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 – increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, talent flight as more people leaving formal jobs, technology disruption, increasing government debt because of Covid-19 spendings, there is backlash against globalization, increasing energy prices, increasing household debt because of falling income levels, there is increasing trade war between United States & China, 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 -

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.

Ability to lead change in Chemical Manufacturing

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

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.

Learning organization

- Air Liquide 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 Air Liquide is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Air Liquide emphasize – knowledge, initiative, and innovation.

Strong track record of project management in the Chemical Manufacturing industry

– Air Liquide is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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.

Innovation driven organization

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

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.

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.

Effective Research and Development (R&D)

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

Superior customer experience

– The customer experience strategy of Air Liquide in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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.

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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 -

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.

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.

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.

No frontier risks strategy

– From the 10K / annual statement of Air Liquide, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.

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.

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.

Aligning sales with marketing

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

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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Air Liquide is slow explore the new channels of communication. These new channels of communication can help Air Liquide to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.

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.

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.

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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 -

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.

Building a culture of innovation

– managers at Air Liquide 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 Chemical Manufacturing industry.

Remote work and new talent hiring opportunities

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

Reforming the budgeting process

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

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.

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.

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.

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.

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.

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.

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.

Leveraging digital technologies

– Air Liquide 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.

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.

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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 -

Learning curve for new practices

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

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.

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.

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.

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.

Environmental challenges

– Air Liquide 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. Air Liquide can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

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.

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.

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.

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 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.

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.

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.

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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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