Mellanox (MLNX) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Mellanox (United States)
Based on various researches at Oak Spring University , Mellanox is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, geopolitical disruptions, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, increasing transportation and logistics costs,
supply chains are disrupted by pandemic , technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Mellanox can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mellanox, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mellanox 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 Mellanox can be done for the following purposes –
1. Strategic planning of Mellanox
2. Improving business portfolio management of Mellanox
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 Mellanox
Strengths of Mellanox | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mellanox are -
Analytics focus
– Mellanox 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 Semiconductors 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.
Cross disciplinary teams
– Horizontal connected teams at the Mellanox 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.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For Mellanox digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mellanox 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.
High brand equity
– Mellanox has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mellanox to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Semiconductors
– Mellanox 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 Mellanox 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
– Mellanox has clearly differentiated products in the market place. This has enabled Mellanox to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped Mellanox to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Mellanox in the Technology sector have low bargaining power. Mellanox has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mellanox to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Mellanox has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Mellanox 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.
Organizational Resilience of Mellanox
– The covid-19 pandemic has put organizational resilience at the centre of everthing Mellanox does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Semiconductors industry
– Mellanox is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Mellanox in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Mellanox 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 Mellanox is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Mellanox emphasize – knowledge, initiative, and innovation.
Weaknesses of Mellanox | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mellanox are -
Compensation and incentives
– The revenue per employee of Mellanox 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.
No frontier risks strategy
– From the 10K / annual statement of Mellanox, 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.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in United States, Mellanox 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.
Ability to respond to the competition
– As the decision making is very deliberative at Mellanox, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. Mellanox has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Mellanox strategy
– From the outside it seems that the employees of Mellanox 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.
Low market penetration in new markets
– Outside its home market of United States, Mellanox needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Mellanox 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.
Slow to strategic competitive environment developments
– As Mellanox 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.
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at Mellanox 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, Mellanox 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. Mellanox 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.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, Mellanox 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.
Mellanox Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Mellanox are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mellanox 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.
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. Mellanox 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. Mellanox 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mellanox can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Mellanox to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Mellanox 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mellanox 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mellanox is facing challenges because of the dominance of functional experts in the organization. Mellanox 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.
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 Mellanox 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.
Better consumer reach
– The expansion of the 5G network will help Mellanox to increase its market reach. Mellanox 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mellanox can use these opportunities to build new business models that can help the communities that Mellanox operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
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. Mellanox can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Mellanox 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.
Using analytics as competitive advantage
– Mellanox 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 Mellanox to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mellanox to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Mellanox External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Mellanox are -
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.
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 Mellanox in the Semiconductors sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Mellanox 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mellanox 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 Mellanox 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 Mellanox.
Technology acceleration in Forth Industrial Revolution
– Mellanox has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, Mellanox 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mellanox 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
– Mellanox 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.
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 Mellanox business can come under increasing regulations regarding data privacy, data security, etc.
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. Mellanox 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, Mellanox 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.
Shortening product life cycle
– it is one of the major threat that Mellanox is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.
Weighted SWOT Analysis of Mellanox Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Mellanox 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 Mellanox 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 Mellanox 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 Mellanox 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 Mellanox needs to make to build a sustainable competitive advantage.