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, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , there is backlash against globalization, cloud computing is disrupting traditional business models, 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 -

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.

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.

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.

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.

Analytics focus

– Lockheed Martin 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 Aerospace & Defense industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Diverse revenue streams

– 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.

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.

Ability to lead change in Aerospace & Defense

– Lockheed Martin is one of the leading players in the Aerospace & Defense industry in Germany. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in Germany but also across the existing markets. The ability to lead change has enabled Lockheed Martin in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Operational resilience

– The operational resilience strategy of Lockheed Martin comprises – understanding the underlying the factors in the Aerospace & Defense industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Effective Research and Development (R&D)

– 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.

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 -

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.

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 cash cycle compare to competitors

Lockheed Martin has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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.

Increasing silos among functional specialists

– The organizational structure of Lockheed Martin is dominated by functional specialists. It is not different from other players in the Aerospace & Defense industry, but Lockheed Martin needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lockheed Martin to focus more on services in the Aerospace & Defense industry rather than just following the product oriented approach.

No frontier risks strategy

– From the 10K / annual statement of Lockheed Martin, it seems that company is thinking out the frontier risks that can impact Aerospace & Defense industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Slow to strategic competitive environment developments

– As Lockheed Martin is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.

Interest costs

– Compare to the competition, Lockheed Martin 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.

Need for greater diversity

– Lockheed Martin 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.

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.

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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 -

Redefining models of collaboration and team work

– As explained in the weaknesses section, Lockheed Martin is facing challenges because of the dominance of functional experts in the organization. Lockheed Martin can utilize new technology in the field of Aerospace & Defense 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 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.

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.

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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. Lockheed Martin 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 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.

Building a culture of innovation

– managers at Lockheed Martin 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 Aerospace & Defense industry.

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.

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.

Buying journey improvements

– Lockheed Martin can improve the customer journey of consumers in the Aerospace & Defense 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.

Developing new processes and practices

– Lockheed Martin can develop new processes and procedures in Aerospace & Defense 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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Lockheed Martin can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

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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 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. Lockheed Martin needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.

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.

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.

Easy access to finance

– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lockheed Martin can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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.

Environmental challenges

– Lockheed Martin 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. Lockheed Martin can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Lockheed Martin may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.

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.

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.

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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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