AU Optronics (AUO) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AU Optronics (United States)
Based on various researches at Oak Spring University , AU Optronics is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, 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%, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, technology disruption,
cloud computing is disrupting traditional business models, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AU Optronics can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AU Optronics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AU Optronics 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 AU Optronics can be done for the following purposes –
1. Strategic planning of AU Optronics
2. Improving business portfolio management of AU Optronics
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 AU Optronics
Strengths of AU Optronics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AU Optronics are -
Low bargaining power of suppliers
– Suppliers of AU Optronics in the Technology sector have low bargaining power. AU Optronics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AU Optronics to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- AU Optronics 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 AU Optronics is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AU Optronics emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– AU Optronics is one of the most innovative firm in Electronic Instr. & Controls sector.
Superior customer experience
– The customer experience strategy of AU Optronics in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– AU Optronics has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AU Optronics 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.
Analytics focus
– AU Optronics 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.
Organizational Resilience of AU Optronics
– The covid-19 pandemic has put organizational resilience at the centre of everthing AU Optronics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– AU Optronics has clearly differentiated products in the market place. This has enabled AU Optronics to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped AU Optronics to invest into research and development (R&D) and innovation.
Ability to lead change in Electronic Instr. & Controls
– AU Optronics 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 AU Optronics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– AU Optronics has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AU Optronics 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.
Strong track record of project management in the Electronic Instr. & Controls industry
– AU Optronics 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 AU Optronics 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.
Weaknesses of AU Optronics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AU Optronics are -
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 AU Optronics supply chain. Even after few cautionary changes, AU Optronics is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AU Optronics vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– AU Optronics 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.
Products dominated business model
– Even though AU Optronics has some of the most successful models in the Electronic Instr. & Controls industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AU Optronics should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– From the 10K / annual statement of AU Optronics, 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.
Interest costs
– Compare to the competition, AU Optronics 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.
Skills based hiring in Electronic Instr. & Controls industry
– The stress on hiring functional specialists at AU Optronics 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.
Slow decision making process
– As mentioned earlier in the report, AU Optronics has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Electronic Instr. & Controls industry over the last five years. AU Optronics 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 AU Optronics is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but AU Optronics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AU Optronics to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Electronic Instr. & Controls industry, AU Optronics 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.
Compensation and incentives
– The revenue per employee of AU Optronics 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.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in United States, AU Optronics 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.
AU Optronics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AU Optronics are -
Using analytics as competitive advantage
– AU Optronics 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 AU Optronics to build a competitive advantage using analytics. The analytics driven competitive advantage can help AU Optronics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– AU Optronics 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.
Developing new processes and practices
– AU Optronics 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.
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. AU Optronics 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. AU Optronics 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.
Manufacturing automation
– AU Optronics 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.
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 AU Optronics in the Electronic Instr. & Controls industry. Now AU Optronics can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of AU Optronics has opened avenues for new revenue streams for the organization in Electronic Instr. & Controls industry. This can help AU Optronics to build a more holistic ecosystem for AU Optronics 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 AU Optronics 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 AU Optronics to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AU Optronics 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.
Loyalty marketing
– AU Optronics 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.
Building a culture of innovation
– managers at AU Optronics 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 Electronic Instr. & Controls industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, AU Optronics is facing challenges because of the dominance of functional experts in the organization. AU Optronics 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AU Optronics can use these opportunities to build new business models that can help the communities that AU Optronics operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
Threats AU Optronics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AU Optronics are -
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.
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. AU Optronics needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– AU Optronics 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 Electronic Instr. & Controls 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. AU Optronics 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 AU Optronics in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
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 AU Optronics business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– AU Optronics 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.
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 AU Optronics.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for AU Optronics 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.
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. AU Optronics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on AU Optronics 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.
Environmental challenges
– AU Optronics 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. AU Optronics can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AU Optronics 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 AU Optronics prominent markets.
Weighted SWOT Analysis of AU Optronics Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AU Optronics 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 AU Optronics 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 AU Optronics 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 AU Optronics 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 AU Optronics needs to make to build a sustainable competitive advantage.
