SWOT Analysis / TOWS Matrix for Legg Mason (United States)
Based on various researches at Oak Spring University , Legg Mason is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, technology disruption, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, wage bills are increasing, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion,
geopolitical disruptions, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Legg Mason can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Legg Mason, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Legg Mason 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 Legg Mason can be done for the following purposes –
1. Strategic planning of Legg Mason
2. Improving business portfolio management of Legg Mason
3. Assessing feasibility of the new initiative in United States
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Legg Mason
Strengths of Legg Mason | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Legg Mason are -
Strong track record of project management in the Investment Services industry
– Legg Mason is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Legg Mason has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Legg Mason staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Legg Mason
– The covid-19 pandemic has put organizational resilience at the centre of everthing Legg Mason does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Legg Mason 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.
High brand equity
– Legg Mason has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Legg Mason to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Legg Mason is present in almost all the verticals within the Investment Services industry. This has provided Legg Mason 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 Legg Mason comprises – understanding the underlying the factors in the Investment Services 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 Investment Services industry
– Legg Mason has clearly differentiated products in the market place. This has enabled Legg Mason to fetch slight price premium compare to the competitors in the Investment Services industry. The sustainable margins have also helped Legg Mason to invest into research and development (R&D) and innovation.
Learning organization
- Legg Mason 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 Legg Mason is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Legg Mason emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Legg Mason has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of Legg Mason have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Investment Services industry
- digital transformation varies from industry to industry. For Legg Mason digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Legg Mason 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.
Ability to lead change in Investment Services
– Legg Mason is one of the leading players in the Investment Services industry in United States. Over the years it has not only transformed the business landscape in the Investment Services industry in United States but also across the existing markets. The ability to lead change has enabled Legg Mason in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Legg Mason | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Legg Mason are -
High operating costs
– Compare to the competitors, Legg Mason has high operating costs in the Investment Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Legg Mason lucrative customers.
Lack of clear differentiation of Legg Mason products
– To increase the profitability and margins on the products, Legg Mason needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that Legg Mason needs to have more collaboration between its sales team and marketing team. Sales professionals in the Investment Services industry have deep experience in developing customer relationships. Marketing department at Legg Mason can leverage the sales team experience to cultivate customer relationships as Legg Mason is planning to shift buying processes online.
High bargaining power of channel partners in Investment Services industry
– because of the regulatory requirements in United States, Legg Mason 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 Investment Services industry.
Interest costs
– Compare to the competition, Legg Mason 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.
No frontier risks strategy
– From the 10K / annual statement of Legg Mason, it seems that company is thinking out the frontier risks that can impact Investment Services 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, Legg Mason 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 Investment Services industry using digital technology.
Need for greater diversity
– Legg Mason 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.
Increasing silos among functional specialists
– The organizational structure of Legg Mason is dominated by functional specialists. It is not different from other players in the Investment Services industry, but Legg Mason needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Legg Mason to focus more on services in the Investment Services industry rather than just following the product oriented approach.
Products dominated business model
– Even though Legg Mason has some of the most successful models in the Investment Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Legg Mason should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Legg Mason has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Legg Mason Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Legg Mason are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Legg Mason is facing challenges because of the dominance of functional experts in the organization. Legg Mason can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Investment Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Legg Mason in the Investment Services industry. Now Legg Mason can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Legg Mason can improve the customer journey of consumers in the Investment Services 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Legg Mason can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Legg Mason can develop new processes and procedures in Investment Services 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.
Creating value in data economy
– The success of analytics program of Legg Mason has opened avenues for new revenue streams for the organization in Investment Services industry. This can help Legg Mason to build a more holistic ecosystem for Legg Mason products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Legg Mason 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. Legg Mason 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.
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 Legg Mason 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.
Manufacturing automation
– Legg Mason can use the latest technology developments to improve its manufacturing and designing process in Investment Services 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. Legg Mason can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Legg Mason in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Legg Mason 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
– Legg Mason has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled Legg Mason to build a competitive advantage using analytics. The analytics driven competitive advantage can help Legg Mason to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Legg Mason External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Legg Mason are -
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 Legg Mason.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Legg Mason has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, Legg Mason needs to keep up with the evolution of technology in the Investment Services 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 Legg Mason
– 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 Legg Mason.
Regulatory challenges
– Legg Mason 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 Investment Services industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Legg Mason may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services 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 Legg Mason in the Investment Services sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Legg Mason 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.
Easy access to finance
– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Legg Mason can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Legg Mason 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 Legg Mason prominent markets.
Consumer confidence and its impact on Legg Mason 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 Investment Services industry and other sectors.
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.
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 Legg Mason business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Legg Mason Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Legg Mason 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 Legg Mason 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 Legg Mason 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 Legg Mason 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 Legg Mason needs to make to build a sustainable competitive advantage.