L Brands (LB) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for L Brands (United States)

Based on various researches at Oak Spring University , L Brands is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, wage bills are increasing, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, etc

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Introduction to SWOT Analysis of L Brands

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that L Brands can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L Brands, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L Brands 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of L Brands can be done for the following purposes –
1. Strategic planning of L Brands
2. Improving business portfolio management of L Brands
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Apparel) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of L Brands

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Strengths of L Brands | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of L Brands are -

Training and development

– L Brands has one of the best training and development program in Services 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.

Low bargaining power of suppliers

– Suppliers of L Brands in the Services sector have low bargaining power. L Brands has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps L Brands to manage not only supply disruptions but also source products at highly competitive prices.

Effective Research and Development (R&D)

– L Brands has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – L Brands staying ahead in the Retail (Apparel) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High switching costs

– The high switching costs that L Brands 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.

Strong track record of project management in the Retail (Apparel) industry

– L Brands is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Sustainable margins compare to other players in Retail (Apparel) industry

– L Brands has clearly differentiated products in the market place. This has enabled L Brands to fetch slight price premium compare to the competitors in the Retail (Apparel) industry. The sustainable margins have also helped L Brands to invest into research and development (R&D) and innovation.

Innovation driven organization

– L Brands is one of the most innovative firm in Retail (Apparel) sector.

Cross disciplinary teams

– Horizontal connected teams at the L Brands 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.

Digital Transformation in Retail (Apparel) industry

- digital transformation varies from industry to industry. For L Brands digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. L Brands 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 L Brands

– The covid-19 pandemic has put organizational resilience at the centre of everthing L Brands does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Analytics focus

– L Brands 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 (Apparel) 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.

Learning organization

- L Brands 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 Brands is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at L Brands emphasize – knowledge, initiative, and innovation.

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Weaknesses of L Brands | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of L Brands are -

Interest costs

– Compare to the competition, L Brands 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.

Increasing silos among functional specialists

– The organizational structure of L Brands is dominated by functional specialists. It is not different from other players in the Retail (Apparel) industry, but L Brands needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help L Brands to focus more on services in the Retail (Apparel) industry rather than just following the product oriented approach.

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 L Brands supply chain. Even after few cautionary changes, L Brands is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left L Brands vulnerable to further global disruptions in South East Asia.

Need for greater diversity

– L Brands has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, L Brands is slow explore the new channels of communication. These new channels of communication can help L Brands to provide better information regarding Retail (Apparel) products and services. It can also build an online community to further reach out to potential customers.

Compensation and incentives

– The revenue per employee of L Brands is just above the Retail (Apparel) 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.

Products dominated business model

– Even though L Brands has some of the most successful models in the Retail (Apparel) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. L Brands 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 L Brands, it seems that company is thinking out the frontier risks that can impact Retail (Apparel) 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.

Ability to respond to the competition

– As the decision making is very deliberative at L Brands, in the dynamic environment of Retail (Apparel) industry it has struggled to respond to the nimble upstart competition. L Brands has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Low market penetration in new markets

– Outside its home market of United States, L Brands needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High bargaining power of channel partners in Retail (Apparel) industry

– because of the regulatory requirements in United States, L Brands 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 (Apparel) industry.

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L Brands Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of L Brands are -

Creating value in data economy

– The success of analytics program of L Brands has opened avenues for new revenue streams for the organization in Retail (Apparel) industry. This can help L Brands to build a more holistic ecosystem for L Brands products in the Retail (Apparel) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Retail (Apparel) industry, but it has also influenced the consumer preferences. L Brands can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects L Brands can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Building a culture of innovation

– managers at L Brands 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 (Apparel) industry.

Redefining models of collaboration and team work

– As explained in the weaknesses section, L Brands is facing challenges because of the dominance of functional experts in the organization. L Brands can utilize new technology in the field of Retail (Apparel) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Leveraging digital technologies

– L Brands 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 Brands 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, L Brands 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.

Using analytics as competitive advantage

– L Brands has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Apparel) sector. This continuous investment in analytics has enabled L Brands to build a competitive advantage using analytics. The analytics driven competitive advantage can help L Brands to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Lowering marketing communication costs

– 5G expansion will open new opportunities for L Brands 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 (Apparel) industry, and it will provide faster access to the consumers.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, L Brands 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 Brands to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, L Brands can use these opportunities to build new business models that can help the communities that L Brands operates in. Secondly it can use opportunities from government spending in Retail (Apparel) sector.

Buying journey improvements

– L Brands can improve the customer journey of consumers in the Retail (Apparel) 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.

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Threats L Brands External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of L Brands are -

Technology acceleration in Forth Industrial Revolution

– L Brands has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, L Brands needs to keep up with the evolution of technology in the Retail (Apparel) 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 wage structure of L Brands

– 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 L Brands.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, L Brands 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 (Apparel) sector.

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 L Brands in the Retail (Apparel) sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for L Brands in Retail (Apparel) industry. The Retail (Apparel) 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.

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 Brands business can come under increasing regulations regarding data privacy, data security, etc.

Stagnating economy with rate increase

– L Brands 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 Retail (Apparel) industry.

Consumer confidence and its impact on L Brands 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 (Apparel) industry and other sectors.

Environmental challenges

– L Brands 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 Brands can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, L Brands 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 L Brands prominent markets.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents L Brands with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Apparel) 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. L Brands 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.

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 Brands needs to understand the core reasons impacting the Retail (Apparel) industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of L Brands Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at L Brands 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 Brands 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 Brands 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 Brands 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 Brands needs to make to build a sustainable competitive advantage.

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