SWOT Analysis / TOWS Matrix for ASML Holding (United States)
Based on various researches at Oak Spring University , ASML Holding is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, technology disruption, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion,
central banks are concerned over increasing inflation, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ASML Holding can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ASML Holding, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ASML Holding 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 ASML Holding can be done for the following purposes –
1. Strategic planning of ASML Holding
2. Improving business portfolio management of ASML Holding
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 ASML Holding
Strengths of ASML Holding | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ASML Holding are -
Innovation driven organization
– ASML Holding is one of the most innovative firm in Semiconductors sector.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For ASML Holding digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ASML Holding 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.
Diverse revenue streams
– ASML Holding is present in almost all the verticals within the Semiconductors industry. This has provided ASML Holding 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.
Superior customer experience
– The customer experience strategy of ASML Holding in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the ASML Holding 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.
Successful track record of launching new products
– ASML Holding has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ASML Holding 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.
High brand equity
– ASML Holding has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled ASML Holding to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Semiconductors
– ASML Holding 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 ASML Holding in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– ASML Holding 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 ASML Holding have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of ASML Holding 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.
Organizational Resilience of ASML Holding
– The covid-19 pandemic has put organizational resilience at the centre of everthing ASML Holding does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– ASML Holding 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.
Weaknesses of ASML Holding | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ASML Holding are -
Need for greater diversity
– ASML Holding 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 cash cycle compare to competitors
ASML Holding 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.
No frontier risks strategy
– From the 10K / annual statement of ASML Holding, 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.
Interest costs
– Compare to the competition, ASML Holding 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.
Lack of clear differentiation of ASML Holding products
– To increase the profitability and margins on the products, ASML Holding needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of ASML Holding is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but ASML Holding needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ASML Holding 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, ASML Holding 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.
Low market penetration in new markets
– Outside its home market of United States, ASML Holding needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, ASML Holding 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 ASML Holding lucrative customers.
Compensation and incentives
– The revenue per employee of ASML Holding 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.
Employees’ less understanding of ASML Holding strategy
– From the outside it seems that the employees of ASML Holding 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.
ASML Holding Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ASML Holding are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for ASML Holding 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 ASML Holding to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help ASML Holding to increase its market reach. ASML Holding 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.
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. ASML Holding 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. ASML Holding 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 ASML Holding 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.
Developing new processes and practices
– ASML Holding 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.
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 ASML Holding in the Semiconductors industry. Now ASML Holding can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ASML Holding can use these opportunities to build new business models that can help the communities that ASML Holding operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
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. ASML Holding can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 ASML Holding 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, ASML Holding is facing challenges because of the dominance of functional experts in the organization. ASML Holding 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.
Buying journey improvements
– ASML Holding 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects ASML Holding 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 ASML Holding 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.
Threats ASML Holding External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ASML Holding are -
Increasing wage structure of ASML Holding
– 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 ASML Holding.
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 ASML Holding is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, ASML Holding 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.
Regulatory challenges
– ASML Holding 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.
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. ASML Holding 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 ASML Holding 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.
Stagnating economy with rate increase
– ASML Holding 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.
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 ASML Holding in the Semiconductors sector and impact the bottomline 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. ASML Holding 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents ASML Holding with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Environmental challenges
– ASML Holding 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. ASML Holding can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
High dependence on third party suppliers
– ASML Holding 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.
Weighted SWOT Analysis of ASML Holding Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ASML Holding 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 ASML Holding 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 ASML Holding 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 ASML Holding 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 ASML Holding needs to make to build a sustainable competitive advantage.