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 – digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, geopolitical disruptions, there is increasing trade war between United States & China, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices,
challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
Innovation driven organization
– L’Oreal ADR is one of the most innovative firm in sector.
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.
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.
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.
High brand equity
– L’Oreal ADR has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled L’Oreal ADR to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Diverse revenue streams
– L’Oreal ADR is present in almost all the verticals within the industry. This has provided L’Oreal ADR 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.
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.
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.
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.
Digital Transformation in industry
- digital transformation varies from industry to industry. For L’Oreal ADR digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. L’Oreal ADR 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.
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 -
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.
Slow decision making process
– As mentioned earlier in the report, L’Oreal ADR has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. L’Oreal ADR 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.
Interest costs
– Compare to the competition, L’Oreal ADR 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.
Skills based hiring in industry
– The stress on hiring functional specialists at L’Oreal ADR 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.
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.
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.
Compensation and incentives
– The revenue per employee of L’Oreal ADR is just above the industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
High dependence on L’Oreal ADR ‘s star products
– The top 2 products and services of L’Oreal ADR still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though L’Oreal ADR has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, L’Oreal ADR needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, L’Oreal ADR 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 industry using digital technology.
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 -
Building a culture of innovation
– managers at L’Oreal ADR 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 industry.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for L’Oreal ADR 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 L’Oreal ADR to hire the very best people irrespective of their geographical location.
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.
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.
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.
Developing new processes and practices
– L’Oreal ADR can develop new processes and procedures in 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.
Buying journey improvements
– L’Oreal ADR can improve the customer journey of consumers in the 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, L’Oreal ADR can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help L’Oreal ADR to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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. L’Oreal ADR needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Regulatory challenges
– L’Oreal ADR 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 industry regulations.
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.
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 L’Oreal ADR.
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.
Environmental challenges
– L’Oreal ADR 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. L’Oreal ADR can take advantage of this fund but it will also bring new competitors in the industry.
Consumer confidence and its impact on L’Oreal ADR 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 industry and other sectors.
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.
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.
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.
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.