TerraSem (182690) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for TerraSem (South Korea)
Based on various researches at Oak Spring University , TerraSem is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs,
cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that TerraSem can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the TerraSem, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which TerraSem 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 TerraSem can be done for the following purposes –
1. Strategic planning of TerraSem
2. Improving business portfolio management of TerraSem
3. Assessing feasibility of the new initiative in South Korea
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of TerraSem
Strengths of TerraSem | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of TerraSem are -
Learning organization
- TerraSem 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 TerraSem is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at TerraSem emphasize – knowledge, initiative, and innovation.
Organizational Resilience of TerraSem
– The covid-19 pandemic has put organizational resilience at the centre of everthing TerraSem does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– TerraSem has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. TerraSem 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.
Training and development
– TerraSem 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.
Sustainable margins compare to other players in Semiconductors industry
– TerraSem has clearly differentiated products in the market place. This has enabled TerraSem to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped TerraSem to invest into research and development (R&D) and innovation.
High brand equity
– TerraSem has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled TerraSem to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Semiconductors industry
– TerraSem is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For TerraSem digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. TerraSem 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.
Effective Research and Development (R&D)
– TerraSem has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – TerraSem staying ahead in the Semiconductors industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of TerraSem in the Technology sector have low bargaining power. TerraSem has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps TerraSem to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– TerraSem is one of the most innovative firm in Semiconductors sector.
Superior customer experience
– The customer experience strategy of TerraSem in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of TerraSem | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of TerraSem are -
Interest costs
– Compare to the competition, TerraSem 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.
Products dominated business model
– Even though TerraSem has some of the most successful models in the Semiconductors industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. TerraSem should strive to include more intangible value offerings along with its core products and services.
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at TerraSem 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, TerraSem 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 TerraSem supply chain. Even after few cautionary changes, TerraSem is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left TerraSem vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, TerraSem 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.
High operating costs
– Compare to the competitors, TerraSem 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 TerraSem lucrative customers.
Compensation and incentives
– The revenue per employee of TerraSem is just above the Semiconductors 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.
High cash cycle compare to competitors
TerraSem has a high cash cycle compare to other players in the Semiconductors industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of South Korea, TerraSem needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in South Korea, TerraSem 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 Semiconductors industry.
TerraSem Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of TerraSem are -
Leveraging digital technologies
– TerraSem 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.
Manufacturing automation
– TerraSem can use the latest technology developments to improve its manufacturing and designing process in Semiconductors sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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. TerraSem can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– TerraSem 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.
Learning at scale
– Online learning technologies has now opened space for TerraSem 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for TerraSem in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Semiconductors industry, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Semiconductors industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. TerraSem 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. TerraSem 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.
Building a culture of innovation
– managers at TerraSem 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.
Buying journey improvements
– TerraSem 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.
Use of Bitcoin and other crypto currencies for transactions in Semiconductors industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for TerraSem in the Semiconductors industry. Now TerraSem can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help TerraSem to increase its market reach. TerraSem 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects TerraSem 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, TerraSem 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.
Threats TerraSem External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of TerraSem are -
Environmental challenges
– TerraSem 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. TerraSem can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
High dependence on third party suppliers
– TerraSem 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.
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. TerraSem needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, TerraSem 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 TerraSem 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.
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. TerraSem 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.
Consumer confidence and its impact on TerraSem 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, TerraSem 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.
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 TerraSem in the Semiconductors 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 TerraSem business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– TerraSem 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.
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 TerraSem.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for TerraSem in Semiconductors industry. The Semiconductors 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.
Weighted SWOT Analysis of TerraSem Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at TerraSem 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 TerraSem 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 TerraSem 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 TerraSem 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 TerraSem needs to make to build a sustainable competitive advantage.