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 energy prices, geopolitical disruptions, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -

Ability to lead change in Computer Peripherals

– Foxconn is one of the leading players in the Computer Peripherals industry in China. Over the years it has not only transformed the business landscape in the Computer Peripherals industry in China but also across the existing markets. The ability to lead change has enabled Foxconn in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

High brand equity

– Foxconn has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Foxconn to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Organizational Resilience of Foxconn

– The covid-19 pandemic has put organizational resilience at the centre of everthing Foxconn does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to recruit top talent

– Foxconn is one of the leading players in the Computer Peripherals industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.

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.

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.

Training and development

– Foxconn 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.

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.

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.

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.

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.

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.

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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 -

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.

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.

Capital Spending Reduction

– Even during the low interest decade, Foxconn 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 Computer Peripherals industry using digital technology.

Workers concerns about automation

– As automation is fast increasing in the Computer Peripherals industry, Foxconn 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.

Slow to strategic competitive environment developments

– As Foxconn is one of the leading players in the Computer Peripherals industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Computer Peripherals industry in last five years.

Aligning sales with marketing

– From the outside it seems that Foxconn needs to have more collaboration between its sales team and marketing team. Sales professionals in the Computer Peripherals industry have deep experience in developing customer relationships. Marketing department at Foxconn can leverage the sales team experience to cultivate customer relationships as Foxconn is planning to shift buying processes online.

Lack of clear differentiation of Foxconn products

– To increase the profitability and margins on the products, Foxconn needs to provide more differentiated products than what it is currently offering in the marketplace.

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.

Employees’ less understanding of Foxconn strategy

– From the outside it seems that the employees of Foxconn 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 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.

High dependence on Foxconn ‘s star products

– The top 2 products and services of Foxconn still accounts for major business revenue. This dependence on star products in Computer Peripherals industry has resulted into insufficient focus on developing new products, even though Foxconn has relatively successful track record of launching new products.

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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 -

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.

Manufacturing automation

– Foxconn can use the latest technology developments to improve its manufacturing and designing process in Computer Peripherals 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.

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.

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.

Leveraging digital technologies

– Foxconn 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Foxconn in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Computer Peripherals industry, and it will provide faster access to the consumers.

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.

Better consumer reach

– The expansion of the 5G network will help Foxconn to increase its market reach. Foxconn 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.

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.

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.

Building a culture of innovation

– managers at Foxconn 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 Computer Peripherals industry.

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.

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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 -

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.

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.

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

Technology acceleration in Forth Industrial Revolution

– Foxconn has witnessed rapid integration of technology during Covid-19 in the Computer Peripherals industry. As one of the leading players in the industry, Foxconn needs to keep up with the evolution of technology in the Computer Peripherals 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.

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.

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.

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.

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.

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.

Environmental challenges

– Foxconn 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. Foxconn can take advantage of this fund but it will also bring new competitors 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.

Easy access to finance

– Easy access to finance in Computer Peripherals industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Foxconn can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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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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