STMicroelectronics (STM) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for STMicroelectronics (Italy)

Based on various researches at Oak Spring University , STMicroelectronics is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, geopolitical disruptions, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, etc

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Introduction to SWOT Analysis of STMicroelectronics

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that STMicroelectronics can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the STMicroelectronics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which STMicroelectronics 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 STMicroelectronics can be done for the following purposes –
1. Strategic planning of STMicroelectronics
2. Improving business portfolio management of STMicroelectronics
3. Assessing feasibility of the new initiative in Italy
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of STMicroelectronics

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

The strengths of STMicroelectronics are -

Strong track record of project management in the Semiconductors industry

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

Ability to recruit top talent

– STMicroelectronics is one of the leading players in the Semiconductors industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.

Ability to lead change in Semiconductors

– STMicroelectronics is one of the leading players in the Semiconductors industry in Italy. Over the years it has not only transformed the business landscape in the Semiconductors industry in Italy but also across the existing markets. The ability to lead change has enabled STMicroelectronics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Diverse revenue streams

– STMicroelectronics is present in almost all the verticals within the Semiconductors industry. This has provided STMicroelectronics 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.

Sustainable margins compare to other players in Semiconductors industry

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

Innovation driven organization

– STMicroelectronics is one of the most innovative firm in Semiconductors sector.

Highly skilled collaborators

– STMicroelectronics has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Semiconductors industry. Secondly the value chain collaborators of STMicroelectronics have helped the firm to develop new products and bring them quickly to the marketplace.

Low bargaining power of suppliers

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

Analytics focus

– STMicroelectronics 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 Semiconductors industry. The technology infrastructure of Italy 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.

Successful track record of launching new products

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

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

Cross disciplinary teams

– Horizontal connected teams at the STMicroelectronics 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.

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

The weaknesses of STMicroelectronics are -

Capital Spending Reduction

– Even during the low interest decade, STMicroelectronics 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 Semiconductors industry using digital technology.

Slow to harness new channels of communication

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

Increasing silos among functional specialists

– The organizational structure of STMicroelectronics is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but STMicroelectronics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help STMicroelectronics to focus more on services in the Semiconductors industry rather than just following the product oriented approach.

Need for greater diversity

– STMicroelectronics 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.

Skills based hiring in Semiconductors industry

– The stress on hiring functional specialists at STMicroelectronics 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.

Workers concerns about automation

– As automation is fast increasing in the Semiconductors industry, STMicroelectronics needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

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 STMicroelectronics supply chain. Even after few cautionary changes, STMicroelectronics is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left STMicroelectronics vulnerable to further global disruptions in South East Asia.

Interest costs

– Compare to the competition, STMicroelectronics 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.

Lack of clear differentiation of STMicroelectronics products

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

High operating costs

– Compare to the competitors, STMicroelectronics has high operating costs in the Semiconductors industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract STMicroelectronics lucrative customers.

Slow decision making process

– As mentioned earlier in the report, STMicroelectronics has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Semiconductors industry over the last five years. STMicroelectronics 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.

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

The opportunities of STMicroelectronics are -

Better consumer reach

– The expansion of the 5G network will help STMicroelectronics to increase its market reach. STMicroelectronics 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.

Developing new processes and practices

– STMicroelectronics can develop new processes and procedures in Semiconductors 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.

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. STMicroelectronics can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Creating value in data economy

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

Using analytics as competitive advantage

– STMicroelectronics has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Semiconductors sector. This continuous investment in analytics has enabled STMicroelectronics to build a competitive advantage using analytics. The analytics driven competitive advantage can help STMicroelectronics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Low interest rates

– Even though inflation is raising its head in most developed economies, STMicroelectronics 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.

Buying journey improvements

– STMicroelectronics can improve the customer journey of consumers in the Semiconductors 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.

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 STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics to hire the very best people irrespective of their geographical location.

Leveraging digital technologies

– STMicroelectronics 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Semiconductors industry, but it has also influenced the consumer preferences. STMicroelectronics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects STMicroelectronics can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Building a culture of innovation

– managers at STMicroelectronics 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 Semiconductors industry.

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

The threats of STMicroelectronics are -

Easy access to finance

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

Stagnating economy with rate increase

– STMicroelectronics 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 Semiconductors 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 STMicroelectronics in the Semiconductors sector and impact the bottomline of the organization.

Shortening product life cycle

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, STMicroelectronics may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Semiconductors sector.

Barriers of entry lowering

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

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.

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

– STMicroelectronics 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 Semiconductors industry regulations.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, STMicroelectronics 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 STMicroelectronics prominent markets.

Increasing wage structure of STMicroelectronics

– 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 STMicroelectronics.

Consumer confidence and its impact on STMicroelectronics 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 Semiconductors industry and other sectors.

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Weighted SWOT Analysis of STMicroelectronics Template, Example

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

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