Silicon Valley of the East: Creating Taiwan's Semiconductor Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Silicon Valley of the East: Creating Taiwan's Semiconductor Industry
A thriving semiconductor industry has been created in Taiwan over the course of the past two decades by the use of advanced organizational techniques of technology leverage and accelerated technology diffusion. By the mid-1990s, the industry had reached a level of output that placed it behind only the United States, Japan, and Korea. Almost all of Taiwan's semiconductor industry is located in the Hsinchu Science-Based Industry Park, which was created in emulation of California's Stanford Research Park, but with more direct government involvement. This article explores the extent to which this emergent Silicon Valley in Taiwan shares the "industrial ecology" that has powered innovation in California and examines the extent to which the Taiwan industry suffers from weaknesses attributed to its rapid creation through technology leverage.
Swot Analysis of "Silicon Valley of the East: Creating Taiwan's Semiconductor Industry" written by John A. Mathews includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Taiwan Semiconductor facing as an external strategic factors. Some of the topics covered in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry case study are - Strategic Management Strategies, Globalization, Research & development and Global Business.
Some of the macro environment factors that can be used to understand the Silicon Valley of the East: Creating Taiwan's Semiconductor Industry casestudy better are - – increasing transportation and logistics costs, wage bills are increasing, supply chains are disrupted by pandemic , there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, technology disruption, etc
Introduction to SWOT Analysis of Silicon Valley of the East: Creating Taiwan's Semiconductor Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Taiwan Semiconductor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Taiwan Semiconductor operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Silicon Valley of the East: Creating Taiwan's Semiconductor Industry can be done for the following purposes –
1. Strategic planning using facts provided in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry case study
2. Improving business portfolio management of Taiwan Semiconductor
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Taiwan Semiconductor
Strengths Silicon Valley of the East: Creating Taiwan's Semiconductor Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Taiwan Semiconductor in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry Harvard Business Review case study are -
High brand equity
– Taiwan Semiconductor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Taiwan Semiconductor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Taiwan Semiconductor has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Taiwan Semiconductor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Taiwan Semiconductor has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Innovation driven organization
– Taiwan Semiconductor is one of the most innovative firm in sector. Manager in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Taiwan Semiconductor is present in almost all the verticals within the industry. This has provided firm in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Taiwan Semiconductor is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Silicon Valley of the East: Creating Taiwan's Semiconductor Industry Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Low bargaining power of suppliers
– Suppliers of Taiwan Semiconductor in the sector have low bargaining power. Silicon Valley of the East: Creating Taiwan's Semiconductor Industry has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Taiwan Semiconductor to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Taiwan Semiconductor has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Taiwan Semiconductor is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by John A. Mathews can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Taiwan Semiconductor has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Silicon Valley of the East: Creating Taiwan's Semiconductor Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Global Business industry
– Silicon Valley of the East: Creating Taiwan's Semiconductor Industry firm has clearly differentiated products in the market place. This has enabled Taiwan Semiconductor to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Taiwan Semiconductor to invest into research and development (R&D) and innovation.
Weaknesses Silicon Valley of the East: Creating Taiwan's Semiconductor Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Silicon Valley of the East: Creating Taiwan's Semiconductor Industry are -
Interest costs
– Compare to the competition, Taiwan Semiconductor has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Taiwan Semiconductor has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry, is just above the industry average. Taiwan Semiconductor needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Need for greater diversity
– Taiwan Semiconductor has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Taiwan Semiconductor supply chain. Even after few cautionary changes mentioned in the HBR case study - Silicon Valley of the East: Creating Taiwan's Semiconductor Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Taiwan Semiconductor vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Silicon Valley of the East: Creating Taiwan's Semiconductor Industry can leverage the sales team experience to cultivate customer relationships as Taiwan Semiconductor is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Taiwan Semiconductor, firm in the HBR case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, John A. Mathews suggests that, Taiwan Semiconductor is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow decision making process
– As mentioned earlier in the report, Taiwan Semiconductor has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Taiwan Semiconductor even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Taiwan Semiconductor products
– To increase the profitability and margins on the products, Taiwan Semiconductor needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry, in the dynamic environment Taiwan Semiconductor has struggled to respond to the nimble upstart competition. Taiwan Semiconductor has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Silicon Valley of the East: Creating Taiwan's Semiconductor Industry | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Taiwan Semiconductor to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Taiwan Semiconductor can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Taiwan Semiconductor can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Taiwan Semiconductor is facing challenges because of the dominance of functional experts in the organization. Silicon Valley of the East: Creating Taiwan's Semiconductor Industry case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Taiwan Semiconductor can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Taiwan Semiconductor can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Taiwan Semiconductor can use these opportunities to build new business models that can help the communities that Taiwan Semiconductor operates in. Secondly it can use opportunities from government spending in Global Business sector.
Building a culture of innovation
– managers at Taiwan Semiconductor can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Taiwan Semiconductor can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Taiwan Semiconductor can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Manufacturing automation
– Taiwan Semiconductor can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Using analytics as competitive advantage
– Taiwan Semiconductor has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Taiwan Semiconductor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Taiwan Semiconductor to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Taiwan Semiconductor to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Taiwan Semiconductor to increase its market reach. Taiwan Semiconductor will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Silicon Valley of the East: Creating Taiwan's Semiconductor Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Taiwan Semiconductor in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Taiwan Semiconductor can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry .
Environmental challenges
– Taiwan Semiconductor needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Taiwan Semiconductor can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Technology acceleration in Forth Industrial Revolution
– Taiwan Semiconductor has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Taiwan Semiconductor needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Taiwan Semiconductor with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Taiwan Semiconductor needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry, Taiwan Semiconductor may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Taiwan Semiconductor will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Taiwan Semiconductor
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Taiwan Semiconductor.
High dependence on third party suppliers
– Taiwan Semiconductor high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Taiwan Semiconductor needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Taiwan Semiconductor business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Silicon Valley of the East: Creating Taiwan's Semiconductor Industry Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Silicon Valley of the East: Creating Taiwan's Semiconductor Industry is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Silicon Valley of the East: Creating Taiwan's Semiconductor Industry is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Taiwan Semiconductor needs to make to build a sustainable competitive advantage.