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
– L’Air Liquide has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled L’Air Liquide to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– L’Air Liquide 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 States 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.
Innovation driven organization
– L’Air Liquide is one of the most innovative firm in sector.
Training and development
– L’Air Liquide has one of the best training and development program in 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.
Organizational Resilience of L’Air Liquide
– The covid-19 pandemic has put organizational resilience at the centre of everthing L’Air Liquide does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– L’Air Liquide has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. L’Air Liquide 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.
Cross disciplinary teams
– Horizontal connected teams at the L’Air Liquide 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 L’Air Liquide 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.
Sustainable margins compare to other players in industry
– L’Air Liquide has clearly differentiated products in the market place. This has enabled L’Air Liquide to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped L’Air Liquide to invest into research and development (R&D) and innovation.
Learning organization
- L’Air Liquide 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 L’Air Liquide is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at L’Air Liquide emphasize – knowledge, initiative, and innovation.
Weaknesses of L’Air Liquide | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of L’Air Liquide are -
Interest costs
– Compare to the competition, L’Air Liquide 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.
Low market penetration in new markets
– Outside its home market of United States, L’Air Liquide needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, L’Air Liquide is slow explore the new channels of communication. These new channels of communication can help L’Air Liquide to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As L’Air Liquide is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Skills based hiring in industry
– The stress on hiring functional specialists at L’Air Liquide 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.
High operating costs
– Compare to the competitors, L’Air Liquide has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract L’Air Liquide lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of L’Air Liquide, it seems that company is thinking out the frontier risks that can impact 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.
Capital Spending Reduction
– Even during the low interest decade, L’Air Liquide 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.
Products dominated business model
– Even though L’Air Liquide has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. L’Air Liquide should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of L’Air Liquide strategy
– From the outside it seems that the employees of L’Air Liquide 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.
Slow decision making process
– As mentioned earlier in the report, L’Air Liquide has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. L’Air Liquide 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.
L’Air Liquide Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of L’Air Liquide are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, L’Air Liquide 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 L’Air Liquide to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects L’Air Liquide can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. L’Air Liquide 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. L’Air Liquide 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
– L’Air Liquide 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, L’Air Liquide is facing challenges because of the dominance of functional experts in the organization. L’Air Liquide can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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. L’Air Liquide can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at L’Air Liquide 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 industry.
Manufacturing automation
– L’Air Liquide 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.
Leveraging digital technologies
– L’Air Liquide 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.
Learning at scale
– Online learning technologies has now opened space for L’Air Liquide 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.
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 L’Air Liquide 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.
Better consumer reach
– The expansion of the 5G network will help L’Air Liquide to increase its market reach. L’Air Liquide 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.
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 L’Air Liquide in the industry. Now L’Air Liquide can target international markets with far fewer capital restrictions requirements than the existing system.
Threats L’Air Liquide External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of L’Air Liquide are -
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. L’Air Liquide needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Consumer confidence and its impact on L’Air Liquide 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.
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. L’Air Liquide 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.
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 L’Air Liquide business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents L’Air Liquide with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– L’Air Liquide 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. L’Air Liquide can take advantage of this fund but it will also bring new competitors in the industry.
Technology acceleration in Forth Industrial Revolution
– L’Air Liquide has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, L’Air Liquide needs to keep up with the evolution of technology in the 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.
Shortening product life cycle
– it is one of the major threat that L’Air Liquide is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– L’Air Liquide 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.
High dependence on third party suppliers
– L’Air Liquide 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.
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 L’Air Liquide.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. L’Air Liquide can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, L’Air Liquide 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.
Weighted SWOT Analysis of L’Air Liquide Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at L’Air Liquide 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 L’Air Liquide 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 L’Air Liquide 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 L’Air Liquide 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 L’Air Liquide needs to make to build a sustainable competitive advantage.
