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 – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, geopolitical disruptions, increasing commodity prices,
talent flight as more people leaving formal jobs, there is backlash against globalization, 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 -
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.
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.
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.
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.
Innovation driven organization
– LafargeHolcim is one of the most innovative firm in Construction - Raw Materials sector.
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.
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.
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.
Organizational Resilience of LafargeHolcim
– The covid-19 pandemic has put organizational resilience at the centre of everthing LafargeHolcim does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Weaknesses of LafargeHolcim | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LafargeHolcim are -
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.
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.
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.
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.
Employees’ less understanding of LafargeHolcim strategy
– From the outside it seems that the employees of LafargeHolcim 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.
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.
High bargaining power of channel partners in Construction - Raw Materials industry
– because of the regulatory requirements in Germany, LafargeHolcim is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Construction - Raw Materials industry.
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.
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.
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.
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.
LafargeHolcim Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LafargeHolcim are -
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.
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.
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.
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.
Manufacturing automation
– LafargeHolcim can use the latest technology developments to improve its manufacturing and designing process in Construction - Raw Materials sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Regulatory challenges
– LafargeHolcim needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Construction - Raw Materials industry regulations.
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.
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.
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.
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.