Proto Labs (PRLB) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Proto Labs (United States)

Based on various researches at Oak Spring University , Proto Labs is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing transportation and logistics costs, increasing energy prices, geopolitical disruptions, etc

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Introduction to SWOT Analysis of Proto Labs

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Proto Labs can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Proto Labs, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Proto Labs 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Proto Labs can be done for the following purposes –
1. Strategic planning of Proto Labs
2. Improving business portfolio management of Proto Labs
3. Assessing feasibility of the new initiative in United States
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Proto Labs

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Strengths of Proto Labs | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Proto Labs are -

High switching costs

– The high switching costs that Proto Labs 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)

– Proto Labs has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Proto Labs staying ahead in the Software & Programming industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Diverse revenue streams

– Proto Labs is present in almost all the verticals within the Software & Programming industry. This has provided Proto Labs 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.

Sustainable margins compare to other players in Software & Programming industry

– Proto Labs has clearly differentiated products in the market place. This has enabled Proto Labs to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Proto Labs to invest into research and development (R&D) and innovation.

Strong track record of project management in the Software & Programming industry

– Proto Labs 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 Proto Labs in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Cross disciplinary teams

– Horizontal connected teams at the Proto Labs 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.

Analytics focus

– Proto Labs 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 Software & Programming 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.

Training and development

– Proto Labs 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.

Digital Transformation in Software & Programming industry

- digital transformation varies from industry to industry. For Proto Labs digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Proto Labs 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.

Innovation driven organization

– Proto Labs is one of the most innovative firm in Software & Programming sector.

Successful track record of launching new products

– Proto Labs has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Proto Labs 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.

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Weaknesses of Proto Labs | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Proto Labs are -

Workers concerns about automation

– As automation is fast increasing in the Software & Programming industry, Proto Labs 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 Proto Labs strategy

– From the outside it seems that the employees of Proto Labs 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.

High bargaining power of channel partners in Software & Programming industry

– because of the regulatory requirements in United States, Proto Labs 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 Software & Programming industry.

Ability to respond to the competition

– As the decision making is very deliberative at Proto Labs, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Proto Labs has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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 Proto Labs supply chain. Even after few cautionary changes, Proto Labs is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Proto Labs vulnerable to further global disruptions in South East Asia.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Proto Labs is slow explore the new channels of communication. These new channels of communication can help Proto Labs to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.

Compensation and incentives

– The revenue per employee of Proto Labs is just above the Software & Programming 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.

Low market penetration in new markets

– Outside its home market of United States, Proto Labs needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High cash cycle compare to competitors

Proto Labs has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Increasing silos among functional specialists

– The organizational structure of Proto Labs is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Proto Labs needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Proto Labs to focus more on services in the Software & Programming industry rather than just following the product oriented approach.

Capital Spending Reduction

– Even during the low interest decade, Proto Labs 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 Software & Programming industry using digital technology.

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Proto Labs Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Proto Labs are -

Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Proto Labs in the Software & Programming industry. Now Proto Labs can target international markets with far fewer capital restrictions requirements than the existing system.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Proto Labs can use these opportunities to build new business models that can help the communities that Proto Labs operates in. Secondly it can use opportunities from government spending in Software & Programming sector.

Buying journey improvements

– Proto Labs can improve the customer journey of consumers in the Software & Programming 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 Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Proto Labs 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. Proto Labs 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 Proto Labs can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Low interest rates

– Even though inflation is raising its head in most developed economies, Proto Labs 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Proto Labs 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 Proto Labs to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Proto Labs 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 Proto Labs to hire the very best people irrespective of their geographical location.

Loyalty marketing

– Proto Labs 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Proto Labs is facing challenges because of the dominance of functional experts in the organization. Proto Labs can utilize new technology in the field of Software & Programming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Building a culture of innovation

– managers at Proto Labs 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 Software & Programming industry.

Using analytics as competitive advantage

– Proto Labs has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Software & Programming sector. This continuous investment in analytics has enabled Proto Labs to build a competitive advantage using analytics. The analytics driven competitive advantage can help Proto Labs to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Software & Programming industry, but it has also influenced the consumer preferences. Proto Labs can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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Threats Proto Labs External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Proto Labs are -

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Proto Labs with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.

Shortening product life cycle

– it is one of the major threat that Proto Labs is facing in Software & Programming 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.

Technology acceleration in Forth Industrial Revolution

– Proto Labs has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Proto Labs needs to keep up with the evolution of technology in the Software & Programming 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.

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.

Environmental challenges

– Proto Labs 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. Proto Labs can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Proto Labs may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.

Consumer confidence and its impact on Proto Labs 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 Software & Programming industry and other sectors.

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. Proto Labs needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.

Regulatory challenges

– Proto Labs 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 Software & Programming industry regulations.

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 Proto Labs business can come under increasing regulations regarding data privacy, data security, etc.

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. Proto Labs 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.

High dependence on third party suppliers

– Proto Labs 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.

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Weighted SWOT Analysis of Proto Labs Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Proto Labs 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 Proto Labs 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 Proto Labs 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 Proto Labs 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 Proto Labs needs to make to build a sustainable competitive advantage.

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