Aehr Test Systems (AEHR) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Aehr Test Systems (United States)
Based on various researches at Oak Spring University , Aehr Test Systems is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, there is backlash against globalization, technology disruption, there is increasing trade war between United States & China, increasing energy prices, digital marketing is dominated by two big players Facebook and Google,
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%, etc
Introduction to SWOT Analysis of Aehr Test Systems
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aehr Test Systems can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aehr Test Systems, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aehr Test Systems 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 Aehr Test Systems can be done for the following purposes –
1. Strategic planning of Aehr Test Systems
2. Improving business portfolio management of Aehr Test Systems
3. Assessing feasibility of the new initiative in United States
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aehr Test Systems
Strengths of Aehr Test Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aehr Test Systems are -
Diverse revenue streams
– Aehr Test Systems is present in almost all the verticals within the Electronic Instr. & Controls industry. This has provided Aehr Test Systems 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.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– Aehr Test Systems has clearly differentiated products in the market place. This has enabled Aehr Test Systems to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped Aehr Test Systems to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Aehr Test Systems in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Aehr Test Systems is one of the leading players in the Electronic Instr. & Controls industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of Aehr Test Systems 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.
High brand equity
– Aehr Test Systems has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aehr Test Systems to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Aehr Test Systems 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 United States 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.
Digital Transformation in Electronic Instr. & Controls industry
- digital transformation varies from industry to industry. For Aehr Test Systems digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aehr Test Systems 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.
Cross disciplinary teams
– Horizontal connected teams at the Aehr Test Systems 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.
Low bargaining power of suppliers
– Suppliers of Aehr Test Systems in the Technology sector have low bargaining power. Aehr Test Systems has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aehr Test Systems to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Aehr Test Systems 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 Aehr Test Systems is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Aehr Test Systems emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Aehr Test Systems has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aehr Test Systems 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.
Weaknesses of Aehr Test Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aehr Test Systems are -
Workers concerns about automation
– As automation is fast increasing in the Electronic Instr. & Controls industry, Aehr Test Systems 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.
Ability to respond to the competition
– As the decision making is very deliberative at Aehr Test Systems, in the dynamic environment of Electronic Instr. & Controls industry it has struggled to respond to the nimble upstart competition. Aehr Test Systems has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee of Aehr Test Systems 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.
Interest costs
– Compare to the competition, Aehr Test Systems 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.
No frontier risks strategy
– From the 10K / annual statement of Aehr Test Systems, 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.
Need for greater diversity
– Aehr Test Systems 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.
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 Aehr Test Systems supply chain. Even after few cautionary changes, Aehr Test Systems is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aehr Test Systems vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Aehr Test Systems strategy
– From the outside it seems that the employees of Aehr Test Systems don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to strategic competitive environment developments
– As Aehr Test Systems is one of the leading players in the Electronic Instr. & Controls industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Electronic Instr. & Controls industry in last five years.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in United States, Aehr Test Systems 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 Aehr Test Systems ‘s star products
– The top 2 products and services of Aehr Test Systems 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 Aehr Test Systems has relatively successful track record of launching new products.
Aehr Test Systems Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aehr Test Systems are -
Better consumer reach
– The expansion of the 5G network will help Aehr Test Systems to increase its market reach. Aehr Test Systems 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aehr Test Systems 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aehr Test Systems 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 Aehr Test Systems in the Electronic Instr. & Controls industry. Now Aehr Test Systems can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Aehr Test Systems can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls 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.
Learning at scale
– Online learning technologies has now opened space for Aehr Test Systems 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aehr Test Systems is facing challenges because of the dominance of functional experts in the organization. Aehr Test Systems 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.
Loyalty marketing
– Aehr Test Systems 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aehr Test Systems 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 Aehr Test Systems to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Electronic Instr. & Controls industry, but it has also influenced the consumer preferences. Aehr Test Systems can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Electronic Instr. & Controls industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aehr Test Systems 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. Aehr Test Systems 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aehr Test Systems can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Aehr Test Systems 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.
Threats Aehr Test Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aehr Test Systems are -
High dependence on third party suppliers
– Aehr Test Systems 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents Aehr Test Systems 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. Aehr Test Systems 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 Aehr Test Systems 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aehr Test Systems 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 Aehr Test Systems prominent markets.
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. Aehr Test Systems needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
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. Aehr Test Systems can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Aehr Test Systems has witnessed rapid integration of technology during Covid-19 in the Electronic Instr. & Controls industry. As one of the leading players in the industry, Aehr Test Systems 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.
Regulatory challenges
– Aehr Test Systems 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.
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 Aehr Test Systems business can come under increasing regulations regarding data privacy, data security, etc.
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.
Shortening product life cycle
– it is one of the major threat that Aehr Test Systems is facing in Electronic Instr. & Controls sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Aehr Test Systems in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Aehr Test Systems Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aehr Test Systems 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 Aehr Test Systems 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 Aehr Test Systems 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 Aehr Test Systems 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 Aehr Test Systems needs to make to build a sustainable competitive advantage.