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 – challanges to central banks by blockchain based private currencies, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
increasing government debt because of Covid-19 spendings, increasing energy prices, 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 -
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.
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.
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.
Diverse revenue streams
– EssilorLuxottica is present in almost all the verticals within the Medical Equipment & Supplies industry. This has provided EssilorLuxottica 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.
Ability to lead change in Medical Equipment & Supplies
– EssilorLuxottica is one of the leading players in the Medical Equipment & Supplies industry in France. Over the years it has not only transformed the business landscape in the Medical Equipment & Supplies industry in France but also across the existing markets. The ability to lead change has enabled EssilorLuxottica in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Medical Equipment & Supplies industry
– EssilorLuxottica has clearly differentiated products in the market place. This has enabled EssilorLuxottica to fetch slight price premium compare to the competitors in the Medical Equipment & Supplies industry. The sustainable margins have also helped EssilorLuxottica to invest into research and development (R&D) and innovation.
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.
High brand equity
– EssilorLuxottica has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled EssilorLuxottica to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Ability to recruit top talent
– EssilorLuxottica is one of the leading players in the Medical Equipment & Supplies industry in France. It is in a position to attract the best talent available in France. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Weaknesses of EssilorLuxottica | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of EssilorLuxottica are -
Interest costs
– Compare to the competition, EssilorLuxottica has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of France, EssilorLuxottica needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Slow decision making process
– As mentioned earlier in the report, EssilorLuxottica has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Medical Equipment & Supplies industry over the last five years. EssilorLuxottica 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.
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 operating costs
– Compare to the competitors, EssilorLuxottica has high operating costs in the Medical Equipment & Supplies industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract EssilorLuxottica lucrative customers.
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.
High dependence on EssilorLuxottica ‘s star products
– The top 2 products and services of EssilorLuxottica still accounts for major business revenue. This dependence on star products in Medical Equipment & Supplies industry has resulted into insufficient focus on developing new products, even though EssilorLuxottica has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of EssilorLuxottica is dominated by functional specialists. It is not different from other players in the Medical Equipment & Supplies industry, but EssilorLuxottica needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help EssilorLuxottica to focus more on services in the Medical Equipment & Supplies industry rather than just following the product oriented approach.
High bargaining power of channel partners in Medical Equipment & Supplies industry
– because of the regulatory requirements in France, EssilorLuxottica 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 Medical Equipment & Supplies industry.
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 -
Redefining models of collaboration and team work
– As explained in the weaknesses section, EssilorLuxottica is facing challenges because of the dominance of functional experts in the organization. EssilorLuxottica can utilize new technology in the field of Medical Equipment & Supplies industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
Loyalty marketing
– EssilorLuxottica 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.
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.
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.
Building a culture of innovation
– managers at EssilorLuxottica 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 Medical Equipment & Supplies industry.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help EssilorLuxottica to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
Consumer confidence and its impact on EssilorLuxottica 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 Medical Equipment & Supplies industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Medical Equipment & Supplies industry are lowering. It can presents EssilorLuxottica with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Medical Equipment & Supplies sector.
High dependence on third party suppliers
– EssilorLuxottica 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.
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. EssilorLuxottica needs to understand the core reasons impacting the Medical Equipment & Supplies industry. This will help it in building a better workplace.
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.
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.
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.
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.