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 – supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, wage bills are increasing, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, 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 -

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.

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.

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.

Operational resilience

– The operational resilience strategy of Foxconn comprises – understanding the underlying the factors in the Computer Peripherals 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.

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.

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.

Superior customer experience

– The customer experience strategy of Foxconn in Computer Peripherals industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous 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.

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.

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.

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.

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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.

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 harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Foxconn is slow explore the new channels of communication. These new channels of communication can help Foxconn to provide better information regarding Computer Peripherals products and services. It can also build an online community to further reach out to potential customers.

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.

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.

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.

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.

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 cash cycle compare to competitors

Foxconn has a high cash cycle compare to other players in the Computer Peripherals industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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.

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.

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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 -

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.

Learning at scale

– Online learning technologies has now opened space for Foxconn 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.

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.

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.

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.

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.

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 Foxconn 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.

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.

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.

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.

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.

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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 -

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.

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.

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.

Regulatory challenges

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

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.

High dependence on third party suppliers

– Foxconn 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. 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.

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.

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.

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.

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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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