SWOT Analysis / TOWS Matrix for Luxoft Holding (United States)
Based on various researches at Oak Spring University , Luxoft Holding is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, wage bills are increasing, geopolitical disruptions, increasing commodity prices, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Luxoft Holding can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Luxoft Holding, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Luxoft Holding 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 Luxoft Holding can be done for the following purposes –
1. Strategic planning of Luxoft Holding
2. Improving business portfolio management of Luxoft Holding
3. Assessing feasibility of the new initiative in United States
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Luxoft Holding
Strengths of Luxoft Holding | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Luxoft Holding are -
Strong track record of project management in the Software & Programming industry
– Luxoft Holding is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Luxoft Holding has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Luxoft Holding to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Luxoft Holding has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of Luxoft Holding have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Software & Programming industry
– Luxoft Holding has clearly differentiated products in the market place. This has enabled Luxoft Holding to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Luxoft Holding to invest into research and development (R&D) and innovation.
Learning organization
- Luxoft Holding 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 Luxoft Holding is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Luxoft Holding emphasize – knowledge, initiative, and innovation.
Ability to lead change in Software & Programming
– Luxoft Holding is one of the leading players in the Software & Programming industry in United States. Over the years it has not only transformed the business landscape in the Software & Programming industry in United States but also across the existing markets. The ability to lead change has enabled Luxoft Holding in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Luxoft Holding in the Technology sector have low bargaining power. Luxoft Holding has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Luxoft Holding to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Luxoft Holding comprises – understanding the underlying the factors in the Software & Programming 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.
Diverse revenue streams
– Luxoft Holding is present in almost all the verticals within the Software & Programming industry. This has provided Luxoft Holding 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.
Superior customer experience
– The customer experience strategy of Luxoft Holding in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Luxoft Holding
– The covid-19 pandemic has put organizational resilience at the centre of everthing Luxoft Holding does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Luxoft Holding digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Luxoft Holding 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 Luxoft Holding | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Luxoft Holding are -
High cash cycle compare to competitors
Luxoft Holding has a high cash cycle compare to other players in the Software & Programming 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 Luxoft Holding, it seems that company is thinking out the frontier risks that can impact Software & Programming 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.
High operating costs
– Compare to the competitors, Luxoft Holding has high operating costs in the Software & Programming industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Luxoft Holding lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Luxoft Holding, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Luxoft Holding has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Luxoft Holding is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Luxoft Holding needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Luxoft Holding to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, Luxoft Holding 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, Luxoft Holding is slow explore the new channels of communication. These new channels of communication can help Luxoft Holding to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Luxoft Holding 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 Software & Programming industry using digital technology.
Products dominated business model
– Even though Luxoft Holding has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Luxoft Holding should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of Luxoft Holding strategy
– From the outside it seems that the employees of Luxoft Holding 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 Luxoft Holding ‘s star products
– The top 2 products and services of Luxoft Holding still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though Luxoft Holding has relatively successful track record of launching new products.
Luxoft Holding Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Luxoft Holding are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Luxoft Holding 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, Luxoft Holding is facing challenges because of the dominance of functional experts in the organization. Luxoft Holding can utilize new technology in the field of Software & Programming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Luxoft Holding 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. Luxoft Holding 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.
Using analytics as competitive advantage
– Luxoft Holding has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Software & Programming sector. This continuous investment in analytics has enabled Luxoft Holding to build a competitive advantage using analytics. The analytics driven competitive advantage can help Luxoft Holding to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Luxoft Holding can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Luxoft Holding 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.
Building a culture of innovation
– managers at Luxoft Holding 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 Software & Programming industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Software & Programming industry, but it has also influenced the consumer preferences. Luxoft Holding can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Luxoft Holding in the Software & Programming industry. Now Luxoft Holding can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Luxoft Holding 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 Luxoft Holding can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Luxoft Holding can improve the customer journey of consumers in the Software & Programming 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.
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. Luxoft Holding can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Luxoft Holding External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Luxoft Holding are -
Environmental challenges
– Luxoft Holding 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. Luxoft Holding can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
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.
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. Luxoft Holding needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
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 Luxoft Holding business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Luxoft Holding 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 Luxoft Holding prominent markets.
Consumer confidence and its impact on Luxoft Holding 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 Software & Programming industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Luxoft Holding with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
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 Luxoft Holding.
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 Luxoft Holding in the Software & Programming sector and impact the bottomline of the organization.
Regulatory challenges
– Luxoft Holding 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 Software & Programming industry regulations.
Easy access to finance
– Easy access to finance in Software & Programming industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Luxoft Holding can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Luxoft Holding 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 Software & Programming industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Luxoft Holding may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.
Weighted SWOT Analysis of Luxoft Holding Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Luxoft Holding 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 Luxoft Holding 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 Luxoft Holding 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 Luxoft Holding 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 Luxoft Holding needs to make to build a sustainable competitive advantage.