LafargeHolcim (HOLN) SWOT Analysis / TOWS Matrix / MBA Resources
Construction - Raw Materials
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for LafargeHolcim (Germany)
Based on various researches at Oak Spring University , LafargeHolcim is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, wage bills are increasing, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices,
supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, 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 Germany
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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the LafargeHolcim 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.
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.
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 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.
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.
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.
Ability to recruit top talent
– LafargeHolcim is one of the leading players in the Construction - Raw Materials 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.
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.
High switching costs
– The high switching costs that LafargeHolcim 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.
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.
Superior customer experience
– The customer experience strategy of LafargeHolcim in Construction - Raw Materials industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of LafargeHolcim | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LafargeHolcim are -
No frontier risks strategy
– From the 10K / annual statement of LafargeHolcim, it seems that company is thinking out the frontier risks that can impact Construction - Raw Materials 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.
Increasing silos among functional specialists
– The organizational structure of LafargeHolcim is dominated by functional specialists. It is not different from other players in the Construction - Raw Materials industry, but LafargeHolcim needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help LafargeHolcim to focus more on services in the Construction - Raw Materials industry rather than just following the product oriented approach.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at LafargeHolcim, in the dynamic environment of Construction - Raw Materials industry it has struggled to respond to the nimble upstart competition. LafargeHolcim has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, LafargeHolcim has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction - Raw Materials industry over the last five years. LafargeHolcim 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.
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.
High cash cycle compare to competitors
LafargeHolcim has a high cash cycle compare to other players in the Construction - Raw Materials industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
Lack of clear differentiation of LafargeHolcim products
– To increase the profitability and margins on the products, LafargeHolcim needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
LafargeHolcim Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LafargeHolcim 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. LafargeHolcim can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Building a culture of innovation
– managers at LafargeHolcim 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 Construction - Raw Materials industry.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, LafargeHolcim can use these opportunities to build new business models that can help the communities that LafargeHolcim operates in. Secondly it can use opportunities from government spending in Construction - Raw Materials sector.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, LafargeHolcim 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.
Creating value in data economy
– The success of analytics program of LafargeHolcim has opened avenues for new revenue streams for the organization in Construction - Raw Materials industry. This can help LafargeHolcim to build a more holistic ecosystem for LafargeHolcim products in the Construction - Raw Materials industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– LafargeHolcim 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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction - Raw Materials industry, but it has also influenced the consumer preferences. LafargeHolcim can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats LafargeHolcim External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LafargeHolcim are -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction - Raw Materials industry are lowering. It can presents LafargeHolcim with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction - Raw Materials sector.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, LafargeHolcim may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction - Raw Materials sector.
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.
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.
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 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.
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.
Environmental challenges
– LafargeHolcim 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. LafargeHolcim can take advantage of this fund but it will also bring new competitors in the Construction - Raw Materials industry.
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.
Easy access to finance
– Easy access to finance in Construction - Raw Materials industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. LafargeHolcim can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
