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 – technology disruption, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, there is increasing trade war between United States & China,
increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, 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 -
Ability to lead change in Semiconductors
– TerraSem is one of the leading players in the Semiconductors industry in South Korea. Over the years it has not only transformed the business landscape in the Semiconductors industry in South Korea but also across the existing markets. The ability to lead change has enabled TerraSem in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Operational resilience
– The operational resilience strategy of TerraSem comprises – understanding the underlying the factors in the Semiconductors 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.
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.
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.
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.
High switching costs
– The high switching costs that TerraSem 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.
Ability to recruit top talent
– TerraSem is one of the leading players in the Semiconductors industry in South Korea. It is in a position to attract the best talent available in South Korea. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– TerraSem 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 TerraSem have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Slow to strategic competitive environment developments
– As TerraSem is one of the leading players in the Semiconductors industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Semiconductors industry in last five years.
Increasing silos among functional specialists
– The organizational structure of TerraSem is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but TerraSem needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help TerraSem to focus more on services in the Semiconductors industry rather than just following the product oriented approach.
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.
Need for greater diversity
– TerraSem 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.
No frontier risks strategy
– From the 10K / annual statement of TerraSem, it seems that company is thinking out the frontier risks that can impact Semiconductors 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 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.
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.
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.
Lack of clear differentiation of TerraSem products
– To increase the profitability and margins on the products, TerraSem needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
TerraSem Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of TerraSem are -
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, TerraSem can use these opportunities to build new business models that can help the communities that TerraSem operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
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.
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. TerraSem can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– TerraSem 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 TerraSem to build a competitive advantage using analytics. The analytics driven competitive advantage can help TerraSem to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– TerraSem 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.
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.
Creating value in data economy
– The success of analytics program of TerraSem has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help TerraSem to build a more holistic ecosystem for TerraSem products in the Semiconductors industry by providing – data insight services, data privacy related products, data based consulting services, 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. TerraSem can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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 TerraSem 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.
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.
Threats TerraSem External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of TerraSem are -
Stagnating economy with rate increase
– TerraSem 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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents TerraSem with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
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. TerraSem can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Shortening product life cycle
– it is one of the major threat that TerraSem is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– TerraSem has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, TerraSem needs to keep up with the evolution of technology in the Semiconductors 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.
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.
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.