Lu Thai Textile (200726) SWOT Analysis / TOWS Matrix / MBA Resources
Apparel/Accessories
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Lu Thai Textile (China)
Based on various researches at Oak Spring University , Lu Thai Textile is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing commodity prices, talent flight as more people leaving formal jobs, there is backlash against globalization, technology disruption, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lu Thai Textile can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lu Thai Textile, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lu Thai Textile 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 Lu Thai Textile can be done for the following purposes –
1. Strategic planning of Lu Thai Textile
2. Improving business portfolio management of Lu Thai Textile
3. Assessing feasibility of the new initiative in China
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lu Thai Textile
Strengths of Lu Thai Textile | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lu Thai Textile are -
High brand equity
– Lu Thai Textile has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lu Thai Textile to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Lu Thai Textile is one of the most innovative firm in Apparel/Accessories sector.
Operational resilience
– The operational resilience strategy of Lu Thai Textile comprises – understanding the underlying the factors in the Apparel/Accessories 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.
Effective Research and Development (R&D)
– Lu Thai Textile has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lu Thai Textile staying ahead in the Apparel/Accessories industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Lu Thai Textile in Apparel/Accessories industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Lu Thai Textile has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lu Thai Textile 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.
Learning organization
- Lu Thai Textile 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 Lu Thai Textile is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lu Thai Textile emphasize – knowledge, initiative, and innovation.
Analytics focus
– Lu Thai Textile 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 Apparel/Accessories industry. The technology infrastructure of China 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.
Strong track record of project management in the Apparel/Accessories industry
– Lu Thai Textile is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Apparel/Accessories industry
- digital transformation varies from industry to industry. For Lu Thai Textile digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lu Thai Textile 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.
Cross disciplinary teams
– Horizontal connected teams at the Lu Thai Textile 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.
High switching costs
– The high switching costs that Lu Thai Textile 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.
Weaknesses of Lu Thai Textile | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lu Thai Textile are -
Skills based hiring in Apparel/Accessories industry
– The stress on hiring functional specialists at Lu Thai Textile 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.
No frontier risks strategy
– From the 10K / annual statement of Lu Thai Textile, it seems that company is thinking out the frontier risks that can impact Apparel/Accessories 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.
Increasing silos among functional specialists
– The organizational structure of Lu Thai Textile is dominated by functional specialists. It is not different from other players in the Apparel/Accessories industry, but Lu Thai Textile needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lu Thai Textile to focus more on services in the Apparel/Accessories industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Lu Thai Textile 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 Apparel/Accessories industry using digital technology.
Need for greater diversity
– Lu Thai Textile has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Lu Thai Textile has a high cash cycle compare to other players in the Apparel/Accessories industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners in Apparel/Accessories industry
– because of the regulatory requirements in China, Lu Thai Textile 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 Apparel/Accessories industry.
Lack of clear differentiation of Lu Thai Textile products
– To increase the profitability and margins on the products, Lu Thai Textile needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Lu Thai Textile strategy
– From the outside it seems that the employees of Lu Thai Textile 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.
Ability to respond to the competition
– As the decision making is very deliberative at Lu Thai Textile, in the dynamic environment of Apparel/Accessories industry it has struggled to respond to the nimble upstart competition. Lu Thai Textile has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Lu Thai Textile is one of the leading players in the Apparel/Accessories industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Apparel/Accessories industry in last five years.
Lu Thai Textile Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lu Thai Textile are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lu Thai Textile is facing challenges because of the dominance of functional experts in the organization. Lu Thai Textile can utilize new technology in the field of Apparel/Accessories 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 Apparel/Accessories industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lu Thai Textile 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. Lu Thai Textile 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lu Thai Textile in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Apparel/Accessories industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Apparel/Accessories industry, but it has also influenced the consumer preferences. Lu Thai Textile can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Lu Thai Textile 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 Apparel/Accessories industry.
Developing new processes and practices
– Lu Thai Textile can develop new processes and procedures in Apparel/Accessories 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lu Thai Textile 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 Lu Thai Textile to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Lu Thai Textile 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 Lu Thai Textile 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 Lu Thai Textile to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Lu Thai Textile has opened avenues for new revenue streams for the organization in Apparel/Accessories industry. This can help Lu Thai Textile to build a more holistic ecosystem for Lu Thai Textile products in the Apparel/Accessories industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lu Thai Textile can use these opportunities to build new business models that can help the communities that Lu Thai Textile operates in. Secondly it can use opportunities from government spending in Apparel/Accessories sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lu Thai Textile 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.
Leveraging digital technologies
– Lu Thai Textile 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.
Threats Lu Thai Textile External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lu Thai Textile are -
Stagnating economy with rate increase
– Lu Thai Textile 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 Apparel/Accessories industry.
Shortening product life cycle
– it is one of the major threat that Lu Thai Textile is facing in Apparel/Accessories sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Lu Thai Textile 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. Lu Thai Textile can take advantage of this fund but it will also bring new competitors in the Apparel/Accessories industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lu Thai Textile in Apparel/Accessories industry. The Apparel/Accessories 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.
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 Lu Thai Textile.
Regulatory challenges
– Lu Thai Textile 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 Apparel/Accessories industry regulations.
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 Lu Thai Textile 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, Lu Thai Textile 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 Lu Thai Textile prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lu Thai Textile may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Apparel/Accessories 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 Lu Thai Textile in the Apparel/Accessories sector and impact the bottomline of the organization.
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.
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. Lu Thai Textile needs to understand the core reasons impacting the Apparel/Accessories industry. This will help it in building a better workplace.
Increasing wage structure of Lu Thai Textile
– 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 Lu Thai Textile.
Weighted SWOT Analysis of Lu Thai Textile Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lu Thai Textile 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 Lu Thai Textile 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 Lu Thai Textile 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 Lu Thai Textile 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 Lu Thai Textile needs to make to build a sustainable competitive advantage.
