Thermon (THR) SWOT Analysis / TOWS Matrix / MBA Resources
Appliance & Tool
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Thermon (United States)
Based on various researches at Oak Spring University , Thermon is operating in a macro-environment that has been destablized by – there is backlash against globalization, geopolitical disruptions, increasing commodity prices, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, increasing energy prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Thermon can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Thermon, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Thermon 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 Thermon can be done for the following purposes –
1. Strategic planning of Thermon
2. Improving business portfolio management of Thermon
3. Assessing feasibility of the new initiative in United States
4. Making a Appliance & Tool sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Thermon
Strengths of Thermon | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Thermon are -
Superior customer experience
– The customer experience strategy of Thermon in Appliance & Tool industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Thermon 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 Thermon is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Thermon emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Thermon 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.
Operational resilience
– The operational resilience strategy of Thermon comprises – understanding the underlying the factors in the Appliance & Tool 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.
Ability to lead change in Appliance & Tool
– Thermon is one of the leading players in the Appliance & Tool industry in United States. Over the years it has not only transformed the business landscape in the Appliance & Tool industry in United States but also across the existing markets. The ability to lead change has enabled Thermon in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Thermon
– The covid-19 pandemic has put organizational resilience at the centre of everthing Thermon does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Thermon in the Consumer Cyclical sector have low bargaining power. Thermon has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Thermon to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Thermon has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Appliance & Tool industry. Secondly the value chain collaborators of Thermon have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Thermon has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Thermon staying ahead in the Appliance & Tool industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Thermon is present in almost all the verticals within the Appliance & Tool industry. This has provided Thermon 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.
Analytics focus
– Thermon 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 Appliance & Tool 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.
Sustainable margins compare to other players in Appliance & Tool industry
– Thermon has clearly differentiated products in the market place. This has enabled Thermon to fetch slight price premium compare to the competitors in the Appliance & Tool industry. The sustainable margins have also helped Thermon to invest into research and development (R&D) and innovation.
Weaknesses of Thermon | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Thermon are -
Skills based hiring in Appliance & Tool industry
– The stress on hiring functional specialists at Thermon 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.
Workers concerns about automation
– As automation is fast increasing in the Appliance & Tool industry, Thermon 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 Thermon strategy
– From the outside it seems that the employees of Thermon 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.
Need for greater diversity
– Thermon 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.
High cash cycle compare to competitors
Thermon has a high cash cycle compare to other players in the Appliance & Tool 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 Thermon is dominated by functional specialists. It is not different from other players in the Appliance & Tool industry, but Thermon needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Thermon to focus more on services in the Appliance & Tool industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Thermon is slow explore the new channels of communication. These new channels of communication can help Thermon to provide better information regarding Appliance & Tool products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of Thermon, it seems that company is thinking out the frontier risks that can impact Appliance & Tool 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.
Interest costs
– Compare to the competition, Thermon 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.
Slow decision making process
– As mentioned earlier in the report, Thermon has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Appliance & Tool industry over the last five years. Thermon 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.
Lack of clear differentiation of Thermon products
– To increase the profitability and margins on the products, Thermon needs to provide more differentiated products than what it is currently offering in the marketplace.
Thermon Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Thermon are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Thermon in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Appliance & Tool industry, and it will provide faster access to the consumers.
Developing new processes and practices
– Thermon can develop new processes and procedures in Appliance & Tool 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.
Leveraging digital technologies
– Thermon 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Thermon is facing challenges because of the dominance of functional experts in the organization. Thermon can utilize new technology in the field of Appliance & Tool industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Thermon 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.
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. Thermon can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Thermon can improve the customer journey of consumers in the Appliance & Tool 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Thermon 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.
Use of Bitcoin and other crypto currencies for transactions in Appliance & Tool industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Thermon in the Appliance & Tool industry. Now Thermon can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Thermon can use the latest technology developments to improve its manufacturing and designing process in Appliance & Tool 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Thermon 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 Thermon to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Thermon to increase its market reach. Thermon 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.
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 Thermon 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.
Threats Thermon External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Thermon are -
Stagnating economy with rate increase
– Thermon 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 Appliance & Tool industry.
Increasing wage structure of Thermon
– 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 Thermon.
Easy access to finance
– Easy access to finance in Appliance & Tool industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Thermon can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Thermon 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 Thermon prominent markets.
High dependence on third party suppliers
– Thermon 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.
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 Thermon.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Thermon may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Appliance & Tool 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 Thermon in the Appliance & Tool sector and impact the bottomline of the organization.
Consumer confidence and its impact on Thermon 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 Appliance & Tool industry and other sectors.
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.
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.
Regulatory challenges
– Thermon 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 Appliance & Tool 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 Thermon business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Thermon Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Thermon 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 Thermon 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 Thermon 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 Thermon 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 Thermon needs to make to build a sustainable competitive advantage.