Elaborative SWOT Analysis of Larsen & Toubro – An Indian Multinational Conglomerate

Quick Stats on Larsen & Toubro

Founder	Henning Holck-Larsen & Soren Kristian Toubro
Year Founded	1938
Origin	Mumbai, India
No. of Employees	337,994+
Company Type	Public
Market Cap	$32.15 Billion (2022)
Annual Revenue	₹147,813.26 Crore (2020)
Net Income/ Profit	₹9,549.03 Crore (2020)

 

Current News about the L&T

• Larsen & Toubro needs 30,000 skilled workers but is struggling to hire.
• Larsen & Toubro snaps up nearly $4 billion in orders from Saudi Aramco.

Buyer Persona

SWOT Analysis of Larsen & Toubro

A SWOT analysis identifies a company’s strengths, weaknesses, opportunities, and threats. A proven and true management paradigm that allows Larsen & Toubro to compare its business and performance with competitors and the industry as a whole.

So let us go ahead and first have a glance at the strengths of Larsen & Toubro from the SWOT analysis of Larsen & Toubro.

Strengths of Larsen & Toubro

Your organisation’s strength is something that makes it stand out from the rest. It can be a competitive advantage that sets it apart from its competitors. Some of the strengths of Larsen & Toubro are as follows –

• Subsidiaries & Joint Ventures: According to 2020 reports, Larsen & Toubro incorporates 118 subsidiaries, 6 associates, 25 joint-venture and 35 joint operations companies, functioning across basic and heavy engineering, construction, realty, manufacturing of capital goods, information technology, and financial services.
• Technology Cluster: L&T provides services using emerging technologies, embedded intelligence and engineering through its L&T technology services, L&T Infotech, and L&T Smart World Communication spread across smart cities in India to provide smart engineering solutions. 
• International Markets: L&T honed its focus on global markets from 2010 onwards, especially ensuring a full range of operations in the Middle East catering to the Gulf and North Africa holding around one-third to both order inflow and revenue. 
• Sustainable Approach: As said in the introduction above, L&T sustains a greener portfolio while working towards heavy engineering. The company always try to ensure a holistic approach towards environmental impacts by reducing its carbon emission and use of water. The company also runs several CSR initiatives to present a positive side of the company.
• Good Returns on Capital Expenditure: Larsen & Toubro is moderately successful at the performance of new projects and has developed good returns on capital expenditure by creating new revenue streams.
• Genuine Material Suppliers: It has a powerful base of reliable suppliers of raw materials, thus facilitating the company to survive any supply chain bottlenecks. 
• Highly Skilled Workforce: Larsen & Toubro is empowering large resources in the training and development of its employees, resulting in a workforce that is not only highly competent but also motivated to achieve a surplus.
• Government Projects: As the conglomerate is a public limited company it gets most of the projects and support from the government of India which ensures that the organisation’s profitability is never going to be affected.  

Weaknesses of Larsen & Toubro

Weaknesses are negative factors that can prevent an organisation from achieving its goals and objectives. Some of these include a poor brand, high levels of debt, inadequate supply chains, and lack of capital. So here are some of the weaknesses of Larsen & Toubro –

• Depends on Domestic Operations: Larsen & Toubro always depends on domestic operations for the revenue, as it only operates in India so its main dependence on revenue is domestic operations only. During FY2011 a total of 80% of revenue was from India. The conglomerate should explore international markets too.
• Increasing Debt: L&T’s debts are increasing rapidly which affects the financial flexibility of the company. It is reported that L&T is in debt of $11,419.3 million in FY 2013.
• Less Investment in New Technologies: As the company embarks on its next phase of expansion, it needs to invest in new technologies that can help it achieve its goals. Currently, technology investment does not meet a company’s ideas.
• Investment in Research & Development: Investment in research and development is below the rapidly growing players in the industry. Even though Larsen & Toubro is consuming above the industry average on research and development, it has not been able to compete with the leading players in the industry regarding innovation.
• Labour Safety: The company’s labour works in an unsafe environment i.e. construction sites, real estate projects, road construction where the risk to their life is higher. This is the place where the responsibility of L&T increases in terms of ensuring its labour safety and sometimes it fails when some unseen events happen with its labour.  

Opportunities for Larsen & Toubro

Opportunity is a competitive advantage that can be gained from various external factors. For instance, if a country lowers its tariffs, a car manufacturer can benefit by exporting its products to a new market. Opportunities for Larsen & Toubro are as follows –

• New Technology: Larsen & Toubro may now use differential pricing in the new market thanks to the new technology. It will motivate the company to reinforce its existing clients via excellent service while also attracting new clients through various value-oriented offers.
• New Markets: The adoption of new technology criteria and government free trade agreements has provided Larsen & Toubro with an opportunity to enter a newly developing market.
• Stable Free Cash Flow: Stable free cash flow gives opportunities to empower contiguous product segments. With extra cash in the bank, the company can empower new technologies as well as in new product segments.
• Mergers & Acquisitions: The company sustains a strong financial position and it should leverage this benefit to increase its mergers and acquisitions both domestically and internationally. This approach will open new revenue streams for the company.

Threats to Larsen & Toubro

Many factors can affect your business outside its immediate environment. Some of these include factors such as a shortage of skilled workers or a supply chain issue. The threats Larsen & Toubro is facing are as follows –

• The Land Acquisition: As the Government introduced “the land acquisition bill” the value of the land would be four times the market value in rural areas & two times in urban areas.
• High Competition: Larsen & Toubro’s stable profitability has increased many competitors in the industry over the last two years which has put downward pressure on not only profitability but also on overall sales, so this is one of the biggest threats for Larsen & Toubro. 
• Increasing Level of Payment: Rising labour pay levels, especially movements such as $15 an hour and increasing prices in China, can lead to serious pressure on the profitability of Larsen & Toubro.
• Competitors Advance Technologies: New technologies developed by competitors or market disruptors could be a serious threat to the industry in the medium to long term future. This is because due to the new technologies developed by the competitors they would be able to do more production, and because of more production, they would be able to supply more as per the demand. New technologies also help in reducing the cost of production.
• The Pressure of Environment Bodies: The company follows heavy construction and equipment rolling on lands which led to increasing pressure from environmental activists and several lawsuits on L&T for exploiting the environment.   

Example of a Failed Campaign Or Backlash from Viewers

There is no failed campaign but Larsen & Toubro (L&T) has been facing problems for the last few months MD SN Subrahmanyan has said. “Indian labourers lack skill sets, and, therefore, there is a need to upskill them”. Indian multinational conglomerate Larsen & Toubro needs about 30,000 skilled labourers but is struggling to hire.

Top 5 Competitors of this brand

• Tata Group is one of India’s largest conglomerates. Tata Projects, a subsidiary of Tata Group, is a competitor to L&T in the construction and engineering sectors.
• Reliance Industries, led by Mukesh Ambani, is a major player in industries. It may compete with L&T in certain infrastructure and construction projects.
• Adani Group is involved in various sectors, including infrastructure, energy, and logistics. Adani Infrastructure and Adani Ports and Special Economic Zone (APSEZ) are competitors to L&T in infrastructure projects.
• BHEL(Bharat Heavy Electricals Limited) is a government-owned company specializing in power generation, transmission, and transportation systems. It competes with L&T in the power and energy sector.
• Essar Group has interests in sectors like steel, energy, infrastructure, and technology. Essar Projects, a subsidiary, competes with L&T in engineering and construction projects.