Foxconn (601138) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Foxconn (China)

Based on various researches at Oak Spring University , Foxconn is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, there is backlash against globalization, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Foxconn

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Foxconn can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Foxconn, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Foxconn 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 Foxconn can be done for the following purposes –
1. Strategic planning of Foxconn
2. Improving business portfolio management of Foxconn
3. Assessing feasibility of the new initiative in China
4. Making a Computer Peripherals sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Foxconn

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

The strengths of Foxconn are -

Sustainable margins compare to other players in Computer Peripherals industry

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

Effective Research and Development (R&D)

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

High switching costs

– The high switching costs that Foxconn 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.

Highly skilled collaborators

– Foxconn has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Peripherals industry. Secondly the value chain collaborators of Foxconn have helped the firm to develop new products and bring them quickly to the marketplace.

Digital Transformation in Computer Peripherals industry

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

Successful track record of launching new products

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

Low bargaining power of suppliers

– Suppliers of Foxconn in the Technology sector have low bargaining power. Foxconn has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Foxconn to manage not only supply disruptions but also source products at highly competitive prices.

Diverse revenue streams

– Foxconn is present in almost all the verticals within the Computer Peripherals industry. This has provided Foxconn 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.

Strong track record of project management in the Computer Peripherals industry

– Foxconn is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Learning organization

- Foxconn 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 Foxconn is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Foxconn emphasize – knowledge, initiative, and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Foxconn 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.

Innovation driven organization

– Foxconn is one of the most innovative firm in Computer Peripherals sector.

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

The weaknesses of Foxconn are -

Interest costs

– Compare to the competition, Foxconn 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 operating costs

– Compare to the competitors, Foxconn has high operating costs in the Computer Peripherals industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Foxconn lucrative customers.

Increasing silos among functional specialists

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

Need for greater diversity

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

Skills based hiring in Computer Peripherals industry

– The stress on hiring functional specialists at Foxconn 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.

Ability to respond to the competition

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

Products dominated business model

– Even though Foxconn has some of the most successful models in the Computer Peripherals industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Foxconn should strive to include more intangible value offerings along with its core products and services.

Slow decision making process

– As mentioned earlier in the report, Foxconn has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Computer Peripherals industry over the last five years. Foxconn 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 China, Foxconn needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Compensation and incentives

– The revenue per employee of Foxconn is just above the Computer Peripherals 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.

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

The opportunities of Foxconn are -

Remote work and new talent hiring opportunities

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

Using analytics as competitive advantage

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

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. Foxconn can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Foxconn can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Use of Bitcoin and other crypto currencies for transactions in Computer Peripherals industry

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

Creating value in data economy

– The success of analytics program of Foxconn has opened avenues for new revenue streams for the organization in Computer Peripherals industry. This can help Foxconn to build a more holistic ecosystem for Foxconn products in the Computer Peripherals industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Developing new processes and practices

– Foxconn can develop new processes and procedures in Computer Peripherals 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.

Finding new ways to collaborate

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

Harnessing reconfiguration of the global supply chains

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

Buying journey improvements

– Foxconn can improve the customer journey of consumers in the Computer Peripherals 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, Foxconn 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Foxconn is facing challenges because of the dominance of functional experts in the organization. Foxconn can utilize new technology in the field of Computer Peripherals industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, Foxconn can use these opportunities to build new business models that can help the communities that Foxconn operates in. Secondly it can use opportunities from government spending in Computer Peripherals sector.

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

The threats of Foxconn are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Foxconn in Computer Peripherals industry. The Computer Peripherals 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.

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 Foxconn in the Computer Peripherals sector and impact the bottomline of the organization.

Learning curve for new practices

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

Barriers of entry lowering

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

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. Foxconn needs to understand the core reasons impacting the Computer Peripherals industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Foxconn 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 Foxconn prominent markets.

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 Foxconn.

Stagnating economy with rate increase

– Foxconn 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 Computer Peripherals industry.

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. Foxconn 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.

Increasing wage structure of Foxconn

– 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 Foxconn.

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 Foxconn 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 Computer Peripherals industry and other sectors.

Shortening product life cycle

– it is one of the major threat that Foxconn is facing in Computer Peripherals sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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Weighted SWOT Analysis of Foxconn Template, Example

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

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