LookSmart (LKST) SWOT Analysis / TOWS Matrix / MBA Resources
Advertising
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for LookSmart (United States)
Based on various researches at Oak Spring University , LookSmart is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, supply chains are disrupted by pandemic , there is backlash against globalization, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing energy prices,
cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that LookSmart can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the LookSmart, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which LookSmart 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 LookSmart can be done for the following purposes –
1. Strategic planning of LookSmart
2. Improving business portfolio management of LookSmart
3. Assessing feasibility of the new initiative in United States
4. Making a Advertising sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of LookSmart
Strengths of LookSmart | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of LookSmart are -
Successful track record of launching new products
– LookSmart has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. LookSmart 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.
High brand equity
– LookSmart has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled LookSmart to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Advertising
– LookSmart is one of the leading players in the Advertising industry in United States. Over the years it has not only transformed the business landscape in the Advertising industry in United States but also across the existing markets. The ability to lead change has enabled LookSmart in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– LookSmart 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 Advertising 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.
High switching costs
– The high switching costs that LookSmart 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.
Effective Research and Development (R&D)
– LookSmart has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – LookSmart staying ahead in the Advertising industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– LookSmart is one of the leading players in the Advertising 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.
Low bargaining power of suppliers
– Suppliers of LookSmart in the Services sector have low bargaining power. LookSmart has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps LookSmart to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– LookSmart 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.
Sustainable margins compare to other players in Advertising industry
– LookSmart has clearly differentiated products in the market place. This has enabled LookSmart to fetch slight price premium compare to the competitors in the Advertising industry. The sustainable margins have also helped LookSmart to invest into research and development (R&D) and innovation.
Diverse revenue streams
– LookSmart is present in almost all the verticals within the Advertising industry. This has provided LookSmart 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.
Operational resilience
– The operational resilience strategy of LookSmart comprises – understanding the underlying the factors in the Advertising 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.
Weaknesses of LookSmart | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LookSmart are -
High operating costs
– Compare to the competitors, LookSmart has high operating costs in the Advertising industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract LookSmart lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, LookSmart 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 Advertising industry using digital technology.
Employees’ less understanding of LookSmart strategy
– From the outside it seems that the employees of LookSmart 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, LookSmart is slow explore the new channels of communication. These new channels of communication can help LookSmart to provide better information regarding Advertising products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Advertising industry
– because of the regulatory requirements in United States, LookSmart 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 Advertising industry.
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 LookSmart supply chain. Even after few cautionary changes, LookSmart is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left LookSmart vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
LookSmart has a high cash cycle compare to other players in the Advertising 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, LookSmart 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.
Lack of clear differentiation of LookSmart products
– To increase the profitability and margins on the products, LookSmart needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of LookSmart, it seems that company is thinking out the frontier risks that can impact Advertising 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.
Low market penetration in new markets
– Outside its home market of United States, LookSmart needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
LookSmart Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LookSmart are -
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. LookSmart can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for LookSmart 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.
Buying journey improvements
– LookSmart can improve the customer journey of consumers in the Advertising 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.
Better consumer reach
– The expansion of the 5G network will help LookSmart to increase its market reach. LookSmart 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Advertising industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. LookSmart 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. LookSmart 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, LookSmart is facing challenges because of the dominance of functional experts in the organization. LookSmart can utilize new technology in the field of Advertising industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, LookSmart 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, LookSmart can use these opportunities to build new business models that can help the communities that LookSmart operates in. Secondly it can use opportunities from government spending in Advertising sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for LookSmart 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 LookSmart to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– LookSmart can develop new processes and procedures in Advertising 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.
Use of Bitcoin and other crypto currencies for transactions in Advertising industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for LookSmart in the Advertising industry. Now LookSmart can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects LookSmart can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– LookSmart 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.
Threats LookSmart External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LookSmart are -
Environmental challenges
– LookSmart 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. LookSmart can take advantage of this fund but it will also bring new competitors in the Advertising industry.
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 LookSmart.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Advertising industry are lowering. It can presents LookSmart with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Advertising sector.
Increasing wage structure of LookSmart
– 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 LookSmart.
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.
Technology acceleration in Forth Industrial Revolution
– LookSmart has witnessed rapid integration of technology during Covid-19 in the Advertising industry. As one of the leading players in the industry, LookSmart needs to keep up with the evolution of technology in the Advertising 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.
High dependence on third party suppliers
– LookSmart 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for LookSmart in Advertising industry. The Advertising 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, LookSmart 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 LookSmart prominent markets.
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 LookSmart business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, LookSmart may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Advertising sector.
Easy access to finance
– Easy access to finance in Advertising industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. LookSmart can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– LookSmart 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 Advertising industry.
Weighted SWOT Analysis of LookSmart Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at LookSmart 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 LookSmart 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 LookSmart 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 LookSmart 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 LookSmart needs to make to build a sustainable competitive advantage.