Air Liquide (AIL) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Air Liquide (Germany)

Based on various researches at Oak Spring University , Air Liquide is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing energy prices, increasing commodity prices, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Air Liquide

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Air Liquide can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Air Liquide, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Air Liquide 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 Air Liquide can be done for the following purposes –
1. Strategic planning of Air Liquide
2. Improving business portfolio management of Air Liquide
3. Assessing feasibility of the new initiative in Germany
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Air Liquide

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Strengths of Air Liquide | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Air Liquide are -

Sustainable margins compare to other players in Chemical Manufacturing industry

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

Low bargaining power of suppliers

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

Analytics focus

– Air Liquide 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 Chemical Manufacturing 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.

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For Air Liquide digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Air Liquide 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.

Operational resilience

– The operational resilience strategy of Air Liquide comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

Training and development

– Air Liquide has one of the best training and development program in Basic Materials 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.

Cross disciplinary teams

– Horizontal connected teams at the Air Liquide are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Highly skilled collaborators

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

High brand equity

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

Ability to recruit top talent

– Air Liquide is one of the leading players in the Chemical Manufacturing 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.

Organizational Resilience of Air Liquide

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

Innovation driven organization

– Air Liquide is one of the most innovative firm in Chemical Manufacturing sector.

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Weaknesses of Air Liquide | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Air Liquide are -

Slow to strategic competitive environment developments

– As Air Liquide is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.

Ability to respond to the competition

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

Need for greater diversity

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

Employees’ less understanding of Air Liquide strategy

– From the outside it seems that the employees of Air Liquide 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.

Lack of clear differentiation of Air Liquide products

– To increase the profitability and margins on the products, Air Liquide needs to provide more differentiated products than what it is currently offering in the marketplace.

High dependence on Air Liquide ‘s star products

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

High operating costs

– Compare to the competitors, Air Liquide has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Air Liquide lucrative customers.

Interest costs

– Compare to the competition, Air Liquide 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.

Products dominated business model

– Even though Air Liquide has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Air Liquide should strive to include more intangible value offerings along with its core products and services.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at Air Liquide 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.

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Air Liquide Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Air Liquide are -

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 Air Liquide 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Air Liquide 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.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

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

Increase in government spending

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

Redefining models of collaboration and team work

– As explained in the weaknesses section, Air Liquide is facing challenges because of the dominance of functional experts in the organization. Air Liquide can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Developing new processes and practices

– Air Liquide can develop new processes and procedures in Chemical Manufacturing 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

– Air Liquide can improve the customer journey of consumers in the Chemical Manufacturing 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Air Liquide in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

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. Air Liquide can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Creating value in data economy

– The success of analytics program of Air Liquide has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Air Liquide to build a more holistic ecosystem for Air Liquide products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Harnessing reconfiguration of the global supply chains

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

Loyalty marketing

– Air Liquide 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Chemical Manufacturing industry, but it has also influenced the consumer preferences. Air Liquide can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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Threats Air Liquide External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Air Liquide are -

Consumer confidence and its impact on Air Liquide 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 Chemical Manufacturing industry and other sectors.

Barriers of entry lowering

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

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 Air Liquide business can come under increasing regulations regarding data privacy, data security, etc.

Shortening product life cycle

– it is one of the major threat that Air Liquide is facing in Chemical Manufacturing 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 dependence on third party suppliers

– Air Liquide 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Air Liquide in Chemical Manufacturing industry. The Chemical Manufacturing 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.

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. Air Liquide needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

Technology acceleration in Forth Industrial Revolution

– Air Liquide has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Air Liquide needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

Easy access to finance

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

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 Air Liquide in the Chemical Manufacturing sector and impact the bottomline of the organization.

Stagnating economy with rate increase

– Air Liquide 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 Chemical Manufacturing industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Air Liquide 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 Air Liquide prominent markets.

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Weighted SWOT Analysis of Air Liquide Template, Example

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

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