North Electro-Optic (600184) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for North Electro-Optic (China)

Based on various researches at Oak Spring University , North Electro-Optic is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , technology disruption, central banks are concerned over increasing inflation, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, increasing commodity prices, etc

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Introduction to SWOT Analysis of North Electro-Optic

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

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Strengths of North Electro-Optic | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of North Electro-Optic are -

Cross disciplinary teams

– Horizontal connected teams at the North Electro-Optic 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

– North Electro-Optic is one of the most innovative firm in Aerospace & Defense sector.

Training and development

– North Electro-Optic has one of the best training and development program in Capital Goods 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 lead change in Aerospace & Defense

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

Low bargaining power of suppliers

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

Organizational Resilience of North Electro-Optic

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

High brand equity

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

Superior customer experience

– The customer experience strategy of North Electro-Optic in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Operational resilience

– The operational resilience strategy of North Electro-Optic comprises – understanding the underlying the factors in the Aerospace & Defense 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.

Effective Research and Development (R&D)

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

Learning organization

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

High switching costs

– The high switching costs that North Electro-Optic 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.

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Weaknesses of North Electro-Optic | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of North Electro-Optic are -

Aligning sales with marketing

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

Slow to strategic competitive environment developments

– As North Electro-Optic is one of the leading players in the Aerospace & Defense industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Aerospace & Defense industry in last five years.

Slow decision making process

– As mentioned earlier in the report, North Electro-Optic has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. North Electro-Optic 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.

Compensation and incentives

– The revenue per employee of North Electro-Optic is just above the Aerospace & Defense 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.

Low market penetration in new markets

– Outside its home market of China, North Electro-Optic needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Need for greater diversity

– North Electro-Optic 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.

Lack of clear differentiation of North Electro-Optic products

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

Increasing silos among functional specialists

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

Capital Spending Reduction

– Even during the low interest decade, North Electro-Optic 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 Aerospace & Defense industry using digital technology.

Skills based hiring in Aerospace & Defense industry

– The stress on hiring functional specialists at North Electro-Optic 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.

High dependence on North Electro-Optic ‘s star products

– The top 2 products and services of North Electro-Optic still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though North Electro-Optic has relatively successful track record of launching new products.

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North Electro-Optic Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of North Electro-Optic are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for North Electro-Optic in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Manufacturing automation

– North Electro-Optic can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense 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.

Better consumer reach

– The expansion of the 5G network will help North Electro-Optic to increase its market reach. North Electro-Optic 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

– North Electro-Optic has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled North Electro-Optic to build a competitive advantage using analytics. The analytics driven competitive advantage can help North Electro-Optic 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. North Electro-Optic can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– North Electro-Optic 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.

Harnessing reconfiguration of the global supply chains

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

Developing new processes and practices

– North Electro-Optic can develop new processes and procedures in Aerospace & Defense 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.

Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for North Electro-Optic in the Aerospace & Defense industry. Now North Electro-Optic can target international markets with far fewer capital restrictions requirements than the existing system.

Reforming the budgeting process

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. North Electro-Optic 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. North Electro-Optic 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.

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 North Electro-Optic 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.

Building a culture of innovation

– managers at North Electro-Optic 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 Aerospace & Defense industry.

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Threats North Electro-Optic External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of North Electro-Optic are -

Consumer confidence and its impact on North Electro-Optic 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 Aerospace & Defense industry and other sectors.

Technology acceleration in Forth Industrial Revolution

– North Electro-Optic has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, North Electro-Optic needs to keep up with the evolution of technology in the Aerospace & Defense 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.

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 North Electro-Optic business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– North Electro-Optic 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 Aerospace & Defense industry regulations.

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 North Electro-Optic in the Aerospace & Defense sector and impact the bottomline of the organization.

High dependence on third party suppliers

– North Electro-Optic 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.

Environmental challenges

– North Electro-Optic 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. North Electro-Optic can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents North Electro-Optic with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, North Electro-Optic 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 North Electro-Optic prominent markets.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, North Electro-Optic may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for North Electro-Optic in Aerospace & Defense industry. The Aerospace & Defense 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.

Stagnating economy with rate increase

– North Electro-Optic 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 Aerospace & Defense industry.

Easy access to finance

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

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Weighted SWOT Analysis of North Electro-Optic Template, Example

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

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