Introduction
LSB Industries, Inc. is among the leading companies in the sector and has maintained a strategic position in the market. The company was established in 1968 in Oklahoma as Oklahoma Corporation before it became a Delaware corporation in 1977. The company’s business includes the manufacture and marketing of chemical products for various uses such as agricultural, industrial, and mining applications (Cazier et al. 110). The firm owns various facilities in El Dorado, Cherokee, Alabama, and Pryor. The main channel of selling is through distributors and direct sales to customers within the United States. LSB Industries, Inc. started from an Oklahoma City firm established in 1946. The organization started upgrading bearing after the military’s confiscation during World War II, leaving intense destruction to the high-demand item.
LSB Industries SWOT Analysis
Strengths
The company has been successful in using mergers and acquisitions to integrate complementary businesses. Integrating various technology companies has helped the company to streamline its operations (Isaksson et al. 123). The firm has reliable suppliers with a strong base hence overcomes any supply chain hindrances. The business also has an effective customer relationship that satisfies customers while also creating good brand equity among the prospective consumers. The firm also enjoys a robust free cash flow that provides resources for expansion into new projects. Having a solid brand portfolio has also been essential for the organization’s intention to broaden into new product types.
Weaknesses
The company has various areas where it needs to improve to develop its competitive advantage. The company’s day’s inventory is high compared to the rivals in the market. Therefore, the need to raise more capital for investing in the channel would facilitate LSB Industries. The company should consider allocating more financial resources to the adoption of new advanced technological solutions to cope with its rapid expansion and expand into potential unexploited markets.
Opportunities
There are several potential opportunities the company can exploit to gain completive advantages and more market growth. Notably, the United States government has entered liberal agreements that encourage free trade and innovation in the technology industry. LSB Industries can capitalize on these opportunities to penetrate emerging markets. The company can also use stable free cash flow to invest in new product divisions and invest in new technologies. Investment in the online platforms has attracted new consumers from these channels and hence opened new sales channels.
Threats
The company faces threats from new technologies of the rivals in the market, which is likely to affect the company long term. LSB Industries, Inc. faces the problem of inadequate and unreliable supply of innovative products. This challenge can cause fluctuations in the number of sales over a given time frame (Bonfante et al. 110616). Despite producing highly profitable products, the demand is uncertain and likely to impact profitability in unlikely incidences during the peak periods.
Customers in LSB Industries, Inc.
The company’s customers have recorded an increase in their revenue cost by 6.67% at the end of the year 2020, with the corresponding revenue cost also increasing by 66.95%. The increase in fertilizer demand is the determinant of the number of customers for the organization. The company sells most of its agricultural products at the current instant market price. Customers for industrial and mining products purchase our products depending on energy prices, and large customers who sign contractual agreements with the firm.
Industry Business Ratios
The primary business activity is industrial inorganic chemicals. LSB Industries Inc. Analysis of the leading financial ratios of the firm with averages for all US industry divisions shows a worse position than that of other rivals listed with the US Securities and Exchange Commission. LSB Industries, Inc.’s revenue reduced by 4% to $351.3 million, while the net loss to the common stockholders increased by 3% to $99.4 million. The decrease in revenue implies a drop in demand for the firm’s product and services due to an unsuitable market environment. The company’s upper net loss shows interest cost, a net rise of 10% to $51.1M and a nonoperating reduction from $1.1M income to $10K of expenses.
Strategies to Adapt to the COVID-19 Pandemic
The current uncertainty in the business environment has necessitated the decision to control costs and uphold liquidity till the situation stabilizes. The company has spotted an integration of firm costs and SG&A for deferment for the coming three months. The combination can also be deferred for a more extended period depending on the duration of the COVID-19 pandemic (Donthu, Naveen, & Anders). The organization has postponed between $5 million and $6 million of capital costs that are not associated with environmental and safety funds until the fourth quarter of the year (Kalaichelvi 8).
The combination of cost reductions, capital preservation initiatives, and enhanced performance can effectively combat the adverse effects of the pandemic. The profits for the business for the financial year 2020 have decreased by 40%. The reliance on one market has led to the overall drop in revenue due to the lack of an alternative market with better economic relief measures during the pandemic than our existing market.
Therefore, the company analyzed the situation and all the possible intervention measures to promote the sustainability of the business. Expanding our business and making entry into new markets that have yet to experience LSB industries’ products is the most suitable and relevant approach to sustain profitability. The strategy would require several activities for effective implementation, and this includes recruitment of new workers, training, and establishes measures that would enable operation during the pandemic. The South Americans have limited access to products that are similar to ours, and hence making an entry in such areas would potentially pay off. Implementing this expansion strategy requires $500000 to be successful, yet the company’s funds are tight and hence require an external source of funding for the project.
Works Cited
Bonfante, Mariele Canal, et al. “Achieving Sustainable Development Goals in rare earth magnets production: A review on state of the art and SWOT analysis.” Renewable and Sustainable Energy Reviews, vol. 137, 2021, pp. 110616. Web.
Cazier, Richard A., and Ray J. Pfeiffer. “10-K Disclosure Repetition and Managerial Reporting Incentives.” Journal of Financial Reporting, vol. 2, no.1, 2017, pp. 107-131. Web.
Donthu, Naveen, and Anders Gustafsson. “Effects of COVID-19 on business and research.” Journal of Business Research, vol. 117, 2020, pp. 284-289. Web.
Kalaichelvi, V., et al. “A stable image steganography: a novel approach based on modified RSA algorithm and 2–4 least significant bit (LSB) technique.” Journal of Ambient Intelligence and Humanized Computing, 2020, pp. 1-9. Web.
Isaksson, Alf J., et al. “The impact of digitalization on the future of control and operations.” Computers & Chemical Engineering, vol. 114, 2018, pp. 122-129. Web.