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 – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic ,
technology disruption, 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 -
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.
Digital Transformation in Construction - Raw Materials industry
- digital transformation varies from industry to industry. For LafargeHolcim digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. LafargeHolcim 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.
Successful track record of launching new products
– LafargeHolcim has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. LafargeHolcim has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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.
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 lead change in Construction - Raw Materials
– LafargeHolcim is one of the leading players in the Construction - Raw Materials industry in Germany. Over the years it has not only transformed the business landscape in the Construction - Raw Materials industry in Germany but also across the existing markets. The ability to lead change has enabled LafargeHolcim in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Sustainable margins compare to other players in Construction - Raw Materials industry
– LafargeHolcim has clearly differentiated products in the market place. This has enabled LafargeHolcim to fetch slight price premium compare to the competitors in the Construction - Raw Materials industry. The sustainable margins have also helped LafargeHolcim to invest into research and development (R&D) and innovation.
Innovation driven organization
– LafargeHolcim is one of the most innovative firm in Construction - Raw Materials sector.
Low bargaining power of suppliers
– Suppliers of LafargeHolcim in the Capital Goods sector have low bargaining power. LafargeHolcim has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps LafargeHolcim to manage not only supply disruptions but also source products at highly competitive prices.
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 -
Interest costs
– Compare to the competition, LafargeHolcim 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.
Workers concerns about automation
– As automation is fast increasing in the Construction - Raw Materials industry, LafargeHolcim 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.
Aligning sales with marketing
– From the outside it seems that LafargeHolcim needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction - Raw Materials industry have deep experience in developing customer relationships. Marketing department at LafargeHolcim can leverage the sales team experience to cultivate customer relationships as LafargeHolcim is planning to shift buying processes online.
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.
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.
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.
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.
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.
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.
Products dominated business model
– Even though LafargeHolcim has some of the most successful models in the Construction - Raw Materials industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. LafargeHolcim should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Construction - Raw Materials industry
– The stress on hiring functional specialists at LafargeHolcim 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.
LafargeHolcim Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LafargeHolcim are -
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.
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.
Better consumer reach
– The expansion of the 5G network will help LafargeHolcim to increase its market reach. LafargeHolcim 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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction - Raw Materials industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. LafargeHolcim 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. LafargeHolcim 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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for LafargeHolcim 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 LafargeHolcim to hire the very best people irrespective of their geographical location.
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.
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.
Developing new processes and practices
– LafargeHolcim can develop new processes and procedures in Construction - Raw Materials 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.
Threats LafargeHolcim External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LafargeHolcim are -
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 LafargeHolcim business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, LafargeHolcim 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 LafargeHolcim prominent markets.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– LafargeHolcim has witnessed rapid integration of technology during Covid-19 in the Construction - Raw Materials industry. As one of the leading players in the industry, LafargeHolcim needs to keep up with the evolution of technology in the Construction - Raw Materials 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.
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.
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.
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.
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.