All companies, regardless of industry, need to analyze their internal and external environment. This allows them to develop a more comprehensive marketing strategy and modify it according to demand and new trends, which are now constantly changing with the rise of the internet and social networks, not to mention the competition that is amplifying each year.
Definition of LCAG matrix
The LCAG Matrix was founded in 1965 by Edmund Learned, Roland Christensen, Kenneth Andrews and William Guth. It complements the SWOT matrix, and as such, makes it possible to analyze the internal and external diagnosis of companies, highlighting their strengths and weaknesses (internal diagnosis) and opportunities and threats (external diagnosis). It is supplemented by the societal and managerial values of the companies in question. The LCAG model is to date one of the oldest analytical models for the strategic approach of the company.
Explanations of the LCAG matrix
Along with the SWOT analysis, the LCAG matrix is the only expertise to integrate both internal and external diagnosis, and therefore to understand the entire environment of a group. The internal diagnosis deals with all the characteristics within the organization itself, which are perceived as either strengths or weaknesses for the success of the strategic objective. Thus, we speak of strengths to designate everything that is actually owned or acquired by the company, financial resources, experience or even know-how. Weaknesses are, on the contrary, all that it lacks compared to the competition to succeed in achieving the set goals.
External diagnosis refers to anything that affects the business environment, and that can have positive or negative repercussions on its activity. So opportunities are all the characteristics that can improve its development, such as the discovery of new products or the emergence of new markets. This is about the potential that a group can benefit from at any given time. Threats, on the other hand, are the elements of the environment that can hinder the development of society, such as competition.
Once these internal and external elements have been highlighted and listed, the LCAG matrix reinforces the analysis by dealing with the assessment of options for action. What are the advantages and disadvantages, for what results, and finally, what compatibilities and incompatibilities can there be with the organization of the company?
Finally, the external analysis will be supplemented by environmental values and internal analysis by societal and managerial values.
In order to illustrate this theoretical explanation, we will take the Chanel company as an example.
LCAG matrix example - Chanel
Internal analysis of the company
Forces
Chanel is a company specializing in the luxury sector which has a great reputation around the world. Luxury is one of the most important sectors for the country's economy, especially since, like Chanel, a large number of brands are of French origin. They attract a large number of tourists from all over the world every year. Chanel also owns a large number of different brands and ranges, all focused on luxury or ultra-luxury. The same goes for partnerships, which in turn increase the reputation or figures of the group. Chanel also offers a large amount of innovation each season, which is a way to retain customers. Overall satisfaction rates are very good, above 85%, which continues to improve the dynamism as well as the brand image of the company. It also has fairly large cash flows, which are attractive in the event of a crisis. Note also that the staff is highly qualified, regardless of the field of activity. The company is generally very well evaluated by its employees, which is all the more important today for the group's notoriety and its credibility. It has a number of values and ethics in line with consumer expectations. These values are followed and respected by suppliers, which further improves the image of the company.
Weaknesses
Chanel is one of those companies that must pay particular attention to research and development, and especially to everything related to technological innovations. Indeed, technology is taking an increasingly important place in the lives of consumers, even in the luxury sector. Many opportunities may have been missed in the past due to less successful technological development than those of the competition. In addition, Chanel must also be careful to regularly develop new ranges to interest consumers and diversify to cope with increasingly tough competition. The company has also struggled to integrate new cultures for many years, which in this case too is lagging behind the competition, whether existing or that made up of new entrants.
The health crisis has also impacted the group’s results, with a turnover that fell by 18% in 2020.
Societal and managerial values
Chanel is part of a group that manages by values, which allows it to have employees who are more motivated and more involved in the group’s goals. For the company, creating real societal and managerial values increases its notoriety and gives more meaning to the very action of the company. In addition, team cohesion is something that takes precedence over the rest because it makes it possible to better manage the modes of collaboration as well as the course of conduct of each and which must be respected by all. This gives the group a real mark of identity and makes consumers' attachment even more evident.
External analysis of the company
Opportunities
The world of luxury and all the more so, French brands, attract new customers every year, in all countries and especially in emerging markets such as China, in particular, which has seen its luxury consumption double in the space of a few years.
Other opportunities come into play, such as e-commerce, which is attracting many customers and whose numbers are steadily increasing. In addition, the group's presence on the Internet and, more particularly, on social networks influence Internet users and allows Chanel to maintain constant interaction with consumers, thus better understanding their expectations and their needs.
New purchasing trends and increased spending in the luxury sector are enabling the group to renew itself and face the health crisis.
Threats
The main threats to the Chanel group are competition and counterfeiting. The first is made up of all the biggest luxury houses, such as Dior or LVMH. The second is a scourge that is raging around the world, but it would seem, however, that counterfeits are even more present on the Asian continent.
The health crisis has also acted as an external threat, it has had a major impact on the group's figures since its appearance.
Environmental values
One of the main strengths of the Chanel group remains the environmental values that govern the brand and which are increasingly important in the purchasing criteria of consumers. Chanel attaches particular importance to the protection of the environment, with the implementation of concrete actions aimed at making a large number of savings on paper and even on energy. The luxury house is also fighting the adverse effects of global warming, funding operations and helping more vulnerable communities adapt to these changes.
The LCAG matrix, therefore, has the advantage of dealing with both the external and internal domain, which allows the company or brand in question to have a more global view of its situation at a given moment. Whether applied to a simple or complex situation, the LCAG model also makes it possible to give a rather relevant vision of reality and to have different axes of progression.
Be careful, however, since the analysis does not take into account all the long-term organizational difficulties or even individual issues or anything that leads to the decision-making process. It must, therefore, be supplemented by other analyses such as PESTEL, the BCG matrix, or even Porter's forces.