Linamar (LNR) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Parts
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Linamar (Canada)
Based on various researches at Oak Spring University , Linamar is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, technology disruption, there is increasing trade war between United States & China, central banks are concerned over increasing inflation,
increasing inequality as vast percentage of new income is going to the top 1%, 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 Linamar can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Linamar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Linamar 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 Linamar can be done for the following purposes –
1. Strategic planning of Linamar
2. Improving business portfolio management of Linamar
3. Assessing feasibility of the new initiative in Canada
4. Making a Auto & Truck Parts sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Linamar
Strengths of Linamar | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Linamar are -
Learning organization
- Linamar 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 Linamar is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Linamar emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Linamar is one of the most innovative firm in Auto & Truck Parts sector.
Effective Research and Development (R&D)
– Linamar has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Linamar staying ahead in the Auto & Truck Parts industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Linamar in Auto & Truck Parts industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Auto & Truck Parts
– Linamar is one of the leading players in the Auto & Truck Parts industry in Canada. Over the years it has not only transformed the business landscape in the Auto & Truck Parts industry in Canada but also across the existing markets. The ability to lead change has enabled Linamar in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Linamar is one of the leading players in the Auto & Truck Parts industry in Canada. It is in a position to attract the best talent available in Canada. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Linamar 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 Auto & Truck Parts industry. The technology infrastructure of Canada 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.
Training and development
– Linamar has one of the best training and development program in Consumer Cyclical 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.
Strong track record of project management in the Auto & Truck Parts industry
– Linamar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Linamar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Linamar 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.
Operational resilience
– The operational resilience strategy of Linamar comprises – understanding the underlying the factors in the Auto & Truck Parts 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.
High brand equity
– Linamar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Linamar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Linamar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Linamar are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Linamar is slow explore the new channels of communication. These new channels of communication can help Linamar to provide better information regarding Auto & Truck Parts products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Linamar has some of the most successful models in the Auto & Truck Parts industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Linamar should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– From the 10K / annual statement of Linamar, it seems that company is thinking out the frontier risks that can impact Auto & Truck Parts 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 Linamar is one of the leading players in the Auto & Truck Parts industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Parts industry in last five years.
Compensation and incentives
– The revenue per employee of Linamar is just above the Auto & Truck Parts 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.
High operating costs
– Compare to the competitors, Linamar has high operating costs in the Auto & Truck Parts industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Linamar lucrative customers.
Lack of clear differentiation of Linamar products
– To increase the profitability and margins on the products, Linamar needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at Linamar, in the dynamic environment of Auto & Truck Parts industry it has struggled to respond to the nimble upstart competition. Linamar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Linamar has a high cash cycle compare to other players in the Auto & Truck Parts industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Linamar 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.
Capital Spending Reduction
– Even during the low interest decade, Linamar 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 Auto & Truck Parts industry using digital technology.
Linamar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Linamar are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Linamar 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.
Leveraging digital technologies
– Linamar 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Linamar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Linamar can use these opportunities to build new business models that can help the communities that Linamar operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
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. Linamar can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Parts industry, but it has also influenced the consumer preferences. Linamar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Parts industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Linamar 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. Linamar 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.
Using analytics as competitive advantage
– Linamar has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Parts sector. This continuous investment in analytics has enabled Linamar to build a competitive advantage using analytics. The analytics driven competitive advantage can help Linamar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Parts industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Linamar in the Auto & Truck Parts industry. Now Linamar can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Linamar can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Parts 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.
Learning at scale
– Online learning technologies has now opened space for Linamar 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Linamar 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 Linamar to hire the very best people irrespective of their geographical location.
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 Linamar 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.
Threats Linamar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Linamar are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Linamar 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 Linamar prominent markets.
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 Linamar.
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. Linamar needs to understand the core reasons impacting the Auto & Truck Parts industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Linamar is facing in Auto & Truck Parts sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Linamar
– 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 Linamar.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Linamar may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Auto & Truck Parts sector.
Consumer confidence and its impact on Linamar 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 Auto & Truck Parts industry and other sectors.
High dependence on third party suppliers
– Linamar 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.
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. Linamar 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.
Easy access to finance
– Easy access to finance in Auto & Truck Parts industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Linamar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Linamar 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 Auto & Truck Parts industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Linamar in Auto & Truck Parts industry. The Auto & Truck Parts 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.
Technology acceleration in Forth Industrial Revolution
– Linamar has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Parts industry. As one of the leading players in the industry, Linamar needs to keep up with the evolution of technology in the Auto & Truck Parts 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.
Weighted SWOT Analysis of Linamar Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Linamar 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 Linamar 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 Linamar 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 Linamar 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 Linamar needs to make to build a sustainable competitive advantage.