Lovisa Holdings Limited SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

SWOT analysis is a strategic planning tool that can be used by Lovisa Holdings Limited managers to do a situational analysis of the firm . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Lovisa Holdings Limited is facing in its current business environment.

The Lovisa Holdings Limited is one of the leading companies in its industry. Lovisa Holdings Limited maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

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The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Lovisa Holdings Limited to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

Lovisa Holdings Limited swot analysis / matrix

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Lovisa Holdings Limited strengths, and eradicate its weaknesses.

Step by Step Guide to Lovisa Holdings Limited SWOT Analysis

Strengths of Lovisa Holdings Limited – Internal Strategic Factors

As one of the leading firms in its industry, Lovisa Holdings Limited has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Lovisa Holdings Limited are –

Read - Lovisa Holdings Limited Porter 5 Forces Analysis & Industry Analysis
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Strong Brand Portfolio – Over the years Lovisa Holdings Limited has invested in building a strong brand portfolio. The SWOT analysis of Lovisa Holdings Limited just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Strong Free Cash Flow – Lovisa Holdings Limited has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Automation of activities brought consistency of quality to Lovisa Holdings Limited products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
Good Returns on Capital Expenditure – Lovisa Holdings Limited is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Superb Performance in New Markets – Lovisa Holdings Limited has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.

Weakness of Lovisa Holdings Limited – Internal Strategic Factors

Weakness are the areas where Lovisa Holdings Limited can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Lovisa Holdings Limited needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Lovisa Holdings Limited
The profitability ratio and Net Contribution % of Lovisa Holdings Limited are below the industry average.
High attrition rate in work force – compare to other organizations in the industry Lovisa Holdings Limited has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Lovisa Holdings Limited is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Lovisa Holdings Limited is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities for Lovisa Holdings Limited – External Strategic Factors

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Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Lovisa Holdings Limited in other product categories.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Lovisa Holdings Limited to capture new customers and increase its market share.
The market development will lead to dilution of competitor’s advantage and enable Lovisa Holdings Limited to increase its competitiveness compare to the other competitors.
New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Lovisa Holdings Limited. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Lovisa Holdings Limited.
Government green drive also opens an opportunity for procurement of Lovisa Holdings Limited products by the state as well as federal government contractors.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Lovisa Holdings Limited’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Lovisa Holdings Limited an opportunity to enter a new emerging market.

Threats Lovisa Holdings Limited Facing - External Strategic Factors

No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
Imitation of the counterfeit and low quality product is also a threat to Lovisa Holdings Limited’s product especially in the emerging markets and low income markets.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
Liability laws in different countries are different and Lovisa Holdings Limited may be exposed to various liability claims given change in policies in those markets.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.

Limitations of SWOT Analysis for Lovisa Holdings Limited

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Lovisa Holdings Limited
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

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Weighted SWOT Analysis of Lovisa Holdings Limited

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Lovisa Holdings Limited managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Lovisa Holdings Limited

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)