Elbit Systems (ESLT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Elbit Systems (Israel)

Based on various researches at Oak Spring University , Elbit Systems is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , wage bills are increasing, etc

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Introduction to SWOT Analysis of Elbit Systems

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Elbit Systems can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Elbit Systems, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Elbit Systems 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Elbit Systems can be done for the following purposes –
1. Strategic planning of Elbit Systems
2. Improving business portfolio management of Elbit Systems
3. Assessing feasibility of the new initiative in Israel
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Elbit Systems

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Strengths of Elbit Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Elbit Systems are -

Organizational Resilience of Elbit Systems

– The covid-19 pandemic has put organizational resilience at the centre of everthing Elbit Systems does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Sustainable margins compare to other players in Communications Equipment industry

– Elbit Systems has clearly differentiated products in the market place. This has enabled Elbit Systems to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped Elbit Systems to invest into research and development (R&D) and innovation.

Superior customer experience

– The customer experience strategy of Elbit Systems in Communications Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Successful track record of launching new products

– Elbit Systems has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Elbit Systems 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.

Low bargaining power of suppliers

– Suppliers of Elbit Systems in the Technology sector have low bargaining power. Elbit Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Elbit Systems to manage not only supply disruptions but also source products at highly competitive prices.

Learning organization

- Elbit Systems 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 Elbit Systems is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Elbit Systems emphasize – knowledge, initiative, and innovation.

High brand equity

– Elbit Systems has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Elbit Systems to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Training and development

– Elbit Systems has one of the best training and development program in Technology 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.

High switching costs

– The high switching costs that Elbit Systems 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.

Ability to recruit top talent

– Elbit Systems is one of the leading players in the Communications Equipment industry in Israel. It is in a position to attract the best talent available in Israel. The firm has a robust talent identification program that helps in identifying the brightest.

Strong track record of project management in the Communications Equipment industry

– Elbit Systems is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Effective Research and Development (R&D)

– Elbit Systems has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Elbit Systems staying ahead in the Communications Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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Weaknesses of Elbit Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Elbit Systems are -

High cash cycle compare to competitors

Elbit Systems has a high cash cycle compare to other players in the Communications Equipment 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 Elbit Systems products

– To increase the profitability and margins on the products, Elbit Systems needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow to strategic competitive environment developments

– As Elbit Systems is one of the leading players in the Communications Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Communications Equipment industry in last five years.

Capital Spending Reduction

– Even during the low interest decade, Elbit Systems has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Communications Equipment industry using digital technology.

Ability to respond to the competition

– As the decision making is very deliberative at Elbit Systems, in the dynamic environment of Communications Equipment industry it has struggled to respond to the nimble upstart competition. Elbit Systems has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Interest costs

– Compare to the competition, Elbit Systems 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.

Employees’ less understanding of Elbit Systems strategy

– From the outside it seems that the employees of Elbit Systems don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

No frontier risks strategy

– From the 10K / annual statement of Elbit Systems, it seems that company is thinking out the frontier risks that can impact Communications Equipment industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Elbit Systems is slow explore the new channels of communication. These new channels of communication can help Elbit Systems to provide better information regarding Communications Equipment products and services. It can also build an online community to further reach out to potential customers.

Products dominated business model

– Even though Elbit Systems has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Elbit Systems should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– Elbit Systems 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.

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Elbit Systems Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Elbit Systems are -

Creating value in data economy

– The success of analytics program of Elbit Systems has opened avenues for new revenue streams for the organization in Communications Equipment industry. This can help Elbit Systems to build a more holistic ecosystem for Elbit Systems products in the Communications Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Use of Bitcoin and other crypto currencies for transactions in Communications Equipment industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Elbit Systems in the Communications Equipment industry. Now Elbit Systems can target international markets with far fewer capital restrictions requirements than the existing system.

Leveraging digital technologies

– Elbit Systems 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Elbit Systems 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 Elbit Systems to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Learning at scale

– Online learning technologies has now opened space for Elbit Systems 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.

Building a culture of innovation

– managers at Elbit Systems 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 Communications Equipment industry.

Buying journey improvements

– Elbit Systems can improve the customer journey of consumers in the Communications Equipment industry by using analytics and artificial intelligence. It 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.

Loyalty marketing

– Elbit Systems 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, Elbit Systems is facing challenges because of the dominance of functional experts in the organization. Elbit Systems can utilize new technology in the field of Communications Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Low interest rates

– Even though inflation is raising its head in most developed economies, Elbit Systems can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Elbit Systems can use these opportunities to build new business models that can help the communities that Elbit Systems operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.

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 Elbit Systems 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Elbit Systems 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 Elbit Systems to hire the very best people irrespective of their geographical location.

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Threats Elbit Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Elbit Systems are -

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. Elbit Systems 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.

Regulatory challenges

– Elbit Systems 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 Communications Equipment industry regulations.

Stagnating economy with rate increase

– Elbit Systems 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 Communications Equipment industry.

Increasing wage structure of Elbit Systems

– 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 Elbit Systems.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents Elbit Systems with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.

Technology acceleration in Forth Industrial Revolution

– Elbit Systems has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, Elbit Systems needs to keep up with the evolution of technology in the Communications Equipment 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.

Shortening product life cycle

– it is one of the major threat that Elbit Systems is facing in Communications Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Environmental challenges

– Elbit Systems 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. Elbit Systems can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.

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 Elbit Systems in the Communications Equipment sector and impact the bottomline of the organization.

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 Elbit Systems business can come under increasing regulations regarding data privacy, data security, etc.

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. Elbit Systems needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.

Easy access to finance

– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Elbit Systems can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of Elbit Systems Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Elbit Systems 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 Elbit Systems 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 Elbit Systems 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 Elbit Systems 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 Elbit Systems needs to make to build a sustainable competitive advantage.

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