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 – central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing transportation and logistics costs, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, 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 -
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.
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.
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.
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.
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.
Innovation driven organization
– LafargeHolcim is one of the most innovative firm in Construction - Raw Materials sector.
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.
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.
Diverse revenue streams
– LafargeHolcim is present in almost all the verticals within the Construction - Raw Materials industry. This has provided LafargeHolcim 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
LafargeHolcim Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LafargeHolcim are -
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.
Buying journey improvements
– LafargeHolcim can improve the customer journey of consumers in the Construction - Raw Materials 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.
Use of Bitcoin and other crypto currencies for transactions in Construction - Raw Materials industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for LafargeHolcim in the Construction - Raw Materials industry. Now LafargeHolcim can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
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.
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.
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.
Leveraging digital technologies
– LafargeHolcim 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.
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.
Threats LafargeHolcim External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LafargeHolcim are -
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.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of LafargeHolcim.
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.
Consumer confidence and its impact on LafargeHolcim 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 Construction - Raw Materials industry and other sectors.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for LafargeHolcim in Construction - Raw Materials industry. The Construction - Raw Materials 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.
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.
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.