Lockheed Martin (LMT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lockheed Martin (Germany)

Based on various researches at Oak Spring University , Lockheed Martin is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, there is backlash against globalization, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing commodity prices, etc

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Introduction to SWOT Analysis of Lockheed Martin

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lockheed Martin can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lockheed Martin, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lockheed Martin 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Lockheed Martin can be done for the following purposes –
1. Strategic planning of Lockheed Martin
2. Improving business portfolio management of Lockheed Martin
3. Assessing feasibility of the new initiative in Germany
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lockheed Martin

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Strengths of Lockheed Martin | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Lockheed Martin are -

Diverse revenue streams

– Lockheed Martin is present in almost all the verticals within the Aerospace & Defense industry. This has provided Lockheed Martin 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 recruit top talent

– Lockheed Martin is one of the leading players in the Aerospace & Defense industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.

High brand equity

– Lockheed Martin has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lockheed Martin to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

High switching costs

– The high switching costs that Lockheed Martin 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.

Highly skilled collaborators

– Lockheed Martin has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of Lockheed Martin have helped the firm to develop new products and bring them quickly to the marketplace.

Innovation driven organization

– Lockheed Martin is one of the most innovative firm in Aerospace & Defense sector.

Organizational Resilience of Lockheed Martin

– The covid-19 pandemic has put organizational resilience at the centre of everthing Lockheed Martin does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Superior customer experience

– The customer experience strategy of Lockheed Martin in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Training and development

– Lockheed Martin 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.

Effective Research and Development (R&D)

– Lockheed Martin has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lockheed Martin staying ahead in the Aerospace & Defense industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Sustainable margins compare to other players in Aerospace & Defense industry

– Lockheed Martin has clearly differentiated products in the market place. This has enabled Lockheed Martin to fetch slight price premium compare to the competitors in the Aerospace & Defense industry. The sustainable margins have also helped Lockheed Martin to invest into research and development (R&D) and innovation.

Low bargaining power of suppliers

– Suppliers of Lockheed Martin in the Capital Goods sector have low bargaining power. Lockheed Martin has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lockheed Martin to manage not only supply disruptions but also source products at highly competitive prices.

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Weaknesses of Lockheed Martin | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Lockheed Martin are -

Slow decision making process

– As mentioned earlier in the report, Lockheed Martin has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. Lockheed Martin 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.

Aligning sales with marketing

– From the outside it seems that Lockheed Martin needs to have more collaboration between its sales team and marketing team. Sales professionals in the Aerospace & Defense industry have deep experience in developing customer relationships. Marketing department at Lockheed Martin can leverage the sales team experience to cultivate customer relationships as Lockheed Martin is planning to shift buying processes online.

Compensation and incentives

– The revenue per employee of Lockheed Martin is just above the Aerospace & Defense 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.

Skills based hiring in Aerospace & Defense industry

– The stress on hiring functional specialists at Lockheed Martin 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, Lockheed Martin has high operating costs in the Aerospace & Defense industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lockheed Martin lucrative customers.

Ability to respond to the competition

– As the decision making is very deliberative at Lockheed Martin, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. Lockheed Martin has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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 Lockheed Martin supply chain. Even after few cautionary changes, Lockheed Martin is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lockheed Martin vulnerable to further global disruptions in South East Asia.

High dependence on Lockheed Martin ‘s star products

– The top 2 products and services of Lockheed Martin still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though Lockheed Martin has relatively successful track record of launching new products.

Employees’ less understanding of Lockheed Martin strategy

– From the outside it seems that the employees of Lockheed Martin 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 bargaining power of channel partners in Aerospace & Defense industry

– because of the regulatory requirements in Germany, Lockheed Martin 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 Aerospace & Defense industry.

Workers concerns about automation

– As automation is fast increasing in the Aerospace & Defense industry, Lockheed Martin 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.

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Lockheed Martin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Lockheed Martin are -

Learning at scale

– Online learning technologies has now opened space for Lockheed Martin 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.

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 Lockheed Martin 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Lockheed Martin can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lockheed Martin 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 Lockheed Martin to hire the very best people irrespective of their geographical location.

Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lockheed Martin in the Aerospace & Defense industry. Now Lockheed Martin can target international markets with far fewer capital restrictions requirements than the existing system.

Better consumer reach

– The expansion of the 5G network will help Lockheed Martin to increase its market reach. Lockheed Martin 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 Lockheed Martin has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Lockheed Martin to build a more holistic ecosystem for Lockheed Martin products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– Lockheed Martin has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled Lockheed Martin to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lockheed Martin to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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. Lockheed Martin can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lockheed Martin can use these opportunities to build new business models that can help the communities that Lockheed Martin operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.

Loyalty marketing

– Lockheed Martin 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lockheed Martin 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. Lockheed Martin 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Lockheed Martin 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 Lockheed Martin to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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Threats Lockheed Martin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Lockheed Martin are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Lockheed Martin 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 Lockheed Martin prominent markets.

High dependence on third party suppliers

– Lockheed Martin 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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Lockheed Martin with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.

Technology acceleration in Forth Industrial Revolution

– Lockheed Martin has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, Lockheed Martin needs to keep up with the evolution of technology in the Aerospace & Defense 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.

Stagnating economy with rate increase

– Lockheed Martin 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 Aerospace & Defense industry.

Increasing wage structure of Lockheed Martin

– 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 Lockheed Martin.

Shortening product life cycle

– it is one of the major threat that Lockheed Martin is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Lockheed Martin business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on Lockheed Martin 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 Aerospace & Defense industry and other sectors.

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 Lockheed Martin.

Regulatory challenges

– Lockheed Martin 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 Aerospace & Defense industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Lockheed Martin in Aerospace & Defense industry. The Aerospace & Defense 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.

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Weighted SWOT Analysis of Lockheed Martin Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin needs to make to build a sustainable competitive advantage.

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