Sanan Optoelectronics (600703) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sanan Optoelectronics (China)

Based on various researches at Oak Spring University , Sanan Optoelectronics is operating in a macro-environment that has been destablized by – increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is backlash against globalization, increasing transportation and logistics costs, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Sanan Optoelectronics

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

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

The strengths of Sanan Optoelectronics are -

Diverse revenue streams

– Sanan Optoelectronics is present in almost all the verticals within the Semiconductors industry. This has provided Sanan Optoelectronics 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.

Digital Transformation in Semiconductors industry

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

Training and development

– Sanan Optoelectronics 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.

Ability to recruit top talent

– Sanan Optoelectronics is one of the leading players in the Semiconductors 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.

High brand equity

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

Low bargaining power of suppliers

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

Superior customer experience

– The customer experience strategy of Sanan Optoelectronics in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that Sanan Optoelectronics 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.

Innovation driven organization

– Sanan Optoelectronics is one of the most innovative firm in Semiconductors sector.

Sustainable margins compare to other players in Semiconductors industry

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

Learning organization

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

Operational resilience

– The operational resilience strategy of Sanan Optoelectronics comprises – understanding the underlying the factors in the Semiconductors 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.

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

The weaknesses of Sanan Optoelectronics are -

No frontier risks strategy

– From the 10K / annual statement of Sanan Optoelectronics, it seems that company is thinking out the frontier risks that can impact Semiconductors 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.

Need for greater diversity

– Sanan Optoelectronics 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.

Products dominated business model

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

Interest costs

– Compare to the competition, Sanan Optoelectronics 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.

Capital Spending Reduction

– Even during the low interest decade, Sanan Optoelectronics 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 Semiconductors industry using digital technology.

High cash cycle compare to competitors

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

Ability to respond to the competition

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

Low market penetration in new markets

– Outside its home market of China, Sanan Optoelectronics needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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

Aligning sales with marketing

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

Slow decision making process

– As mentioned earlier in the report, Sanan Optoelectronics has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Semiconductors industry over the last five years. Sanan Optoelectronics 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.

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

The opportunities of Sanan Optoelectronics are -

Better consumer reach

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

Loyalty marketing

– Sanan Optoelectronics 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Sanan Optoelectronics 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.

Learning at scale

– Online learning technologies has now opened space for Sanan Optoelectronics 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.

Developing new processes and practices

– Sanan Optoelectronics can develop new processes and procedures in Semiconductors 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.

Creating value in data economy

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

Harnessing reconfiguration of the global supply chains

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Semiconductors industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sanan Optoelectronics 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. Sanan Optoelectronics 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.

Manufacturing automation

– Sanan Optoelectronics can use the latest technology developments to improve its manufacturing and designing process in Semiconductors 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 Sanan Optoelectronics 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 Sanan Optoelectronics to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

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

Building a culture of innovation

– managers at Sanan Optoelectronics 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 Semiconductors industry.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Sanan Optoelectronics is facing challenges because of the dominance of functional experts in the organization. Sanan Optoelectronics can utilize new technology in the field of Semiconductors industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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

The threats of Sanan Optoelectronics are -

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.

Technology acceleration in Forth Industrial Revolution

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

Easy access to finance

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

Barriers of entry lowering

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

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 Sanan Optoelectronics.

Increasing international competition and downward pressure on margins

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

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

Consumer confidence and its impact on Sanan Optoelectronics 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 Semiconductors industry and other sectors.

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. Sanan Optoelectronics 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Sanan Optoelectronics in Semiconductors industry. The Semiconductors 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.

Regulatory challenges

– Sanan Optoelectronics 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 Semiconductors industry regulations.

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Weighted SWOT Analysis of Sanan Optoelectronics Template, Example

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

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