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 – increasing commodity prices, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic ,
digital marketing is dominated by two big players Facebook and Google, 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 -
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.
Learning organization
- L’Oreal ADR 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 L’Oreal ADR is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at L’Oreal ADR emphasize – knowledge, initiative, and innovation.
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.
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.
High switching costs
– The high switching costs that L’Oreal ADR 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.
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.
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 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.
Innovation driven organization
– L’Oreal ADR is one of the most innovative firm in sector.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the industry, L’Oreal ADR 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 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.
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 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.
No frontier risks strategy
– From the 10K / annual statement of L’Oreal ADR, it seems that company is thinking out the frontier risks that can impact 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.
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 -
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.
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.
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.
Creating value in data economy
– The success of analytics program of L’Oreal ADR has opened avenues for new revenue streams for the organization in industry. This can help L’Oreal ADR to build a more holistic ecosystem for L’Oreal ADR products in the industry by providing – data insight services, data privacy related products, data based consulting services, 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. L’Oreal ADR can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
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.
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 -
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.
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 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.
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.
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.
Increasing wage structure of L’Oreal ADR
– 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 L’Oreal ADR.
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.
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.
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.
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.
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.
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.
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.
