Based on various researches at Oak Spring University , Lumentum Holdings Inc is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, technology disruption, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, etc
Introduction to SWOT Analysis of Lumentum Holdings Inc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lumentum Holdings Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lumentum Holdings Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lumentum Holdings Inc 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 Lumentum Holdings Inc can be done for the following purposes –
1. Strategic planning of Lumentum Holdings Inc
2. Improving business portfolio management of Lumentum Holdings Inc
3. Assessing feasibility of the new initiative in United States
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lumentum Holdings Inc
Strengths of Lumentum Holdings Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lumentum Holdings Inc are -
Organizational Resilience of Lumentum Holdings Inc
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lumentum Holdings Inc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Lumentum Holdings Inc comprises – understanding the underlying the factors in the Communications Equipment 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
– Lumentum Holdings Inc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lumentum Holdings Inc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Lumentum Holdings Inc in Communications Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Lumentum Holdings Inc 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 Communications Equipment 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.
Cross disciplinary teams
– Horizontal connected teams at the Lumentum Holdings Inc 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.
Sustainable margins compare to other players in Communications Equipment industry
– Lumentum Holdings Inc has clearly differentiated products in the market place. This has enabled Lumentum Holdings Inc to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped Lumentum Holdings Inc to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Lumentum Holdings Inc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lumentum Holdings Inc staying ahead in the Communications Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Lumentum Holdings Inc in the Technology sector have low bargaining power. Lumentum Holdings Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lumentum Holdings Inc to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Lumentum Holdings Inc is present in almost all the verticals within the Communications Equipment industry. This has provided Lumentum Holdings Inc 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.
Learning organization
- Lumentum Holdings Inc 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 Lumentum Holdings Inc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lumentum Holdings Inc emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Lumentum Holdings Inc is one of the leading players in the Communications Equipment industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Lumentum Holdings Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lumentum Holdings Inc are -
Skills based hiring in Communications Equipment industry
– The stress on hiring functional specialists at Lumentum Holdings Inc 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.
No frontier risks strategy
– From the 10K / annual statement of Lumentum Holdings Inc, it seems that company is thinking out the frontier risks that can impact Communications Equipment 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.
Interest costs
– Compare to the competition, Lumentum Holdings Inc 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.
High cash cycle compare to competitors
Lumentum Holdings Inc has a high cash cycle compare to other players in the Communications Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Lumentum Holdings Inc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Communications Equipment industry over the last five years. Lumentum Holdings Inc 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.
Aligning sales with marketing
– From the outside it seems that Lumentum Holdings Inc needs to have more collaboration between its sales team and marketing team. Sales professionals in the Communications Equipment industry have deep experience in developing customer relationships. Marketing department at Lumentum Holdings Inc can leverage the sales team experience to cultivate customer relationships as Lumentum Holdings Inc is planning to shift buying processes online.
Need for greater diversity
– Lumentum Holdings Inc 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.
Capital Spending Reduction
– Even during the low interest decade, Lumentum Holdings Inc 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 Communications Equipment industry using digital technology.
High dependence on Lumentum Holdings Inc ‘s star products
– The top 2 products and services of Lumentum Holdings Inc still accounts for major business revenue. This dependence on star products in Communications Equipment industry has resulted into insufficient focus on developing new products, even though Lumentum Holdings Inc has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Communications Equipment industry, Lumentum Holdings Inc 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, Lumentum Holdings Inc is slow explore the new channels of communication. These new channels of communication can help Lumentum Holdings Inc to provide better information regarding Communications Equipment products and services. It can also build an online community to further reach out to potential customers.
Lumentum Holdings Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lumentum Holdings Inc are -
Learning at scale
– Online learning technologies has now opened space for Lumentum Holdings Inc 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.
Better consumer reach
– The expansion of the 5G network will help Lumentum Holdings Inc to increase its market reach. Lumentum Holdings Inc 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lumentum Holdings Inc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Communications Equipment industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lumentum Holdings Inc 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 Lumentum Holdings Inc to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Lumentum Holdings Inc 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 Communications Equipment industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lumentum Holdings Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Lumentum Holdings Inc can improve the customer journey of consumers in the Communications Equipment 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lumentum Holdings Inc can use these opportunities to build new business models that can help the communities that Lumentum Holdings Inc operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.
Use of Bitcoin and other crypto currencies for transactions in Communications Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lumentum Holdings Inc in the Communications Equipment industry. Now Lumentum Holdings Inc can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Lumentum Holdings Inc can use the latest technology developments to improve its manufacturing and designing process in Communications Equipment 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.
Using analytics as competitive advantage
– Lumentum Holdings Inc has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled Lumentum Holdings Inc to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lumentum Holdings Inc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Lumentum Holdings Inc 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lumentum Holdings Inc 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.
Threats Lumentum Holdings Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lumentum Holdings Inc 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. Lumentum Holdings Inc 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.
Shortening product life cycle
– it is one of the major threat that Lumentum Holdings Inc is facing in Communications Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lumentum Holdings Inc 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 Lumentum Holdings Inc prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lumentum Holdings Inc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Equipment sector.
High dependence on third party suppliers
– Lumentum Holdings Inc 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.
Environmental challenges
– Lumentum Holdings Inc 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. Lumentum Holdings Inc can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.
Easy access to finance
– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lumentum Holdings Inc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Lumentum Holdings Inc business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lumentum Holdings Inc in Communications Equipment industry. The Communications Equipment 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.
Increasing wage structure of Lumentum Holdings Inc
– 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 Lumentum Holdings Inc.
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 Lumentum Holdings Inc.
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. Lumentum Holdings Inc needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.
Consumer confidence and its impact on Lumentum Holdings Inc 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 Communications Equipment industry and other sectors.
Weighted SWOT Analysis of Lumentum Holdings Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lumentum Holdings Inc 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 Lumentum Holdings Inc 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 Lumentum Holdings Inc 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 Lumentum Holdings Inc 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 Lumentum Holdings Inc needs to make to build a sustainable competitive advantage.