Fabrinet (FN) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fabrinet (United States)
Based on various researches at Oak Spring University , Fabrinet is operating in a macro-environment that has been destablized by – increasing energy prices, increasing household debt because of falling income levels, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing commodity prices,
there is increasing trade war between United States & China, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fabrinet can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fabrinet, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fabrinet 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 Fabrinet can be done for the following purposes –
1. Strategic planning of Fabrinet
2. Improving business portfolio management of Fabrinet
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 Fabrinet
Strengths of Fabrinet | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fabrinet are -
Ability to lead change in Semiconductors
– Fabrinet 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 Fabrinet in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Fabrinet in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Fabrinet 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.
Learning organization
- Fabrinet 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 Fabrinet is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Fabrinet emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Fabrinet is one of the leading players in the Semiconductors 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.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For Fabrinet digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fabrinet 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.
Sustainable margins compare to other players in Semiconductors industry
– Fabrinet has clearly differentiated products in the market place. This has enabled Fabrinet to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped Fabrinet to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Fabrinet has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Fabrinet 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.
Highly skilled collaborators
– Fabrinet 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 Fabrinet have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Fabrinet 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.
Successful track record of launching new products
– Fabrinet has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fabrinet 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.
Innovation driven organization
– Fabrinet is one of the most innovative firm in Semiconductors sector.
Weaknesses of Fabrinet | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fabrinet 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 Fabrinet supply chain. Even after few cautionary changes, Fabrinet is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fabrinet vulnerable to further global disruptions in South East Asia.
High dependence on Fabrinet ‘s star products
– The top 2 products and services of Fabrinet still accounts for major business revenue. This dependence on star products in Semiconductors industry has resulted into insufficient focus on developing new products, even though Fabrinet has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Fabrinet needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Fabrinet 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.
Slow to strategic competitive environment developments
– As Fabrinet is one of the leading players in the Semiconductors industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Semiconductors industry in last five years.
Interest costs
– Compare to the competition, Fabrinet 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 Fabrinet products
– To increase the profitability and margins on the products, Fabrinet needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fabrinet is slow explore the new channels of communication. These new channels of communication can help Fabrinet to provide better information regarding Semiconductors products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of Fabrinet, 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.
Products dominated business model
– Even though Fabrinet has some of the most successful models in the Semiconductors industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Fabrinet should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Fabrinet 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.
Fabrinet Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fabrinet are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Fabrinet 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.
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. Fabrinet can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Fabrinet 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.
Using analytics as competitive advantage
– Fabrinet has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Semiconductors sector. This continuous investment in analytics has enabled Fabrinet to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fabrinet to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fabrinet is facing challenges because of the dominance of functional experts in the organization. Fabrinet 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fabrinet 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 Fabrinet to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fabrinet 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.
Creating value in data economy
– The success of analytics program of Fabrinet has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help Fabrinet to build a more holistic ecosystem for Fabrinet products in the Semiconductors industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Fabrinet 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.
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 Fabrinet in the Semiconductors industry. Now Fabrinet can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Fabrinet 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.
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. Fabrinet 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. Fabrinet 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
– Fabrinet 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.
Threats Fabrinet External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fabrinet are -
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 Fabrinet business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fabrinet 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fabrinet 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.
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.
Regulatory challenges
– Fabrinet 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. Fabrinet can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Fabrinet 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.
High dependence on third party suppliers
– Fabrinet 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.
Consumer confidence and its impact on Fabrinet 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 Semiconductors industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fabrinet 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 Fabrinet prominent markets.
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 Fabrinet in the Semiconductors sector and impact the bottomline of the organization.
Increasing wage structure of Fabrinet
– 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 Fabrinet.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents Fabrinet 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 Fabrinet Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fabrinet 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 Fabrinet 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 Fabrinet 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 Fabrinet 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 Fabrinet needs to make to build a sustainable competitive advantage.