NeoPhotonics (NPTN) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for NeoPhotonics (United States)
Based on various researches at Oak Spring University , NeoPhotonics is operating in a macro-environment that has been destablized by – increasing energy prices, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is backlash against globalization, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing,
there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that NeoPhotonics can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the NeoPhotonics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which NeoPhotonics 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 NeoPhotonics can be done for the following purposes –
1. Strategic planning of NeoPhotonics
2. Improving business portfolio management of NeoPhotonics
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 NeoPhotonics
Strengths of NeoPhotonics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of NeoPhotonics are -
Diverse revenue streams
– NeoPhotonics is present in almost all the verticals within the Semiconductors industry. This has provided NeoPhotonics 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.
High switching costs
– The high switching costs that NeoPhotonics 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.
Low bargaining power of suppliers
– Suppliers of NeoPhotonics in the Technology sector have low bargaining power. NeoPhotonics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps NeoPhotonics to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– NeoPhotonics 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 NeoPhotonics have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of NeoPhotonics 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.
Strong track record of project management in the Semiconductors industry
– NeoPhotonics is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For NeoPhotonics digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. NeoPhotonics 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.
Superior customer experience
– The customer experience strategy of NeoPhotonics in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Semiconductors industry
– NeoPhotonics has clearly differentiated products in the market place. This has enabled NeoPhotonics to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped NeoPhotonics to invest into research and development (R&D) and innovation.
Ability to lead change in Semiconductors
– NeoPhotonics 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 NeoPhotonics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– NeoPhotonics has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. NeoPhotonics 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
– NeoPhotonics is one of the most innovative firm in Semiconductors sector.
Weaknesses of NeoPhotonics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NeoPhotonics are -
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at NeoPhotonics 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.
Aligning sales with marketing
– From the outside it seems that NeoPhotonics needs to have more collaboration between its sales team and marketing team. Sales professionals in the Semiconductors industry have deep experience in developing customer relationships. Marketing department at NeoPhotonics can leverage the sales team experience to cultivate customer relationships as NeoPhotonics is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of United States, NeoPhotonics needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though NeoPhotonics 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. NeoPhotonics should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, NeoPhotonics 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.
Increasing silos among functional specialists
– The organizational structure of NeoPhotonics is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but NeoPhotonics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help NeoPhotonics to focus more on services in the Semiconductors industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of NeoPhotonics 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.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, NeoPhotonics 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.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in United States, NeoPhotonics 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.
High operating costs
– Compare to the competitors, NeoPhotonics 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 NeoPhotonics lucrative customers.
High dependence on NeoPhotonics ‘s star products
– The top 2 products and services of NeoPhotonics 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 NeoPhotonics has relatively successful track record of launching new products.
NeoPhotonics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of NeoPhotonics are -
Using analytics as competitive advantage
– NeoPhotonics 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 NeoPhotonics to build a competitive advantage using analytics. The analytics driven competitive advantage can help NeoPhotonics 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, NeoPhotonics is facing challenges because of the dominance of functional experts in the organization. NeoPhotonics 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.
Developing new processes and practices
– NeoPhotonics 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for NeoPhotonics 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 NeoPhotonics to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at NeoPhotonics 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.
Learning at scale
– Online learning technologies has now opened space for NeoPhotonics 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, NeoPhotonics 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.
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 NeoPhotonics 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.
Buying journey improvements
– NeoPhotonics 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.
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. NeoPhotonics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of NeoPhotonics has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help NeoPhotonics to build a more holistic ecosystem for NeoPhotonics products in the Semiconductors industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– NeoPhotonics 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.
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. NeoPhotonics 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. NeoPhotonics 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.
Threats NeoPhotonics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of NeoPhotonics 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.
Consumer confidence and its impact on NeoPhotonics 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.
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. NeoPhotonics 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for NeoPhotonics 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, NeoPhotonics 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.
High dependence on third party suppliers
– NeoPhotonics 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.
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. NeoPhotonics needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
Environmental challenges
– NeoPhotonics 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. NeoPhotonics can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
Increasing wage structure of NeoPhotonics
– 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 NeoPhotonics.
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 NeoPhotonics in the Semiconductors sector and impact the bottomline of the organization.
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. NeoPhotonics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that NeoPhotonics is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Weighted SWOT Analysis of NeoPhotonics Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at NeoPhotonics 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 NeoPhotonics 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 NeoPhotonics 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 NeoPhotonics 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 NeoPhotonics needs to make to build a sustainable competitive advantage.