Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy
After fifty-five years in the semiconductor industry, Morris Chang, founder and Chairman of Taiwan Semiconductor Manufacturing Company (TSMC), was seeing a change. After four decades of regular double-digit growth the industry was still growing-but now at a much slower pace. In 2004, TSMC entered the China market, the world's second largest for semiconductors, by building a fabrication plant in Shanghai. Was China the market opportunity which TSMC could bet on for expansion, or should its strategy be to focus on new product development and innovation?
Authors :: Michael Shih-ta Chen, William C. Kirby, Keith Wong
Swot Analysis of "Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy" written by Michael Shih-ta Chen, William C. Kirby, Keith Wong includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tsmc Semiconductor facing as an external strategic factors. Some of the topics covered in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy case study are - Strategic Management Strategies, Global strategy, Globalization, Policy and Global Business.
Some of the macro environment factors that can be used to understand the Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy casestudy better are - – increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings,
technology disruption, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tsmc Semiconductor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tsmc 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy case study
2. Improving business portfolio management of Tsmc 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 Tsmc Semiconductor
Strengths Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tsmc Semiconductor in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy Harvard Business Review case study are -
Effective Research and Development (R&D)
– Tsmc Semiconductor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Tsmc Semiconductor are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Training and development
– Tsmc Semiconductor has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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.
Diverse revenue streams
– Tsmc Semiconductor is present in almost all the verticals within the industry. This has provided firm in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Tsmc Semiconductor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tsmc 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.
Superior customer experience
– The customer experience strategy of Tsmc Semiconductor in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Tsmc Semiconductor has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tsmc Semiconductor has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Tsmc Semiconductor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tsmc Semiconductor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Tsmc 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 Michael Shih-ta Chen, William C. Kirby, Keith Wong 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.
Sustainable margins compare to other players in Global Business industry
– Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy firm has clearly differentiated products in the market place. This has enabled Tsmc Semiconductor to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Tsmc Semiconductor to invest into research and development (R&D) and innovation.
Learning organization
- Tsmc Semiconductor is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Tsmc Semiconductor is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Tsmc Semiconductor
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tsmc Semiconductor does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy are -
High operating costs
– Compare to the competitors, firm in the HBR case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Tsmc Semiconductor 's lucrative customers.
Slow to strategic competitive environment developments
– As Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy HBR case study mentions - Tsmc Semiconductor takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Skills based hiring
– The stress on hiring functional specialists at Tsmc Semiconductor has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tsmc Semiconductor is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Tsmc 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Tsmc Semiconductor has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Tsmc Semiconductor, firm in the HBR case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Tsmc Semiconductor has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy, is just above the industry average. Tsmc 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.
Slow decision making process
– As mentioned earlier in the report, Tsmc 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. Tsmc 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy, in the dynamic environment Tsmc Semiconductor has struggled to respond to the nimble upstart competition. Tsmc Semiconductor has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy | 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy are -
Buying journey improvements
– Tsmc Semiconductor can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Tsmc Semiconductor to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Tsmc Semiconductor has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, 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. Tsmc Semiconductor can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Tsmc Semiconductor can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Tsmc 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tsmc Semiconductor can use these opportunities to build new business models that can help the communities that Tsmc Semiconductor operates in. Secondly it can use opportunities from government spending in Global Business sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tsmc Semiconductor can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tsmc Semiconductor is facing challenges because of the dominance of functional experts in the organization. Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tsmc 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 Tsmc Semiconductor to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Tsmc 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.
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 Tsmc 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.
Using analytics as competitive advantage
– Tsmc 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tsmc Semiconductor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy are -
Consumer confidence and its impact on Tsmc Semiconductor demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Tsmc Semiconductor is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Tsmc 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.
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. Tsmc 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.
High dependence on third party suppliers
– Tsmc 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy, Tsmc 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 .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Tsmc Semiconductor in the Global Business sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tsmc 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.
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 Tsmc Semiconductor business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tsmc 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy .
Stagnating economy with rate increase
– Tsmc Semiconductor can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Environmental challenges
– Tsmc 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. Tsmc Semiconductor can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tsmc Semiconductor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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 Taiwan Semiconductor Manufacturing Company Limited: A Global Company's China Strategy 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 Tsmc Semiconductor needs to make to build a sustainable competitive advantage.
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