Thermax (THMX) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Thermax (India)
Based on various researches at Oak Spring University , Thermax is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Thermax can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Thermax, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Thermax 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 Thermax can be done for the following purposes –
1. Strategic planning of Thermax
2. Improving business portfolio management of Thermax
3. Assessing feasibility of the new initiative in India
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Thermax
Strengths of Thermax | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Thermax are -
Successful track record of launching new products
– Thermax has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Thermax 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.
Strong track record of project management in the Misc. Capital Goods industry
– Thermax is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Thermax 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 Misc. Capital Goods industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Thermax has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Thermax to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Thermax has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Thermax staying ahead in the Misc. Capital Goods industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Misc. Capital Goods industry
– Thermax has clearly differentiated products in the market place. This has enabled Thermax to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped Thermax to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Thermax 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.
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For Thermax digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Thermax 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 Thermax in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Thermax is present in almost all the verticals within the Misc. Capital Goods industry. This has provided Thermax 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.
Training and development
– Thermax has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Thermax is one of the most innovative firm in Misc. Capital Goods sector.
Weaknesses of Thermax | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Thermax are -
Slow to strategic competitive environment developments
– As Thermax is one of the leading players in the Misc. Capital Goods industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Capital Goods industry in last five years.
Products dominated business model
– Even though Thermax has some of the most successful models in the Misc. Capital Goods industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Thermax should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at Thermax, in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. Thermax has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Thermax ‘s star products
– The top 2 products and services of Thermax still accounts for major business revenue. This dependence on star products in Misc. Capital Goods industry has resulted into insufficient focus on developing new products, even though Thermax has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Thermax 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.
Need for greater diversity
– Thermax 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 cash cycle compare to competitors
Thermax has a high cash cycle compare to other players in the Misc. Capital Goods industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Thermax products
– To increase the profitability and margins on the products, Thermax needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Thermax is slow explore the new channels of communication. These new channels of communication can help Thermax to provide better information regarding Misc. Capital Goods products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of India, Thermax needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Thermax needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Capital Goods industry have deep experience in developing customer relationships. Marketing department at Thermax can leverage the sales team experience to cultivate customer relationships as Thermax is planning to shift buying processes online.
Thermax Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Thermax are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Thermax can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Capital Goods industry, but it has also influenced the consumer preferences. Thermax can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Thermax can use these opportunities to build new business models that can help the communities that Thermax operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Leveraging digital technologies
– Thermax 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.
Building a culture of innovation
– managers at Thermax 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 Misc. Capital Goods industry.
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 Thermax 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.
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. Thermax can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Thermax 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.
Creating value in data economy
– The success of analytics program of Thermax has opened avenues for new revenue streams for the organization in Misc. Capital Goods industry. This can help Thermax to build a more holistic ecosystem for Thermax products in the Misc. Capital Goods industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Thermax 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Thermax is facing challenges because of the dominance of functional experts in the organization. Thermax can utilize new technology in the field of Misc. Capital Goods industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Thermax can develop new processes and procedures in Misc. Capital Goods 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.
Manufacturing automation
– Thermax can use the latest technology developments to improve its manufacturing and designing process in Misc. Capital Goods sector. 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.
Threats Thermax External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Thermax are -
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 Thermax business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Thermax may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Misc. Capital Goods sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Thermax.
Environmental challenges
– Thermax 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. Thermax can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
High dependence on third party suppliers
– Thermax 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.
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.
Technology acceleration in Forth Industrial Revolution
– Thermax has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Thermax needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Thermax in Misc. Capital Goods industry. The Misc. Capital Goods 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.
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 Thermax in the Misc. Capital Goods sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Thermax 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 Thermax prominent markets.
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. Thermax 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 Thermax
– 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 Thermax.
Weighted SWOT Analysis of Thermax Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Thermax 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 Thermax 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 Thermax 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 Thermax 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 Thermax needs to make to build a sustainable competitive advantage.