Based on various researches at Oak Spring University , Luen Thai Holdings is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, wage bills are increasing, there is backlash against globalization,
technology disruption, increasing energy prices, 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 -
Ability to recruit top talent
– Luen Thai Holdings is one of the leading players in the Apparel/Accessories industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
Digital Transformation in Apparel/Accessories industry
- digital transformation varies from industry to industry. For Luen Thai Holdings digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Luen Thai Holdings 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.
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.
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.
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.
Successful track record of launching new products
– Luen Thai Holdings has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Luen Thai Holdings 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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Luen Thai Holdings in the Consumer Cyclical sector have low bargaining power. Luen Thai Holdings has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Luen Thai Holdings to manage not only supply disruptions but also source products at highly competitive prices.
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 -
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.
Employees’ less understanding of Luen Thai Holdings strategy
– From the outside it seems that the employees of Luen Thai Holdings 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.
Capital Spending Reduction
– Even during the low interest decade, Luen Thai Holdings 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 Apparel/Accessories industry using digital technology.
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.
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.
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.
High operating costs
– Compare to the competitors, Luen Thai Holdings has high operating costs in the Apparel/Accessories industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Luen Thai Holdings lucrative customers.
Slow to strategic competitive environment developments
– As Luen Thai Holdings is one of the leading players in the Apparel/Accessories industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Apparel/Accessories industry in last five years.
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.
Interest costs
– Compare to the competition, Luen Thai Holdings 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.
Aligning sales with marketing
– From the outside it seems that Luen Thai Holdings needs to have more collaboration between its sales team and marketing team. Sales professionals in the Apparel/Accessories industry have deep experience in developing customer relationships. Marketing department at Luen Thai Holdings can leverage the sales team experience to cultivate customer relationships as Luen Thai Holdings is planning to shift buying processes online.
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 -
Using analytics as competitive advantage
– Luen Thai Holdings has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Apparel/Accessories sector. This continuous investment in analytics has enabled Luen Thai Holdings to build a competitive advantage using analytics. The analytics driven competitive advantage can help Luen Thai Holdings to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Leveraging digital technologies
– Luen Thai Holdings 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.
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.
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.
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.
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.
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.
Buying journey improvements
– Luen Thai Holdings can improve the customer journey of consumers in the Apparel/Accessories 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 Apparel/Accessories industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Luen Thai Holdings in the Apparel/Accessories industry. Now Luen Thai Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
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 -
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 Luen Thai Holdings in the Apparel/Accessories sector and impact the bottomline of the organization.
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.
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.
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.
Regulatory challenges
– Luen Thai Holdings 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 Apparel/Accessories industry regulations.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Luen Thai Holdings in Apparel/Accessories industry. The Apparel/Accessories 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Luen Thai Holdings may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Apparel/Accessories sector.
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.
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.
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.
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.
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.