SWOT Analysis / TOWS Matrix for L’Oreal ADR (United States)
Based on various researches at Oak Spring University , L’Oreal ADR is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing energy prices, increasing commodity prices, technology disruption, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
wage bills are increasing, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that L’Oreal ADR can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L’Oreal ADR, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L’Oreal ADR 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 L’Oreal ADR can be done for the following purposes –
1. Strategic planning of L’Oreal ADR
2. Improving business portfolio management of L’Oreal ADR
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of L’Oreal ADR
Strengths of L’Oreal ADR | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of L’Oreal ADR are -
Sustainable margins compare to other players in industry
– L’Oreal ADR has clearly differentiated products in the market place. This has enabled L’Oreal ADR to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped L’Oreal ADR to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– L’Oreal ADR has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of L’Oreal ADR have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the industry
– L’Oreal ADR is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– L’Oreal ADR 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 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.
Successful track record of launching new products
– L’Oreal ADR has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. L’Oreal ADR 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.
Effective Research and Development (R&D)
– L’Oreal ADR has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – L’Oreal ADR staying ahead in the 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 L’Oreal ADR in the sector have low bargaining power. L’Oreal ADR has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps L’Oreal ADR to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– L’Oreal ADR is one of the leading players in the 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.
Cross disciplinary teams
– Horizontal connected teams at the L’Oreal ADR 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.
Ability to lead change in
– L’Oreal ADR is one of the leading players in the industry in United States. Over the years it has not only transformed the business landscape in the industry in United States but also across the existing markets. The ability to lead change has enabled L’Oreal ADR in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– L’Oreal ADR has one of the best training and development program in 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.
Organizational Resilience of L’Oreal ADR
– The covid-19 pandemic has put organizational resilience at the centre of everthing L’Oreal ADR does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of L’Oreal ADR | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of L’Oreal ADR are -
Slow to strategic competitive environment developments
– As L’Oreal ADR is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Employees’ less understanding of L’Oreal ADR strategy
– From the outside it seems that the employees of L’Oreal ADR 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, L’Oreal ADR is slow explore the new channels of communication. These new channels of communication can help L’Oreal ADR to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, L’Oreal ADR has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract L’Oreal ADR lucrative customers.
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’Oreal ADR supply chain. Even after few cautionary changes, L’Oreal ADR is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left L’Oreal ADR vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at L’Oreal ADR, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. L’Oreal ADR has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of L’Oreal ADR products
– To increase the profitability and margins on the products, L’Oreal ADR needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
L’Oreal ADR has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that L’Oreal ADR needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at L’Oreal ADR can leverage the sales team experience to cultivate customer relationships as L’Oreal ADR is planning to shift buying processes online.
Products dominated business model
– Even though L’Oreal ADR has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. L’Oreal ADR should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in industry
– because of the regulatory requirements in United States, L’Oreal ADR 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 industry.
L’Oreal ADR Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of L’Oreal ADR are -
Loyalty marketing
– L’Oreal ADR has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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 L’Oreal ADR 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.
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’Oreal ADR can use these opportunities to build new business models that can help the communities that L’Oreal ADR operates in. Secondly it can use opportunities from government spending in sector.
Better consumer reach
– The expansion of the 5G network will help L’Oreal ADR to increase its market reach. L’Oreal ADR 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.
Manufacturing automation
– L’Oreal ADR can use the latest technology developments to improve its manufacturing and designing process in 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
– L’Oreal ADR has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled L’Oreal ADR to build a competitive advantage using analytics. The analytics driven competitive advantage can help L’Oreal ADR to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for L’Oreal ADR in the industry. Now L’Oreal ADR 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 L’Oreal ADR can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for L’Oreal ADR 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for L’Oreal ADR in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, L’Oreal ADR 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, L’Oreal ADR is facing challenges because of the dominance of functional experts in the organization. L’Oreal ADR can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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. L’Oreal ADR can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats L’Oreal ADR External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of L’Oreal ADR 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. L’Oreal ADR 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.
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.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. L’Oreal ADR can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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’Oreal ADR in the sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, L’Oreal ADR 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’Oreal ADR prominent markets.
Stagnating economy with rate increase
– L’Oreal ADR 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 industry.
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’Oreal ADR business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that L’Oreal ADR is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– L’Oreal ADR 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, L’Oreal ADR may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents L’Oreal ADR with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– L’Oreal ADR has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, L’Oreal ADR needs to keep up with the evolution of technology in the 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.
Weighted SWOT Analysis of L’Oreal ADR Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at L’Oreal ADR 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’Oreal ADR 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’Oreal ADR 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’Oreal ADR 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’Oreal ADR needs to make to build a sustainable competitive advantage.