Advanced Energy (AEIS) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Advanced Energy (United States)
Based on various researches at Oak Spring University , Advanced Energy is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing transportation and logistics costs,
increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Advanced Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Advanced Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Advanced Energy 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 Advanced Energy can be done for the following purposes –
1. Strategic planning of Advanced Energy
2. Improving business portfolio management of Advanced Energy
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 Advanced Energy
Strengths of Advanced Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Advanced Energy are -
Superior customer experience
– The customer experience strategy of Advanced Energy in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Advanced Energy 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 Advanced Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Advanced Energy emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Advanced Energy 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 Advanced Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Advanced Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Advanced Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Electronic Instr. & Controls
– Advanced Energy is one of the leading players in the Electronic Instr. & Controls industry in United States. Over the years it has not only transformed the business landscape in the Electronic Instr. & Controls industry in United States but also across the existing markets. The ability to lead change has enabled Advanced Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Advanced Energy 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.
High switching costs
– The high switching costs that Advanced Energy 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.
Strong track record of project management in the Electronic Instr. & Controls industry
– Advanced Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Advanced Energy 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.
Low bargaining power of suppliers
– Suppliers of Advanced Energy in the Technology sector have low bargaining power. Advanced Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Advanced Energy to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– Advanced Energy has clearly differentiated products in the market place. This has enabled Advanced Energy to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped Advanced Energy to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Advanced Energy is present in almost all the verticals within the Electronic Instr. & Controls industry. This has provided Advanced Energy 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.
Weaknesses of Advanced Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Advanced Energy are -
Capital Spending Reduction
– Even during the low interest decade, Advanced Energy 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
Advanced Energy 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.
Increasing silos among functional specialists
– The organizational structure of Advanced Energy is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but Advanced Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Advanced Energy to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Advanced Energy 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.
Ability to respond to the competition
– As the decision making is very deliberative at Advanced Energy, in the dynamic environment of Electronic Instr. & Controls industry it has struggled to respond to the nimble upstart competition. Advanced Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Advanced Energy strategy
– From the outside it seems that the employees of Advanced Energy 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.
Aligning sales with marketing
– From the outside it seems that Advanced Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Electronic Instr. & Controls industry have deep experience in developing customer relationships. Marketing department at Advanced Energy can leverage the sales team experience to cultivate customer relationships as Advanced Energy is planning to shift buying processes online.
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 Advanced Energy supply chain. Even after few cautionary changes, Advanced Energy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Advanced Energy vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Advanced Energy 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.
Low market penetration in new markets
– Outside its home market of United States, Advanced Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Advanced Energy 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.
Advanced Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Advanced Energy are -
Buying journey improvements
– Advanced Energy 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Advanced Energy 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.
Manufacturing automation
– Advanced Energy 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.
Leveraging digital technologies
– Advanced Energy 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Advanced Energy 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 Advanced Energy to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Advanced Energy 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.
Creating value in data economy
– The success of analytics program of Advanced Energy has opened avenues for new revenue streams for the organization in Electronic Instr. & Controls industry. This can help Advanced Energy to build a more holistic ecosystem for Advanced Energy products in the Electronic Instr. & Controls industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Advanced Energy 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 Advanced Energy to hire the very best people irrespective of their geographical location.
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. Advanced Energy 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. Advanced Energy 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.
Developing new processes and practices
– Advanced Energy 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.
Learning at scale
– Online learning technologies has now opened space for Advanced Energy 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Advanced Energy can use these opportunities to build new business models that can help the communities that Advanced Energy operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
Using analytics as competitive advantage
– Advanced Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electronic Instr. & Controls sector. This continuous investment in analytics has enabled Advanced Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Advanced Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Advanced Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Advanced Energy are -
High dependence on third party suppliers
– Advanced Energy 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.
Shortening product life cycle
– it is one of the major threat that Advanced Energy is facing in Electronic Instr. & Controls sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Advanced Energy business can come under increasing regulations regarding data privacy, data security, etc.
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. Advanced Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Advanced Energy 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.
Consumer confidence and its impact on Advanced Energy 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.
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. Advanced Energy needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
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. Advanced Energy 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.
Environmental challenges
– Advanced Energy 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. Advanced Energy can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
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 Advanced Energy in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Increasing wage structure of Advanced Energy
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Advanced Energy.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Advanced Energy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Advanced Energy 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 Advanced Energy prominent markets.
Weighted SWOT Analysis of Advanced Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Advanced Energy 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 Advanced Energy 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 Advanced Energy 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 Advanced Energy 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 Advanced Energy needs to make to build a sustainable competitive advantage.