Based on various researches at Oak Spring University , Luen Thai Holdings is operating in a macro-environment that has been destablized by – increasing commodity prices, technology disruption, central banks are concerned over increasing inflation, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, there is backlash against globalization,
geopolitical disruptions, supply chains are disrupted by pandemic , 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Luen Thai Holdings 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.
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.
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.
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.
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.
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.
High brand equity
– Luen Thai Holdings has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Luen Thai Holdings to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Luen Thai Holdings, in the dynamic environment of Apparel/Accessories industry it has struggled to respond to the nimble upstart competition. Luen Thai Holdings has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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 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.
Compensation and incentives
– The revenue per employee of Luen Thai Holdings is just above the Apparel/Accessories 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.
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.
Increasing silos among functional specialists
– The organizational structure of Luen Thai Holdings is dominated by functional specialists. It is not different from other players in the Apparel/Accessories industry, but Luen Thai Holdings needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Luen Thai Holdings to focus more on services in the Apparel/Accessories industry rather than just following the product oriented approach.
Products dominated business model
– Even though Luen Thai Holdings has some of the most successful models in the Apparel/Accessories industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Luen Thai Holdings should strive to include more intangible value offerings along with its core products and services.
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.
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 -
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.
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 Luen Thai Holdings 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.
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.
Developing new processes and practices
– Luen Thai Holdings can develop new processes and procedures in Apparel/Accessories 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.
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.
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.
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.
Loyalty marketing
– Luen Thai Holdings has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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.
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.
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.
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 -
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.
Shortening product life cycle
– it is one of the major threat that Luen Thai Holdings is facing in Apparel/Accessories sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.