LafargeHolcim (LHN) SWOT Analysis / TOWS Matrix / MBA Resources
Construction - Raw Materials
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for LafargeHolcim (France)
Based on various researches at Oak Spring University , LafargeHolcim is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing commodity prices, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that LafargeHolcim can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the LafargeHolcim, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which LafargeHolcim 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 LafargeHolcim can be done for the following purposes –
1. Strategic planning of LafargeHolcim
2. Improving business portfolio management of LafargeHolcim
3. Assessing feasibility of the new initiative in France
4. Making a Construction - Raw Materials sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of LafargeHolcim
Strengths of LafargeHolcim | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of LafargeHolcim are -
Analytics focus
– LafargeHolcim 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 Construction - Raw Materials 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.
Ability to recruit top talent
– LafargeHolcim is one of the leading players in the Construction - Raw Materials 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.
Digital Transformation in Construction - Raw Materials industry
- digital transformation varies from industry to industry. For LafargeHolcim digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. LafargeHolcim 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.
Effective Research and Development (R&D)
– LafargeHolcim has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – LafargeHolcim staying ahead in the Construction - Raw Materials industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– LafargeHolcim has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled LafargeHolcim to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of LafargeHolcim in the Capital Goods sector have low bargaining power. LafargeHolcim has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps LafargeHolcim to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of LafargeHolcim comprises – understanding the underlying the factors in the Construction - Raw Materials 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
- LafargeHolcim 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 LafargeHolcim is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at LafargeHolcim emphasize – knowledge, initiative, and innovation.
Training and development
– LafargeHolcim has one of the best training and development program in Capital Goods 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.
Sustainable margins compare to other players in Construction - Raw Materials industry
– LafargeHolcim has clearly differentiated products in the market place. This has enabled LafargeHolcim to fetch slight price premium compare to the competitors in the Construction - Raw Materials industry. The sustainable margins have also helped LafargeHolcim to invest into research and development (R&D) and innovation.
Strong track record of project management in the Construction - Raw Materials industry
– LafargeHolcim is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– LafargeHolcim has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction - Raw Materials industry. Secondly the value chain collaborators of LafargeHolcim have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of LafargeHolcim | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LafargeHolcim are -
Need for greater diversity
– LafargeHolcim 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.
Slow to strategic competitive environment developments
– As LafargeHolcim is one of the leading players in the Construction - Raw Materials industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction - Raw Materials industry in last five years.
Interest costs
– Compare to the competition, LafargeHolcim 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.
Skills based hiring in Construction - Raw Materials industry
– The stress on hiring functional specialists at LafargeHolcim 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 bargaining power of channel partners in Construction - Raw Materials industry
– because of the regulatory requirements in France, LafargeHolcim 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 Construction - Raw Materials industry.
Aligning sales with marketing
– From the outside it seems that LafargeHolcim needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction - Raw Materials industry have deep experience in developing customer relationships. Marketing department at LafargeHolcim can leverage the sales team experience to cultivate customer relationships as LafargeHolcim is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, LafargeHolcim is slow explore the new channels of communication. These new channels of communication can help LafargeHolcim to provide better information regarding Construction - Raw Materials 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, LafargeHolcim 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 Construction - Raw Materials industry using digital technology.
High operating costs
– Compare to the competitors, LafargeHolcim has high operating costs in the Construction - Raw Materials industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract LafargeHolcim lucrative customers.
Compensation and incentives
– The revenue per employee of LafargeHolcim is just above the Construction - Raw Materials 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.
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 LafargeHolcim supply chain. Even after few cautionary changes, LafargeHolcim is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left LafargeHolcim vulnerable to further global disruptions in South East Asia.
LafargeHolcim Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LafargeHolcim are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for LafargeHolcim in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction - Raw Materials industry, and it will provide faster access to the consumers.
Manufacturing automation
– LafargeHolcim can use the latest technology developments to improve its manufacturing and designing process in Construction - Raw Materials 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, LafargeHolcim is facing challenges because of the dominance of functional experts in the organization. LafargeHolcim can utilize new technology in the field of Construction - Raw Materials industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Construction - Raw Materials industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for LafargeHolcim in the Construction - Raw Materials industry. Now LafargeHolcim can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– LafargeHolcim can develop new processes and procedures in Construction - Raw Materials 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.
Buying journey improvements
– LafargeHolcim can improve the customer journey of consumers in the Construction - Raw Materials 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.
Using analytics as competitive advantage
– LafargeHolcim has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction - Raw Materials sector. This continuous investment in analytics has enabled LafargeHolcim to build a competitive advantage using analytics. The analytics driven competitive advantage can help LafargeHolcim to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– LafargeHolcim 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 LafargeHolcim 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, LafargeHolcim 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 LafargeHolcim to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects LafargeHolcim can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction - Raw Materials industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. LafargeHolcim 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. LafargeHolcim 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.
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 LafargeHolcim 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.
Threats LafargeHolcim External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LafargeHolcim are -
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. LafargeHolcim 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.
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 LafargeHolcim.
High dependence on third party suppliers
– LafargeHolcim 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.
Consumer confidence and its impact on LafargeHolcim 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 Construction - Raw Materials industry and other sectors.
Increasing wage structure of LafargeHolcim
– 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 LafargeHolcim.
Shortening product life cycle
– it is one of the major threat that LafargeHolcim is facing in Construction - Raw Materials sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. LafargeHolcim needs to understand the core reasons impacting the Construction - Raw Materials industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– LafargeHolcim 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 Construction - Raw Materials 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 LafargeHolcim in the Construction - Raw Materials sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– LafargeHolcim has witnessed rapid integration of technology during Covid-19 in the Construction - Raw Materials industry. As one of the leading players in the industry, LafargeHolcim needs to keep up with the evolution of technology in the Construction - Raw Materials 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, LafargeHolcim 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 LafargeHolcim prominent markets.
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.
Weighted SWOT Analysis of LafargeHolcim Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at LafargeHolcim 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 LafargeHolcim 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 LafargeHolcim 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 LafargeHolcim 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 LafargeHolcim needs to make to build a sustainable competitive advantage.