SWOT Analysis / TOWS Matrix for Advantest Corp. (Japan)
Based on various researches at Oak Spring University , Advantest Corp. is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Advantest Corp. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Advantest Corp., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Advantest Corp. 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 Advantest Corp. can be done for the following purposes –
1. Strategic planning of Advantest Corp.
2. Improving business portfolio management of Advantest Corp.
3. Assessing feasibility of the new initiative in Japan
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Advantest Corp.
Strengths of Advantest Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Advantest Corp. are -
Digital Transformation in Electronic Instr. & Controls industry
- digital transformation varies from industry to industry. For Advantest Corp. digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Advantest Corp. 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.
Ability to lead change in Electronic Instr. & Controls
– Advantest Corp. is one of the leading players in the Electronic Instr. & Controls industry in Japan. Over the years it has not only transformed the business landscape in the Electronic Instr. & Controls industry in Japan but also across the existing markets. The ability to lead change has enabled Advantest Corp. in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Advantest Corp. has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Advantest Corp. staying ahead in the Electronic Instr. & Controls 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 Advantest Corp. 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
– Advantest Corp. 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.
Analytics focus
– Advantest Corp. 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 Electronic Instr. & Controls industry. The technology infrastructure of Japan 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.
Operational resilience
– The operational resilience strategy of Advantest Corp. comprises – understanding the underlying the factors in the Electronic Instr. & Controls industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– Advantest Corp. has clearly differentiated products in the market place. This has enabled Advantest Corp. to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped Advantest Corp. to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Advantest Corp. has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electronic Instr. & Controls industry. Secondly the value chain collaborators of Advantest Corp. have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Advantest Corp. has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Advantest Corp. 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.
Innovation driven organization
– Advantest Corp. is one of the most innovative firm in Electronic Instr. & Controls sector.
High switching costs
– The high switching costs that Advantest Corp. 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.
Weaknesses of Advantest Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Advantest Corp. are -
No frontier risks strategy
– From the 10K / annual statement of Advantest Corp., it seems that company is thinking out the frontier risks that can impact Electronic Instr. & Controls 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.
Capital Spending Reduction
– Even during the low interest decade, Advantest Corp. 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 Electronic Instr. & Controls industry using digital technology.
Compensation and incentives
– The revenue per employee of Advantest Corp. is just above the Electronic Instr. & Controls industry average. It 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.
Ability to respond to the competition
– As the decision making is very deliberative at Advantest Corp., in the dynamic environment of Electronic Instr. & Controls industry it has struggled to respond to the nimble upstart competition. Advantest Corp. has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, Advantest Corp. has high operating costs in the Electronic Instr. & Controls industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Advantest Corp. lucrative customers.
High dependence on Advantest Corp. ‘s star products
– The top 2 products and services of Advantest Corp. still accounts for major business revenue. This dependence on star products in Electronic Instr. & Controls industry has resulted into insufficient focus on developing new products, even though Advantest Corp. has relatively successful track record of launching new products.
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 Advantest Corp. supply chain. Even after few cautionary changes, Advantest Corp. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Advantest Corp. vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in Japan, Advantest Corp. is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Electronic Instr. & Controls industry.
Increasing silos among functional specialists
– The organizational structure of Advantest Corp. is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but Advantest Corp. needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Advantest Corp. to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Japan, Advantest Corp. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Advantest Corp. 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.
Advantest Corp. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Advantest Corp. are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Advantest Corp. can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Advantest Corp. 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 Advantest Corp. to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Advantest Corp. has opened avenues for new revenue streams for the organization in Electronic Instr. & Controls industry. This can help Advantest Corp. to build a more holistic ecosystem for Advantest Corp. products in the Electronic Instr. & Controls industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Advantest Corp. can improve the customer journey of consumers in the Electronic Instr. & Controls 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Advantest Corp. in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electronic Instr. & Controls industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Advantest Corp. 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Advantest Corp. can use these opportunities to build new business models that can help the communities that Advantest Corp. operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Advantest Corp. is facing challenges because of the dominance of functional experts in the organization. Advantest Corp. can utilize new technology in the field of Electronic Instr. & Controls industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Advantest Corp. has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electronic Instr. & Controls sector. This continuous investment in analytics has enabled Advantest Corp. to build a competitive advantage using analytics. The analytics driven competitive advantage can help Advantest Corp. 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, Advantest Corp. 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.
Developing new processes and practices
– Advantest Corp. can develop new processes and procedures in Electronic Instr. & Controls 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.
Leveraging digital technologies
– Advantest Corp. 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.
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 Advantest Corp. 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.
Threats Advantest Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Advantest Corp. are -
Environmental challenges
– Advantest Corp. 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. Advantest Corp. can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
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 Advantest Corp. business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Advantest Corp. 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 Electronic Instr. & Controls industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents Advantest Corp. with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electronic Instr. & Controls sector.
Increasing wage structure of Advantest Corp.
– 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 Advantest Corp..
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Advantest Corp. 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 Advantest Corp. prominent markets.
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.
Easy access to finance
– Easy access to finance in Electronic Instr. & Controls industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Advantest Corp. can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Advantest Corp. 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.
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 Advantest Corp. in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
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 Advantest Corp..
Technology acceleration in Forth Industrial Revolution
– Advantest Corp. has witnessed rapid integration of technology during Covid-19 in the Electronic Instr. & Controls industry. As one of the leading players in the industry, Advantest Corp. needs to keep up with the evolution of technology in the Electronic Instr. & Controls 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Advantest Corp. may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
Weighted SWOT Analysis of Advantest Corp. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Advantest Corp. 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 Advantest Corp. 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 Advantest Corp. 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 Advantest Corp. 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 Advantest Corp. needs to make to build a sustainable competitive advantage.