North Electro-Optic (600184) SWOT Analysis / TOWS Matrix / MBA Resources
Aerospace & Defense
Strategy / 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 – supply chains are disrupted by pandemic , there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China,
cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
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.
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
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 -
Innovation driven organization
– North Electro-Optic is one of the most innovative firm in Aerospace & Defense sector.
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 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.
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.
Digital Transformation in Aerospace & Defense industry
- digital transformation varies from industry to industry. For North Electro-Optic digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. North Electro-Optic 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.
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.
Ability to recruit top talent
– North Electro-Optic is one of the leading players in the Aerospace & Defense 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.
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.
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.
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.
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.
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.
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 -
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.
High cash cycle compare to competitors
North Electro-Optic has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of North Electro-Optic strategy
– From the outside it seems that the employees of North Electro-Optic 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at North Electro-Optic, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. North Electro-Optic has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though North Electro-Optic has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. North Electro-Optic should strive to include more intangible value offerings along with its core products and services.
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.
Workers concerns about automation
– As automation is fast increasing in the Aerospace & Defense industry, North Electro-Optic 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, North Electro-Optic is slow explore the new channels of communication. These new channels of communication can help North Electro-Optic to provide better information regarding Aerospace & Defense products and services. It can also build an online community to further reach out to potential customers.
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.
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 -
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Aerospace & Defense industry, but it has also influenced the consumer preferences. North Electro-Optic can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
Leveraging digital technologies
– North Electro-Optic 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.
Buying journey improvements
– North Electro-Optic can improve the customer journey of consumers in the Aerospace & Defense 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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, North Electro-Optic can use these opportunities to build new business models that can help the communities that North Electro-Optic operates in. Secondly it can use opportunities from government spending in Aerospace & Defense sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, North Electro-Optic 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.
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 -
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. North Electro-Optic needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.
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.
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 North Electro-Optic.
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.
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.
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.
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.
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.
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.
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.
Increasing wage structure of North Electro-Optic
– 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 North Electro-Optic.
Shortening product life cycle
– it is one of the major threat that North Electro-Optic is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
