Strategic Management

IIFT Kolkata (Batch of 2019-21)

Strategic Profile of L&T

Tools used: Porter’s Five Forces, TOWS, BMC

Submitted to:
Dr. Naman Sharma

Submitted by:
Group J
Section B
Disha Garg (68)
Hemant Jadhav (72)
Vaibhav Bajpai (106)

09th March 2020

(1) Mission, Vision and Values of L&T

A. Mission
 Be responsive to customer needs, delivering optimal solutions and value-added services
 Ensure sustainable growth and professional excellence using state-of-the-art technology,
process-driven approaches, eco-friendly solutions and IT enabled tools
 Foster a culture of mutual trust, respect, teamwork, continuous learning, innovation, challenge
and employee empowerment to provide a growth-oriented workplace
 Adhere to fair, transparent and ethical practices in interaction with all stakeholders, in keeping
the tenets of good corporate citizenship
 Remain flexible and agile, continually adapting to the changing business environment

B. Vision
 L&T shall be a professionally-managed Indian multinational, committed to total customer
satisfaction and enhancing shareholder value
 L&T-ites shall be innovative, entrepreneurial and empowered team constantly creating value
and attaining global benchmarks
 L&T shall foster a culture of caring, trust and continuous learning while meeting expectations
of employees, stakeholders and society

C. Values
 Every aspect of L&T's businesses is characterised by professionalism and high standards of
corporate governance. Sustainability is embedded into our long-term strategy for growth.
 L&T is committed to fulfilling its economic, environmental and social responsibilities while
conducting business efficiently. It conserves natural resources and enhances social equity for
sustainable growth, and fosters a culture of trust, caring and continuous learning while
meeting the expectations of all stakeholders.
 L&T believes in inclusive growth by empowering communities & accelerating development.
 L&T leverages its inherent strength and capabilities to implement sustainable CSR programs
towards ‘Building India’s Social Infrastructure’.
 L&T follows a Green Portfolio as:
(2) Porter’s Five Forces
Threat of New Entrants (+)

 Firms producing large capacities have a cost advantage because economies of scale are
difficult to achieve in engineering industry. Production is costlier for new entrants
 Firms in the industry sell differentiated products. There is a strong emphasis on advertising
and customer service. Thus, it is difficult for new firms to enter
 There are high capital requirements in the industry. Capital expenditure is also high
 The government policies within the industry require strict licensing and legal requirements.
This makes it difficult for new entrants to join the industry

Bargaining Power of Suppliers (+)

 The number of suppliers in the industry in which Larsen Toubro operates is a lot compared
to the buyers. This means that the suppliers have less control over prices
 The product that these suppliers provide are fairly standardised, less differentiated and have
low switching costs. This makes it easier for Larsen Toubro to switch suppliers which
makes the bargaining power of suppliers weaker
 This industry’s profits are closely tied to that of the suppliers. These suppliers, therefore,
have to provide reasonable pricing. This makes the bargaining power of suppliers a weaker
force within the industry

Bargaining Power of Buyers (+)

 The number of suppliers in this industry is a lot more than the number of firms producing
the products. Thus, the buyers have a few firms to choose from, and therefore, do not have
much control over prices
 The product differentiation within the industry is high, thus the buyers are not able to find
alternative firms producing a particular product thus weakening their power
 The income of the buyers within the industry is low. This means that there is pressure to
purchase at low prices, making the buyers more price sensitive and making their bargaining
power weak

Threat of Substitute Products or Services (+)

 There are very few substitutes available for the products that are produced in the industry.
There is no ceiling on maximum profit that firms can earn in the industry
 The very few substitutes available are of high quality and expensive, thus, come with a high
switching cost. Threat of substitutes is thus weak

Rivalry Among Existing Firms (-)

 There are few competitors which engage in competitive actions to gain position and become
market leaders. This makes the rivalry among existing firms high
 The fixed costs are high. Thus, companies push to their full capacity. Companies reduce
their prices when demand slackens. Thus, high rivalry exists
 The industry is prone to disruptions in the supply-demand balance, often leading to
overproduction i.e. cutting down prices to ensure sales. Thus, high rivalry exists
 The strategies of the firms within the industry are diverse that results in them running head-
on into each other regarding strategy
(3) TOWS
 (4) BMC
The Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and
communicate a business idea or concept.
1. Key partners: List of external companies/suppliers/parties a company needs to achieve its key
activities and deliver value to the customer
2. Key activities: Actions that business undertakes to achieve the value proposition for its customers
3. Key resources: Resources needed practically to undertake the action/activities of business
4. Value proposition: Fundamental concept of the exchange of value between business & clients
5. Customer relationships: It is how a business interacts with its customers
6. Channels: The avenues through which one’s customer comes into contact with its business and
becomes part of its sales cycle
7. Customer relationships: It is how a business interacts with its customers

Key Partners Key Activities Value Customer Customer

Propositions Relationships Segments
GULF Interstate Construction &
Engineering Engineering Accessibility Training to Firms operating
customers in industrial
Chiyoda Designing Operating in various sector
Corporation of products/services Extensive phone
Japan Electrical & including and email support
Automation technology,
Mitsubishi construction,
Hitachi power manufacturing &
systems(MHPS) financial services
Key Resources Channels
Sargent & Lundy Brand Status
Human resources Websites
Valdel Group Biggest fabrication
Physical resources company in the Social media
And also sectors in form of world pages
including Power, manufacturing
Construction and facilities Advertising
Hydrocarbon
Participation in
conferences

Cost Structure Revenue Streams

Personal service Technology services

Product enhancement Engineering & Construction
Area of sales/marketing Machinery & Industrial products
Cost of goods Sales of its manufactured products
Variable expense Contracts established from provision of service
(5) Existing Strategies
(6) Suggested Strategies
L&Tcan
L&T canfocus
focusononinnovation
innovationtoto
differentiate its products andspend
differentiate its products and spendon on
marketingtotobuild
marketing buildstrong
strongbrand
brand
identification. This will help it retainits
identification. This will help it retain its
customers
customers
It can focus on providing greater quality
in its products. Buyers would choose its
products at a lower price as compared to
substitute products that provide greater
quality but at a higher price
L&T can purchase raw materials from its
suppliers at a low cost. If the costs or
products are not suitable, it can then
switch its suppliers because switching
costs are low
L&T when follows the industry
standards can always prevent wastage of
money and resources. This can help fight
with the rising cost of construction
materials
It should go for more joint ventures
when required to increase the asset base
and get more and more projects and
contracts to increase the revenues
Rising cost of working capital is beyond
the company’s control as it cannot
control the interest rates but it can
always go for cost optimization to reduce
costs of operations
It can have multiple suppliers within its
supply chain. For example, it can have
different suppliers for its different
geographic locations. This way it can
ensure efficiency within its supply chain
L&T needs to build a large customer
base, as the bargaining power of buyers
is weak. It can do this through marketing
efforts aimed at building brand loyalty
It should use the already started foreign
operations to tap on the opportunities
present in the outside market. It should
get more contracts and projects in the
outside markets
L&T should use its reputation and core
competencies to win and complete more
and more projects abroad and thus
gaining the revenues maximized in those
geographies also
The group’s organization structure has to
be overhauled so as to increase the
coordination among the so many
subsidiaries and s of the company
The govt spending more and more on
infrastructure and smart cities. It is the
golden time for the L&T to raise capital
for winning more and more contracts and
using its core competency to earn more
projects and earn revenues.