Hon Hai Precision (2317q) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hon Hai Precision (United Kingdom)
Based on various researches at Oak Spring University , Hon Hai Precision is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing commodity prices, increasing transportation and logistics costs, wage bills are increasing, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
geopolitical disruptions, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Hon Hai Precision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hon Hai Precision can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hon Hai Precision, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hon Hai Precision 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 Hon Hai Precision can be done for the following purposes –
1. Strategic planning of Hon Hai Precision
2. Improving business portfolio management of Hon Hai Precision
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hon Hai Precision
Strengths of Hon Hai Precision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hon Hai Precision are -
Effective Research and Development (R&D)
– Hon Hai Precision has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hon Hai Precision staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Hon Hai Precision
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hon Hai Precision does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Hon Hai Precision has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hon Hai Precision to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Hon Hai Precision 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.
Learning organization
- Hon Hai Precision 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 Hon Hai Precision is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hon Hai Precision emphasize – knowledge, initiative, and innovation.
Analytics focus
– Hon Hai Precision 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 of United Kingdom 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.
Strong track record of project management in the industry
– Hon Hai Precision is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Hon Hai Precision has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Hon Hai Precision have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in industry
– Hon Hai Precision has clearly differentiated products in the market place. This has enabled Hon Hai Precision to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Hon Hai Precision to invest into research and development (R&D) and innovation.
Training and development
– Hon Hai Precision has one of the best training and development program in 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
– Hon Hai Precision is one of the most innovative firm in sector.
Low bargaining power of suppliers
– Suppliers of Hon Hai Precision in the sector have low bargaining power. Hon Hai Precision has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hon Hai Precision to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Hon Hai Precision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hon Hai Precision are -
High dependence on Hon Hai Precision ‘s star products
– The top 2 products and services of Hon Hai Precision still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though Hon Hai Precision has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of Hon Hai Precision is just above the 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.
Skills based hiring in industry
– The stress on hiring functional specialists at Hon Hai Precision 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 decision making process
– As mentioned earlier in the report, Hon Hai Precision 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. Hon Hai Precision 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.
Capital Spending Reduction
– Even during the low interest decade, Hon Hai Precision 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 industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at Hon Hai Precision, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Hon Hai Precision has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Hon Hai Precision is one of the leading players in the industry, it 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.
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 Hon Hai Precision supply chain. Even after few cautionary changes, Hon Hai Precision is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hon Hai Precision vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Hon Hai Precision is dominated by functional specialists. It is not different from other players in the industry, but Hon Hai Precision needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hon Hai Precision to focus more on services in the industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Hon Hai Precision has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hon Hai Precision lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hon Hai Precision is slow explore the new channels of communication. These new channels of communication can help Hon Hai Precision to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Hon Hai Precision Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hon Hai Precision are -
Better consumer reach
– The expansion of the 5G network will help Hon Hai Precision to increase its market reach. Hon Hai Precision 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hon Hai Precision can use these opportunities to build new business models that can help the communities that Hon Hai Precision operates in. Secondly it can use opportunities from government spending in sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hon Hai Precision in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Hon Hai Precision has opened avenues for new revenue streams for the organization in industry. This can help Hon Hai Precision to build a more holistic ecosystem for Hon Hai Precision products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hon Hai Precision 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hon Hai Precision 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 Hon Hai Precision to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hon Hai Precision 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 Hon Hai Precision to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hon Hai Precision can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Hon Hai Precision can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Hon Hai Precision can improve the customer journey of consumers in the 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Hon Hai Precision can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Hon Hai Precision 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.
Learning at scale
– Online learning technologies has now opened space for Hon Hai Precision 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.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hon Hai Precision in the industry. Now Hon Hai Precision can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Hon Hai Precision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hon Hai Precision are -
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.
Stagnating economy with rate increase
– Hon Hai Precision 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 industry.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hon Hai Precision in industry. The 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 Hon Hai Precision 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, Hon Hai Precision may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
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 Hon Hai Precision in the sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Hon Hai Precision is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Hon Hai Precision has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Hon Hai Precision needs to keep up with the evolution of technology in the 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.
High dependence on third party suppliers
– Hon Hai Precision 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.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hon Hai Precision can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hon Hai Precision 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 Hon Hai Precision prominent markets.
Regulatory challenges
– Hon Hai Precision 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 industry regulations.
Weighted SWOT Analysis of Hon Hai Precision Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hon Hai Precision 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 Hon Hai Precision 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 Hon Hai Precision 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 Hon Hai Precision 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 Hon Hai Precision needs to make to build a sustainable competitive advantage.