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 – central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, increasing commodity prices, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing,
supply chains are disrupted by pandemic , technology disruption, 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 -
Training and development
– Lu Thai Textile has one of the best training and development program in Consumer Cyclical 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.
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.
Innovation driven organization
– Lu Thai Textile is one of the most innovative firm in Apparel/Accessories sector.
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.
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.
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.
Diverse revenue streams
– Lu Thai Textile is present in almost all the verticals within the Apparel/Accessories industry. This has provided Lu Thai Textile 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.
Sustainable margins compare to other players in Apparel/Accessories industry
– Lu Thai Textile has clearly differentiated products in the market place. This has enabled Lu Thai Textile to fetch slight price premium compare to the competitors in the Apparel/Accessories industry. The sustainable margins have also helped Lu Thai Textile to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Lu Thai Textile in the Consumer Cyclical sector have low bargaining power. Lu Thai Textile has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lu Thai Textile to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Lu Thai Textile
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lu Thai Textile does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Lu Thai Textile has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Apparel/Accessories industry. Secondly the value chain collaborators of Lu Thai Textile have helped the firm to develop new products and bring them quickly to the marketplace.
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 -
High operating costs
– Compare to the competitors, Lu Thai Textile has high operating costs in the Apparel/Accessories industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lu Thai Textile lucrative customers.
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.
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.
Low market penetration in new markets
– Outside its home market of China, Lu Thai Textile needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Slow decision making process
– As mentioned earlier in the report, Lu Thai Textile has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Apparel/Accessories industry over the last five years. Lu Thai Textile 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lu Thai Textile is slow explore the new channels of communication. These new channels of communication can help Lu Thai Textile to provide better information regarding Apparel/Accessories products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Aligning sales with marketing
– From the outside it seems that Lu Thai Textile needs to have more collaboration between its sales team and marketing team. Sales professionals in the Apparel/Accessories industry have deep experience in developing customer relationships. Marketing department at Lu Thai Textile can leverage the sales team experience to cultivate customer relationships as Lu Thai Textile is planning to shift buying processes online.
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 -
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.
Use of Bitcoin and other crypto currencies for transactions in Apparel/Accessories industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lu Thai Textile in the Apparel/Accessories industry. Now Lu Thai Textile can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Loyalty marketing
– Lu Thai Textile 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.
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.
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.
Buying journey improvements
– Lu Thai Textile can improve the customer journey of consumers in the Apparel/Accessories 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.
Manufacturing automation
– Lu Thai Textile can use the latest technology developments to improve its manufacturing and designing process in Apparel/Accessories 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.
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.
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.
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.
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 -
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.
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.
High dependence on third party suppliers
– Lu Thai Textile 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.
Technology acceleration in Forth Industrial Revolution
– Lu Thai Textile has witnessed rapid integration of technology during Covid-19 in the Apparel/Accessories industry. As one of the leading players in the industry, Lu Thai Textile needs to keep up with the evolution of technology in the Apparel/Accessories 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.
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.
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.
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. Lu Thai Textile 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.
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.
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.
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.
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.
Consumer confidence and its impact on Lu Thai Textile 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 Apparel/Accessories industry and other sectors.
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.