Stem (STMH) SWOT Analysis / TOWS Matrix / MBA Resources
Rental & Leasing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Stem (United States)
Based on various researches at Oak Spring University , Stem is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, technology disruption, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, geopolitical disruptions,
increasing energy prices, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Stem can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Stem, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Stem 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 Stem can be done for the following purposes –
1. Strategic planning of Stem
2. Improving business portfolio management of Stem
3. Assessing feasibility of the new initiative in United States
4. Making a Rental & Leasing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Stem
Strengths of Stem | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Stem are -
Operational resilience
– The operational resilience strategy of Stem comprises – understanding the underlying the factors in the Rental & Leasing 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
- Stem 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 Stem is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Stem emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Stem in Rental & Leasing 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 Stem 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.
Sustainable margins compare to other players in Rental & Leasing industry
– Stem has clearly differentiated products in the market place. This has enabled Stem to fetch slight price premium compare to the competitors in the Rental & Leasing industry. The sustainable margins have also helped Stem to invest into research and development (R&D) and innovation.
Strong track record of project management in the Rental & Leasing industry
– Stem is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Stem
– The covid-19 pandemic has put organizational resilience at the centre of everthing Stem does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Stem has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Stem 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.
Highly skilled collaborators
– Stem has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Rental & Leasing industry. Secondly the value chain collaborators of Stem have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Stem 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.
High brand equity
– Stem has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Stem to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Rental & Leasing
– Stem is one of the leading players in the Rental & Leasing industry in United States. Over the years it has not only transformed the business landscape in the Rental & Leasing industry in United States but also across the existing markets. The ability to lead change has enabled Stem in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Stem | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Stem are -
Interest costs
– Compare to the competition, Stem 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.
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 Stem supply chain. Even after few cautionary changes, Stem is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Stem vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Stem has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Rental & Leasing industry over the last five years. Stem 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.
Low market penetration in new markets
– Outside its home market of United States, Stem needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Stem needs to have more collaboration between its sales team and marketing team. Sales professionals in the Rental & Leasing industry have deep experience in developing customer relationships. Marketing department at Stem can leverage the sales team experience to cultivate customer relationships as Stem is planning to shift buying processes online.
High operating costs
– Compare to the competitors, Stem has high operating costs in the Rental & Leasing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Stem lucrative customers.
Skills based hiring in Rental & Leasing industry
– The stress on hiring functional specialists at Stem 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 to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Stem is slow explore the new channels of communication. These new channels of communication can help Stem to provide better information regarding Rental & Leasing products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Stem products
– To increase the profitability and margins on the products, Stem needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Stem ‘s star products
– The top 2 products and services of Stem still accounts for major business revenue. This dependence on star products in Rental & Leasing industry has resulted into insufficient focus on developing new products, even though Stem has relatively successful track record of launching new products.
Need for greater diversity
– Stem has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Stem Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Stem are -
Use of Bitcoin and other crypto currencies for transactions in Rental & Leasing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Stem in the Rental & Leasing industry. Now Stem can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Stem 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 Rental & Leasing industry.
Creating value in data economy
– The success of analytics program of Stem has opened avenues for new revenue streams for the organization in Rental & Leasing industry. This can help Stem to build a more holistic ecosystem for Stem products in the Rental & Leasing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Stem to increase its market reach. Stem 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.
Manufacturing automation
– Stem can use the latest technology developments to improve its manufacturing and designing process in Rental & Leasing 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Stem is facing challenges because of the dominance of functional experts in the organization. Stem can utilize new technology in the field of Rental & Leasing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Stem 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.
Buying journey improvements
– Stem can improve the customer journey of consumers in the Rental & Leasing 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.
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 Stem 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Rental & Leasing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Stem 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. Stem 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.
Leveraging digital technologies
– Stem 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.
Developing new processes and practices
– Stem can develop new processes and procedures in Rental & Leasing 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Stem in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Rental & Leasing industry, and it will provide faster access to the consumers.
Threats Stem External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Stem are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Stem may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Rental & Leasing 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 Stem in the Rental & Leasing sector and impact the bottomline of the organization.
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 Stem.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Stem in Rental & Leasing industry. The Rental & Leasing 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.
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. Stem 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.
Environmental challenges
– Stem 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. Stem can take advantage of this fund but it will also bring new competitors in the Rental & Leasing industry.
Technology acceleration in Forth Industrial Revolution
– Stem has witnessed rapid integration of technology during Covid-19 in the Rental & Leasing industry. As one of the leading players in the industry, Stem needs to keep up with the evolution of technology in the Rental & Leasing 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.
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. Stem needs to understand the core reasons impacting the Rental & Leasing industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Stem 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 Rental & Leasing industry.
Increasing wage structure of Stem
– 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 Stem.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Stem 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 Stem prominent markets.
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 Stem Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Stem 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 Stem 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 Stem 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 Stem 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 Stem needs to make to build a sustainable competitive advantage.