SWOT Analysis / TOWS Matrix for Applied Materials (United States)
Based on various researches at Oak Spring University , Applied Materials is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, cloud computing is disrupting traditional business models, there is backlash against globalization, central banks are concerned over increasing inflation,
technology disruption, wage bills are increasing, etc
Introduction to SWOT Analysis of Applied Materials
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Applied Materials can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Applied Materials, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Applied Materials 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 Applied Materials can be done for the following purposes –
1. Strategic planning of Applied Materials
2. Improving business portfolio management of Applied Materials
3. Assessing feasibility of the new initiative in United States
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Applied Materials
Strengths of Applied Materials | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Applied Materials are -
Diverse revenue streams
– Applied Materials is present in almost all the verticals within the Semiconductors industry. This has provided Applied Materials 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.
High switching costs
– The high switching costs that Applied Materials 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.
Innovation driven organization
– Applied Materials is one of the most innovative firm in Semiconductors sector.
Learning organization
- Applied Materials 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 Applied Materials is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Applied Materials emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Semiconductors industry
– Applied Materials is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Semiconductors
– Applied Materials is one of the leading players in the Semiconductors industry in United States. Over the years it has not only transformed the business landscape in the Semiconductors industry in United States but also across the existing markets. The ability to lead change has enabled Applied Materials in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Semiconductors industry
– Applied Materials has clearly differentiated products in the market place. This has enabled Applied Materials to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped Applied Materials to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Applied Materials in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Applied Materials has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Applied Materials 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.
Cross disciplinary teams
– Horizontal connected teams at the Applied Materials 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.
High brand equity
– Applied Materials has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Applied Materials to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Applied Materials has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Applied Materials 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.
Weaknesses of Applied Materials | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Applied Materials are -
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in United States, Applied Materials 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.
Employees’ less understanding of Applied Materials strategy
– From the outside it seems that the employees of Applied Materials 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.
High cash cycle compare to competitors
Applied Materials 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.
Ability to respond to the competition
– As the decision making is very deliberative at Applied Materials, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. Applied Materials has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, Applied Materials 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 Applied Materials supply chain. Even after few cautionary changes, Applied Materials is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Applied Materials vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Applied Materials needs to have more collaboration between its sales team and marketing team. Sales professionals in the Semiconductors industry have deep experience in developing customer relationships. Marketing department at Applied Materials can leverage the sales team experience to cultivate customer relationships as Applied Materials is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Applied Materials has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Semiconductors industry over the last five years. Applied Materials even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Increasing silos among functional specialists
– The organizational structure of Applied Materials is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but Applied Materials needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Applied Materials to focus more on services in the Semiconductors industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Applied Materials 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.
Capital Spending Reduction
– Even during the low interest decade, Applied Materials 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.
Applied Materials Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Applied Materials are -
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. Applied Materials 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 Semiconductors industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Applied Materials 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. Applied Materials 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
– Applied Materials 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Applied Materials 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 Applied Materials to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Applied Materials can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Applied Materials 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.
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 Applied Materials 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.
Leveraging digital technologies
– Applied Materials 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.
Better consumer reach
– The expansion of the 5G network will help Applied Materials to increase its market reach. Applied Materials 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.
Manufacturing automation
– Applied Materials 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Applied Materials is facing challenges because of the dominance of functional experts in the organization. Applied Materials can utilize new technology in the field of Semiconductors industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Applied Materials has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help Applied Materials to build a more holistic ecosystem for Applied Materials products in the Semiconductors 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 Applied Materials 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 Applied Materials to hire the very best people irrespective of their geographical location.
Threats Applied Materials External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Applied Materials are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Applied Materials 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.
Regulatory challenges
– Applied Materials 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.
Technology acceleration in Forth Industrial Revolution
– Applied Materials has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, Applied Materials 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.
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. Applied Materials 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.
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 Applied Materials in the Semiconductors sector and impact the bottomline of the organization.
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.
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 Applied Materials.
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. Applied Materials 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. Applied Materials needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Applied Materials 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.
Environmental challenges
– Applied Materials 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. Applied Materials can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
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 Applied Materials with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Weighted SWOT Analysis of Applied Materials Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials needs to make to build a sustainable competitive advantage.