Based on various researches at Oak Spring University , Luen Thai Holdings is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, technology disruption, supply chains are disrupted by pandemic ,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Luen Thai Holdings
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Luen Thai Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Luen Thai Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Luen Thai Holdings 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 Luen Thai Holdings can be done for the following purposes –
1. Strategic planning of Luen Thai Holdings
2. Improving business portfolio management of Luen Thai Holdings
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Luen Thai Holdings
Strengths of Luen Thai Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Luen Thai Holdings are -
Innovation driven organization
– Luen Thai Holdings is one of the most innovative firm in Apparel/Accessories sector.
Diverse revenue streams
– Luen Thai Holdings is present in almost all the verticals within the Apparel/Accessories industry. This has provided Luen Thai Holdings 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.
Effective Research and Development (R&D)
– Luen Thai Holdings has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Luen Thai Holdings staying ahead in the Apparel/Accessories 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 Apparel/Accessories industry
– Luen Thai Holdings is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Luen Thai Holdings in Apparel/Accessories industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Luen Thai Holdings has one of the best training and development program in Consumer Cyclical 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 Luen Thai Holdings
– The covid-19 pandemic has put organizational resilience at the centre of everthing Luen Thai Holdings does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Apparel/Accessories industry
– Luen Thai Holdings has clearly differentiated products in the market place. This has enabled Luen Thai Holdings to fetch slight price premium compare to the competitors in the Apparel/Accessories industry. The sustainable margins have also helped Luen Thai Holdings to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Luen Thai Holdings 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
- Luen Thai Holdings 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 Luen Thai Holdings is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Luen Thai Holdings emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Luen Thai Holdings has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Apparel/Accessories industry. Secondly the value chain collaborators of Luen Thai Holdings have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Luen Thai Holdings comprises – understanding the underlying the factors in the Apparel/Accessories 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.
Weaknesses of Luen Thai Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Luen Thai Holdings are -
High bargaining power of channel partners in Apparel/Accessories industry
– because of the regulatory requirements in Hong Kong, Luen Thai Holdings 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 Apparel/Accessories industry.
No frontier risks strategy
– From the 10K / annual statement of Luen Thai Holdings, it seems that company is thinking out the frontier risks that can impact Apparel/Accessories 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 dependence on Luen Thai Holdings ‘s star products
– The top 2 products and services of Luen Thai Holdings still accounts for major business revenue. This dependence on star products in Apparel/Accessories industry has resulted into insufficient focus on developing new products, even though Luen Thai Holdings has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Hong Kong, Luen Thai Holdings needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Luen Thai Holdings is slow explore the new channels of communication. These new channels of communication can help Luen Thai Holdings to provide better information regarding Apparel/Accessories products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Luen Thai Holdings has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Apparel/Accessories industry over the last five years. Luen Thai Holdings 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 cash cycle compare to competitors
Luen Thai Holdings has a high cash cycle compare to other players in the Apparel/Accessories industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Apparel/Accessories industry
– The stress on hiring functional specialists at Luen Thai Holdings 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.
Lack of clear differentiation of Luen Thai Holdings products
– To increase the profitability and margins on the products, Luen Thai Holdings needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Luen Thai Holdings supply chain. Even after few cautionary changes, Luen Thai Holdings is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Luen Thai Holdings vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Apparel/Accessories industry, Luen Thai Holdings 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.
Luen Thai Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Luen Thai Holdings are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Apparel/Accessories industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Luen Thai Holdings 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. Luen Thai Holdings 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.
Manufacturing automation
– Luen Thai Holdings can use the latest technology developments to improve its manufacturing and designing process in Apparel/Accessories 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Luen Thai Holdings 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.
Learning at scale
– Online learning technologies has now opened space for Luen Thai Holdings 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Luen Thai Holdings is facing challenges because of the dominance of functional experts in the organization. Luen Thai Holdings can utilize new technology in the field of Apparel/Accessories 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 Luen Thai Holdings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Luen Thai Holdings 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 Apparel/Accessories industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Luen Thai Holdings 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 Luen Thai Holdings to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Luen Thai Holdings 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 Luen Thai Holdings to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Luen Thai Holdings can use these opportunities to build new business models that can help the communities that Luen Thai Holdings operates in. Secondly it can use opportunities from government spending in Apparel/Accessories sector.
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. Luen Thai Holdings 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 Luen Thai Holdings has opened avenues for new revenue streams for the organization in Apparel/Accessories industry. This can help Luen Thai Holdings to build a more holistic ecosystem for Luen Thai Holdings products in the Apparel/Accessories industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Luen Thai Holdings to increase its market reach. Luen Thai Holdings 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.
Threats Luen Thai Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Luen Thai Holdings 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 Luen Thai Holdings business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Luen Thai Holdings 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.
Stagnating economy with rate increase
– Luen Thai Holdings 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 Apparel/Accessories industry.
Increasing wage structure of Luen Thai Holdings
– 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 Luen Thai Holdings.
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. Luen Thai Holdings 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 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.
Technology acceleration in Forth Industrial Revolution
– Luen Thai Holdings has witnessed rapid integration of technology during Covid-19 in the Apparel/Accessories industry. As one of the leading players in the industry, Luen Thai Holdings needs to keep up with the evolution of technology in the Apparel/Accessories 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.
Consumer confidence and its impact on Luen Thai Holdings 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 Apparel/Accessories industry and other sectors.
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. Luen Thai Holdings needs to understand the core reasons impacting the Apparel/Accessories industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Apparel/Accessories industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Luen Thai Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Luen Thai Holdings 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 Luen Thai Holdings prominent markets.
Environmental challenges
– Luen Thai Holdings 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. Luen Thai Holdings can take advantage of this fund but it will also bring new competitors in the Apparel/Accessories industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Apparel/Accessories industry are lowering. It can presents Luen Thai Holdings with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Apparel/Accessories sector.
Weighted SWOT Analysis of Luen Thai Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Luen Thai Holdings 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 Luen Thai Holdings 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 Luen Thai Holdings 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 Luen Thai Holdings 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 Luen Thai Holdings needs to make to build a sustainable competitive advantage.
