Based on various researches at Oak Spring University , EXFO Inc is operating in a macro-environment that has been destablized by – technology disruption, there is increasing trade war between United States & China, increasing commodity prices, talent flight as more people leaving formal jobs, wage bills are increasing, there is backlash against globalization, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that EXFO Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the EXFO Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which EXFO Inc 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 EXFO Inc can be done for the following purposes –
1. Strategic planning of EXFO Inc
2. Improving business portfolio management of EXFO Inc
3. Assessing feasibility of the new initiative in Canada
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of EXFO Inc
Strengths of EXFO Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of EXFO Inc are -
Diverse revenue streams
– EXFO Inc is present in almost all the verticals within the Communications Equipment industry. This has provided EXFO Inc 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.
Analytics focus
– EXFO Inc 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 Communications Equipment industry. The technology infrastructure of Canada 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 EXFO Inc 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.
Effective Research and Development (R&D)
– EXFO Inc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – EXFO Inc staying ahead in the Communications Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of EXFO Inc in Communications Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of EXFO Inc comprises – understanding the underlying the factors in the Communications Equipment 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 EXFO Inc in the Technology sector have low bargaining power. EXFO Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps EXFO Inc to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– EXFO Inc has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Equipment industry. Secondly the value chain collaborators of EXFO Inc have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Communications Equipment industry
- digital transformation varies from industry to industry. For EXFO Inc digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. EXFO Inc 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.
Organizational Resilience of EXFO Inc
– The covid-19 pandemic has put organizational resilience at the centre of everthing EXFO Inc 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 Communications Equipment industry
– EXFO Inc has clearly differentiated products in the market place. This has enabled EXFO Inc to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped EXFO Inc to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– EXFO Inc is one of the leading players in the Communications Equipment industry in Canada. It is in a position to attract the best talent available in Canada. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of EXFO Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of EXFO Inc are -
Aligning sales with marketing
– From the outside it seems that EXFO Inc needs to have more collaboration between its sales team and marketing team. Sales professionals in the Communications Equipment industry have deep experience in developing customer relationships. Marketing department at EXFO Inc can leverage the sales team experience to cultivate customer relationships as EXFO Inc is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of EXFO Inc is dominated by functional specialists. It is not different from other players in the Communications Equipment industry, but EXFO Inc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help EXFO Inc to focus more on services in the Communications Equipment industry rather than just following the product oriented approach.
High cash cycle compare to competitors
EXFO Inc has a high cash cycle compare to other players in the Communications Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, EXFO Inc is slow explore the new channels of communication. These new channels of communication can help EXFO Inc to provide better information regarding Communications Equipment products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though EXFO Inc has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. EXFO Inc should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Communications Equipment industry, EXFO Inc 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.
Employees’ less understanding of EXFO Inc strategy
– From the outside it seems that the employees of EXFO Inc 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.
Capital Spending Reduction
– Even during the low interest decade, EXFO Inc 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 Communications Equipment industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, EXFO Inc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Communications Equipment industry over the last five years. EXFO Inc 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.
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 EXFO Inc supply chain. Even after few cautionary changes, EXFO Inc is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left EXFO Inc vulnerable to further global disruptions in South East Asia.
Skills based hiring in Communications Equipment industry
– The stress on hiring functional specialists at EXFO Inc 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.
EXFO Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of EXFO Inc are -
Buying journey improvements
– EXFO Inc can improve the customer journey of consumers in the Communications Equipment 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.
Leveraging digital technologies
– EXFO Inc 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, EXFO Inc is facing challenges because of the dominance of functional experts in the organization. EXFO Inc can utilize new technology in the field of Communications Equipment 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 EXFO Inc has opened avenues for new revenue streams for the organization in Communications Equipment industry. This can help EXFO Inc to build a more holistic ecosystem for EXFO Inc products in the Communications Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– EXFO Inc can develop new processes and procedures in Communications Equipment 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.
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. EXFO Inc can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, EXFO Inc 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 EXFO Inc 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
– EXFO Inc 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Communications Equipment industry, but it has also influenced the consumer preferences. EXFO Inc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at EXFO Inc 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 Communications Equipment industry.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, EXFO Inc can use these opportunities to build new business models that can help the communities that EXFO Inc operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects EXFO Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– EXFO Inc has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled EXFO Inc to build a competitive advantage using analytics. The analytics driven competitive advantage can help EXFO Inc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats EXFO Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of EXFO Inc are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, EXFO Inc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Equipment sector.
High dependence on third party suppliers
– EXFO Inc 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 EXFO Inc 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 Communications Equipment industry and other sectors.
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 EXFO Inc business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing wage structure of EXFO Inc
– 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 EXFO Inc.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, EXFO Inc 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 EXFO Inc prominent markets.
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 EXFO Inc.
Environmental challenges
– EXFO Inc 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. EXFO Inc can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents EXFO Inc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.
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 EXFO Inc in the Communications Equipment 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. EXFO Inc 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.
Weighted SWOT Analysis of EXFO Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at EXFO Inc 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 EXFO Inc 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 EXFO Inc 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 EXFO Inc 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 EXFO Inc needs to make to build a sustainable competitive advantage.