Lanxess AG (LXSG) SWOT Analysis / TOWS Matrix / MBA Resources
Chemicals - Plastics & Rubber
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Lanxess AG (Germany)
Based on various researches at Oak Spring University , Lanxess AG is operating in a macro-environment that has been destablized by – increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, technology disruption,
digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lanxess AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lanxess AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lanxess AG 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 Lanxess AG can be done for the following purposes –
1. Strategic planning of Lanxess AG
2. Improving business portfolio management of Lanxess AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Chemicals - Plastics & Rubber sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lanxess AG
Strengths of Lanxess AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lanxess AG are -
High switching costs
– The high switching costs that Lanxess AG 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.
Organizational Resilience of Lanxess AG
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lanxess AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Chemicals - Plastics & Rubber industry
– Lanxess AG 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
– Lanxess AG is one of the leading players in the Chemicals - Plastics & Rubber 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
- Lanxess AG 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 Lanxess AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lanxess AG emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Lanxess AG has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemicals - Plastics & Rubber industry. Secondly the value chain collaborators of Lanxess AG have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Lanxess AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lanxess AG staying ahead in the Chemicals - Plastics & Rubber 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 Chemicals - Plastics & Rubber industry
– Lanxess AG has clearly differentiated products in the market place. This has enabled Lanxess AG to fetch slight price premium compare to the competitors in the Chemicals - Plastics & Rubber industry. The sustainable margins have also helped Lanxess AG to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Lanxess AG in the Basic Materials sector have low bargaining power. Lanxess AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lanxess AG to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Lanxess AG is one of the most innovative firm in Chemicals - Plastics & Rubber sector.
Cross disciplinary teams
– Horizontal connected teams at the Lanxess AG 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.
Training and development
– Lanxess AG has one of the best training and development program in Basic Materials 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.
Weaknesses of Lanxess AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lanxess AG are -
Low market penetration in new markets
– Outside its home market of Germany, Lanxess AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Lanxess AG has a high cash cycle compare to other players in the Chemicals - Plastics & Rubber 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
– Lanxess AG 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.
Increasing silos among functional specialists
– The organizational structure of Lanxess AG is dominated by functional specialists. It is not different from other players in the Chemicals - Plastics & Rubber industry, but Lanxess AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lanxess AG to focus more on services in the Chemicals - Plastics & Rubber industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Lanxess AG, in the dynamic environment of Chemicals - Plastics & Rubber industry it has struggled to respond to the nimble upstart competition. Lanxess AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Chemicals - Plastics & Rubber industry
– The stress on hiring functional specialists at Lanxess AG 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.
Compensation and incentives
– The revenue per employee of Lanxess AG is just above the Chemicals - Plastics & Rubber 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.
Capital Spending Reduction
– Even during the low interest decade, Lanxess AG 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 Chemicals - Plastics & Rubber industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Lanxess AG has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemicals - Plastics & Rubber industry over the last five years. Lanxess AG 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lanxess AG supply chain. Even after few cautionary changes, Lanxess AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lanxess AG vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lanxess AG is slow explore the new channels of communication. These new channels of communication can help Lanxess AG to provide better information regarding Chemicals - Plastics & Rubber products and services. It can also build an online community to further reach out to potential customers.
Lanxess AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lanxess AG are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemicals - Plastics & Rubber industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lanxess AG 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. Lanxess AG 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lanxess AG is facing challenges because of the dominance of functional experts in the organization. Lanxess AG can utilize new technology in the field of Chemicals - Plastics & Rubber industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Lanxess AG has opened avenues for new revenue streams for the organization in Chemicals - Plastics & Rubber industry. This can help Lanxess AG to build a more holistic ecosystem for Lanxess AG products in the Chemicals - Plastics & Rubber industry by providing – data insight services, data privacy related products, data based consulting services, 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. Lanxess AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Chemicals - Plastics & Rubber industry, but it has also influenced the consumer preferences. Lanxess AG 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 Lanxess AG in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemicals - Plastics & Rubber industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Lanxess AG 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lanxess AG 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 Lanxess AG to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Lanxess AG to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Lanxess AG 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 Chemicals - Plastics & Rubber industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lanxess AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lanxess AG 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.
Use of Bitcoin and other crypto currencies for transactions in Chemicals - Plastics & Rubber industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lanxess AG in the Chemicals - Plastics & Rubber industry. Now Lanxess AG can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Lanxess AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lanxess AG are -
Stagnating economy with rate increase
– Lanxess AG 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 Chemicals - Plastics & Rubber industry.
High dependence on third party suppliers
– Lanxess AG 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.
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 Lanxess AG business can come under increasing regulations regarding data privacy, data security, etc.
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 Lanxess AG in the Chemicals - Plastics & Rubber sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Chemicals - Plastics & Rubber industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lanxess AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Lanxess AG.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lanxess AG 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 Lanxess AG prominent markets.
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.
Shortening product life cycle
– it is one of the major threat that Lanxess AG is facing in Chemicals - Plastics & Rubber 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.
Regulatory challenges
– Lanxess AG 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 Chemicals - Plastics & Rubber industry regulations.
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. Lanxess AG needs to understand the core reasons impacting the Chemicals - Plastics & Rubber 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. Lanxess AG 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.
Weighted SWOT Analysis of Lanxess AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lanxess AG 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 Lanxess AG 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 Lanxess AG 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 Lanxess AG 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 Lanxess AG needs to make to build a sustainable competitive advantage.
