EssilorLuxottica (ESLX) SWOT Analysis / TOWS Matrix / MBA Resources
Medical Equipment & Supplies
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for EssilorLuxottica (France)
Based on various researches at Oak Spring University , EssilorLuxottica is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing energy prices, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models,
banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that EssilorLuxottica can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the EssilorLuxottica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which EssilorLuxottica 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 EssilorLuxottica can be done for the following purposes –
1. Strategic planning of EssilorLuxottica
2. Improving business portfolio management of EssilorLuxottica
3. Assessing feasibility of the new initiative in France
4. Making a Medical Equipment & Supplies sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of EssilorLuxottica
Strengths of EssilorLuxottica | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of EssilorLuxottica are -
Analytics focus
– EssilorLuxottica 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 Medical Equipment & Supplies industry. The technology infrastructure of France 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 Medical Equipment & Supplies industry
– EssilorLuxottica is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of EssilorLuxottica in the Healthcare sector have low bargaining power. EssilorLuxottica has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps EssilorLuxottica to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that EssilorLuxottica 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.
Operational resilience
– The operational resilience strategy of EssilorLuxottica comprises – understanding the underlying the factors in the Medical Equipment & Supplies 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.
Highly skilled collaborators
– EssilorLuxottica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Medical Equipment & Supplies industry. Secondly the value chain collaborators of EssilorLuxottica have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Medical Equipment & Supplies industry
- digital transformation varies from industry to industry. For EssilorLuxottica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. EssilorLuxottica 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.
Training and development
– EssilorLuxottica has one of the best training and development program in Healthcare 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.
Successful track record of launching new products
– EssilorLuxottica has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. EssilorLuxottica 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
- EssilorLuxottica 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 EssilorLuxottica is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at EssilorLuxottica emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of EssilorLuxottica in Medical Equipment & Supplies industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of EssilorLuxottica
– The covid-19 pandemic has put organizational resilience at the centre of everthing EssilorLuxottica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of EssilorLuxottica | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of EssilorLuxottica are -
Slow to strategic competitive environment developments
– As EssilorLuxottica is one of the leading players in the Medical Equipment & Supplies industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Medical Equipment & Supplies industry in last five years.
Lack of clear differentiation of EssilorLuxottica products
– To increase the profitability and margins on the products, EssilorLuxottica needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of EssilorLuxottica strategy
– From the outside it seems that the employees of EssilorLuxottica 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 cash cycle compare to competitors
EssilorLuxottica has a high cash cycle compare to other players in the Medical Equipment & Supplies industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee of EssilorLuxottica is just above the Medical Equipment & Supplies 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.
Workers concerns about automation
– As automation is fast increasing in the Medical Equipment & Supplies industry, EssilorLuxottica 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.
Products dominated business model
– Even though EssilorLuxottica has some of the most successful models in the Medical Equipment & Supplies industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. EssilorLuxottica should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at EssilorLuxottica, in the dynamic environment of Medical Equipment & Supplies industry it has struggled to respond to the nimble upstart competition. EssilorLuxottica has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Medical Equipment & Supplies industry
– The stress on hiring functional specialists at EssilorLuxottica 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 EssilorLuxottica supply chain. Even after few cautionary changes, EssilorLuxottica is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left EssilorLuxottica vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, EssilorLuxottica 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 Medical Equipment & Supplies industry using digital technology.
EssilorLuxottica Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of EssilorLuxottica are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for EssilorLuxottica in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Medical Equipment & Supplies industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– EssilorLuxottica 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.
Use of Bitcoin and other crypto currencies for transactions in Medical Equipment & Supplies industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for EssilorLuxottica in the Medical Equipment & Supplies industry. Now EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, EssilorLuxottica 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 EssilorLuxottica to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. EssilorLuxottica can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help EssilorLuxottica to increase its market reach. EssilorLuxottica 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.
Creating value in data economy
– The success of analytics program of EssilorLuxottica has opened avenues for new revenue streams for the organization in Medical Equipment & Supplies industry. This can help EssilorLuxottica to build a more holistic ecosystem for EssilorLuxottica products in the Medical Equipment & Supplies industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Medical Equipment & Supplies industry, but it has also influenced the consumer preferences. EssilorLuxottica can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Medical Equipment & Supplies industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. EssilorLuxottica 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. EssilorLuxottica 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects EssilorLuxottica can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– EssilorLuxottica can use the latest technology developments to improve its manufacturing and designing process in Medical Equipment & Supplies 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.
Using analytics as competitive advantage
– EssilorLuxottica has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Medical Equipment & Supplies sector. This continuous investment in analytics has enabled EssilorLuxottica to build a competitive advantage using analytics. The analytics driven competitive advantage can help EssilorLuxottica to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats EssilorLuxottica External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of EssilorLuxottica are -
Shortening product life cycle
– it is one of the major threat that EssilorLuxottica is facing in Medical Equipment & Supplies sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– EssilorLuxottica 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. EssilorLuxottica can take advantage of this fund but it will also bring new competitors in the Medical Equipment & Supplies industry.
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 EssilorLuxottica in the Medical Equipment & Supplies 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. EssilorLuxottica 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, EssilorLuxottica may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Medical Equipment & Supplies sector.
Regulatory challenges
– EssilorLuxottica 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 Medical Equipment & Supplies industry regulations.
Increasing wage structure of EssilorLuxottica
– 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 EssilorLuxottica.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, EssilorLuxottica 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 EssilorLuxottica prominent markets.
Easy access to finance
– Easy access to finance in Medical Equipment & Supplies industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. EssilorLuxottica can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for EssilorLuxottica in Medical Equipment & Supplies industry. The Medical Equipment & Supplies 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.
Stagnating economy with rate increase
– EssilorLuxottica 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 Medical Equipment & Supplies 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 EssilorLuxottica.
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 EssilorLuxottica business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of EssilorLuxottica Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica needs to make to build a sustainable competitive advantage.
