Avatec (149950) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Avatec (South Korea)
Based on various researches at Oak Spring University , Avatec is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing commodity prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Avatec can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Avatec, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Avatec 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 Avatec can be done for the following purposes –
1. Strategic planning of Avatec
2. Improving business portfolio management of Avatec
3. Assessing feasibility of the new initiative in South Korea
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Avatec
Strengths of Avatec | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Avatec are -
Effective Research and Development (R&D)
– Avatec has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Avatec 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.
Strong track record of project management in the Electronic Instr. & Controls industry
– Avatec is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Avatec in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Avatec 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.
Successful track record of launching new products
– Avatec has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Avatec 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
– Avatec is one of the most innovative firm in Electronic Instr. & Controls sector.
Diverse revenue streams
– Avatec is present in almost all the verticals within the Electronic Instr. & Controls industry. This has provided Avatec 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.
Ability to lead change in Electronic Instr. & Controls
– Avatec is one of the leading players in the Electronic Instr. & Controls industry in South Korea. Over the years it has not only transformed the business landscape in the Electronic Instr. & Controls industry in South Korea but also across the existing markets. The ability to lead change has enabled Avatec in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Avatec 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.
Highly skilled collaborators
– Avatec 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 Avatec have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Avatec has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Avatec to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Avatec in the Technology sector have low bargaining power. Avatec has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Avatec to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Avatec | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Avatec are -
Capital Spending Reduction
– Even during the low interest decade, Avatec 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.
High cash cycle compare to competitors
Avatec has a high cash cycle compare to other players in the Electronic Instr. & Controls industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Avatec, 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.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in South Korea, Avatec 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.
High dependence on Avatec ‘s star products
– The top 2 products and services of Avatec 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 Avatec has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Electronic Instr. & Controls industry, Avatec 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.
Lack of clear differentiation of Avatec products
– To increase the profitability and margins on the products, Avatec needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of South Korea, Avatec needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Avatec 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.
Products dominated business model
– Even though Avatec has some of the most successful models in the Electronic Instr. & Controls industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Avatec should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Electronic Instr. & Controls industry
– The stress on hiring functional specialists at Avatec 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.
Avatec Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Avatec are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Avatec 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 Avatec to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Avatec 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 Avatec to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Avatec is facing challenges because of the dominance of functional experts in the organization. Avatec 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Avatec can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Avatec 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, Avatec can use these opportunities to build new business models that can help the communities that Avatec operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
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. Avatec can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Avatec 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 Avatec 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.
Developing new processes and practices
– Avatec 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Avatec 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.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Avatec in the Electronic Instr. & Controls industry. Now Avatec can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Avatec 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.
Threats Avatec External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Avatec are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents Avatec 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.
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. Avatec 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.
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 Avatec business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Avatec in Electronic Instr. & Controls industry. The Electronic Instr. & Controls 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.
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. Avatec can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Avatec needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Avatec 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.
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.
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 Avatec in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Avatec 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 Avatec prominent markets.
Regulatory challenges
– Avatec 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 Electronic Instr. & Controls industry regulations.
Consumer confidence and its impact on Avatec 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 Electronic Instr. & Controls industry and other sectors.
Environmental challenges
– Avatec 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. Avatec can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
Weighted SWOT Analysis of Avatec Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Avatec 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 Avatec 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 Avatec 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 Avatec 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 Avatec needs to make to build a sustainable competitive advantage.
