Previously we looked at the elaborated marketing strategy of Microsoft, the world’s leading software application provider. Now, let us hop over and look at the elaborated SWOT Analysis of Larsen & Toubro.
Larsen & Toubro or commonly spoken as L&T is an Indian multinational conglomerate, with business interests in engineering, construction, manufacturing, technology and financial services. It is among the top 5 construction companies in India.
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Want to see how Larsen & Toubro has succeeded in the construction industry? In this blog, you will learn about the SWOT analysis of Larsen & Toubro. Before we get started, learn more about Larsen & Toubro‘s company, how it was established, its products, financial position, and its competitors.
About Larsen & Toubro
L&T is counted as the world’s top 5 construction companies. It was founded by two Danish engineers taking refuge in India i.e. Henning Holck Larsen and Soren Kristian Toubro in 1938 in Mumbai.
It mainly operates in constructions like buildings & factories, heavy civil infrastructure, transportation infrastructure, power transmission and distribution, water & effluent treatment. Manufacturing like defence & aerospace, machinery & engineering products etc.
L&T holds a strong name in India within the field of construction and manufacturing which reinforces its trust in its clients. L&T has handled various large scale projects in India and has successfully created a trustworthy name which is extremely important, especially within the industry.
L&T awards and recognitions include L&T selected as the ‘Best Project’ in three categories – Roads & Highways, Public-Private Partnership, and Environmental Sustainability. This is the third consecutive year that L&T has won honours from D&B. L&T also ranked 4th in the list of top companies in Linkedin.
|Founder||Henning Holck-Larsen & Soren Kristian Toubro|
|No. of Employees||337,994+|
|Market Cap||$32.15 Billion (2022)|
|Annual Revenue||₹147,813.26 Crore (2020)|
|Net Income/ Profit||₹9,549.03 Crore (2020)|
Products & Services by Larsen & Toubro
Being one of the eldest construction companies in India L&T provides products & services like
- Heavy Equipment
- Electrical Equipment
- Power Generation
- Heavy Industry
- IT Services
- Rapid Transit
- Financial Services
- Real Estate
Competitors of Larsen & Toubro
L&T had a monopoly in the market for about 80 years. The other companies which gave a challenge are
- AB Infrabuild Ltd
- Lanco Infratech
- GMR Infra
- Reliance Infrastructure Ltd
- Hindustan Construction company
As now we have a better understanding of Larsen & Toubro, let’s look into the SWOT Analysis of Larsen & Toubro.
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, 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 material, 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 and 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 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, investment in technology does not meet the ideas that a company has.
- 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 more. 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 type of 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.
This ends our elaborative SWOT analysis of Larsen & Toubro. Let us conclude our learning below.
Larsen & Toubro is one of the largest & most respected construction companies in India. It has manufacturing facilities in India, Saudi & Oman. Although the company was facing loss & several of its customers were deferring their projects due to lack of funds, L&T always try to stand strong.
The firm must concentrate on developing markets having big economic growth rates. For example, the company could expand the number of Larsen & Toubro distributors in countries like China. One way to tap into various markets while being cost-effective is through digital marketing.
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