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 – customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing household debt because of falling income levels, wage bills are increasing, increasing government debt because of Covid-19 spendings, technology disruption, cloud computing is disrupting traditional business models,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Innovation driven organization
– Stem is one of the most innovative firm in Rental & Leasing sector.
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.
Low bargaining power of suppliers
– Suppliers of Stem in the Services sector have low bargaining power. Stem has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Stem to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Rental & Leasing industry
- digital transformation varies from industry to industry. For Stem digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Stem 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.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Stem has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Stem staying ahead in the Rental & Leasing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Weaknesses of Stem | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Stem are -
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.
No frontier risks strategy
– From the 10K / annual statement of Stem, it seems that company is thinking out the frontier risks that can impact Rental & Leasing 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.
Increasing silos among functional specialists
– The organizational structure of Stem is dominated by functional specialists. It is not different from other players in the Rental & Leasing industry, but Stem needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Stem to focus more on services in the Rental & Leasing industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Stem has a high cash cycle compare to other players in the Rental & Leasing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Stem, in the dynamic environment of Rental & Leasing industry it has struggled to respond to the nimble upstart competition. Stem has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Rental & Leasing industry
– because of the regulatory requirements in United States, Stem 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 Rental & Leasing industry.
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.
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.
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.
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.
Stem Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Stem are -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Stem can use these opportunities to build new business models that can help the communities that Stem operates in. Secondly it can use opportunities from government spending in Rental & Leasing sector.
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. Stem can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Stem 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.
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.
Learning at scale
– Online learning technologies has now opened space for Stem 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
– 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.
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.
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.
Using analytics as competitive advantage
– Stem has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Rental & Leasing sector. This continuous investment in analytics has enabled Stem to build a competitive advantage using analytics. The analytics driven competitive advantage can help Stem to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Threats Stem External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Stem are -
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.
Shortening product life cycle
– it is one of the major threat that Stem is facing in Rental & Leasing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Stem 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 Rental & Leasing industry regulations.
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.
High dependence on third party suppliers
– Stem 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.
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.
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.
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.
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
– 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Rental & Leasing industry are lowering. It can presents Stem with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Rental & Leasing sector.
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.
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.
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.