Lockheed Martin (LMT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lockheed Martin (United States)

Based on various researches at Oak Spring University , Lockheed Martin is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, technology disruption, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, increasing energy prices, central banks are concerned over increasing inflation, there is backlash against globalization, increasing government debt because of Covid-19 spendings, geopolitical disruptions, etc

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Introduction to SWOT Analysis of Lockheed Martin

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lockheed Martin can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lockheed Martin, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lockheed Martin 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 Lockheed Martin can be done for the following purposes –
1. Strategic planning of Lockheed Martin
2. Improving business portfolio management of Lockheed Martin
3. Assessing feasibility of the new initiative in United States
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lockheed Martin

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Strengths of Lockheed Martin | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Lockheed Martin are -

Learning organization

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

Strong track record of project management in the Aerospace & Defense industry

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

Innovation driven organization

– Lockheed Martin is one of the most innovative firm in Aerospace & Defense sector.

Successful track record of launching new products

– Lockheed Martin has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lockheed Martin 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.

Digital Transformation in Aerospace & Defense industry

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

Training and development

– Lockheed Martin has one of the best training and development program in Capital Goods 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.

Ability to lead change in Aerospace & Defense

– Lockheed Martin is one of the leading players in the Aerospace & Defense industry in United States. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in United States but also across the existing markets. The ability to lead change has enabled Lockheed Martin in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

High brand equity

– Lockheed Martin has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lockheed Martin to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Cross disciplinary teams

– Horizontal connected teams at the Lockheed Martin 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.

Analytics focus

– Lockheed Martin 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 Aerospace & Defense 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.

Diverse revenue streams

– Lockheed Martin is present in almost all the verticals within the Aerospace & Defense industry. This has provided Lockheed Martin 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.

Effective Research and Development (R&D)

– Lockheed Martin has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lockheed Martin staying ahead in the Aerospace & Defense industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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Weaknesses of Lockheed Martin | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Lockheed Martin are -

Workers concerns about automation

– As automation is fast increasing in the Aerospace & Defense industry, Lockheed Martin 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, Lockheed Martin is slow explore the new channels of communication. These new channels of communication can help Lockheed Martin to provide better information regarding Aerospace & Defense products and services. It can also build an online community to further reach out to potential customers.

Slow decision making process

– As mentioned earlier in the report, Lockheed Martin has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. Lockheed Martin 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.

Ability to respond to the competition

– As the decision making is very deliberative at Lockheed Martin, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. Lockheed Martin has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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

High dependence on Lockheed Martin ‘s star products

– The top 2 products and services of Lockheed Martin still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though Lockheed Martin has relatively successful track record of launching new products.

Skills based hiring in Aerospace & Defense industry

– The stress on hiring functional specialists at Lockheed Martin 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.

High cash cycle compare to competitors

Lockheed Martin has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

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

High operating costs

– Compare to the competitors, Lockheed Martin has high operating costs in the Aerospace & Defense industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lockheed Martin lucrative customers.

Lack of clear differentiation of Lockheed Martin products

– To increase the profitability and margins on the products, Lockheed Martin needs to provide more differentiated products than what it is currently offering in the marketplace.

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Lockheed Martin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Lockheed Martin are -

Reforming the budgeting process

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

Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lockheed Martin in the Aerospace & Defense industry. Now Lockheed Martin can target international markets with far fewer capital restrictions requirements than the existing system.

Finding new ways to collaborate

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

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 Lockheed Martin 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.

Developing new processes and practices

– Lockheed Martin can develop new processes and procedures in Aerospace & Defense 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.

Building a culture of innovation

– managers at Lockheed Martin 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 Aerospace & Defense industry.

Using analytics as competitive advantage

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lockheed Martin 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. Lockheed Martin 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.

Learning at scale

– Online learning technologies has now opened space for Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Lockheed Martin in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Manufacturing automation

– Lockheed Martin can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Lockheed Martin 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.

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Threats Lockheed Martin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Lockheed Martin are -

Environmental challenges

– Lockheed Martin 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. Lockheed Martin can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

Increasing wage structure of Lockheed Martin

– 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 Lockheed Martin.

High dependence on third party suppliers

– Lockheed Martin 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.

Consumer confidence and its impact on Lockheed Martin 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 Aerospace & Defense industry and other sectors.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Lockheed Martin with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Lockheed Martin in Aerospace & Defense industry. The Aerospace & Defense 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

– Lockheed Martin has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, Lockheed Martin needs to keep up with the evolution of technology in the Aerospace & Defense 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.

Easy access to finance

– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lockheed Martin 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, Lockheed Martin 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 Lockheed Martin prominent markets.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Lockheed Martin may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.

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.

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 Lockheed Martin in the Aerospace & Defense sector and impact the bottomline of the organization.

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 Lockheed Martin.

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Weighted SWOT Analysis of Lockheed Martin Template, Example

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

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