Thales (TCFP) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Thales (France)

Based on various researches at Oak Spring University , Thales is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing energy prices, etc

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Introduction to SWOT Analysis of Thales

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

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

The strengths of Thales are -

Organizational Resilience of Thales

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

Ability to recruit top talent

– Thales is one of the leading players in the Communications Equipment industry in France. It is in a position to attract the best talent available in France. The firm has a robust talent identification program that helps in identifying the brightest.

Analytics focus

– Thales is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Communications Equipment industry. The technology infrastructure of France is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Diverse revenue streams

– Thales is present in almost all the verticals within the Communications Equipment industry. This has provided Thales 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.

Strong track record of project management in the Communications Equipment industry

– Thales is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

High switching costs

– The high switching costs that Thales 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.

Ability to lead change in Communications Equipment

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

Digital Transformation in Communications Equipment industry

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

Low bargaining power of suppliers

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

High brand equity

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

Effective Research and Development (R&D)

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

Cross disciplinary teams

– Horizontal connected teams at the Thales 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 Thales | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Thales are -

Need for greater diversity

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

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

Interest costs

– Compare to the competition, Thales 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.

Workers concerns about automation

– As automation is fast increasing in the Communications Equipment industry, Thales 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.

High bargaining power of channel partners in Communications Equipment industry

– because of the regulatory requirements in France, Thales is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Communications Equipment industry.

Lack of clear differentiation of Thales products

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

Slow decision making process

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

High cash cycle compare to competitors

Thales has a high cash cycle compare to other players in the Communications Equipment 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 Thales is just above the Communications Equipment 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 France, Thales needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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

The opportunities of Thales are -

Lowering marketing communication costs

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Thales can use these opportunities to build new business models that can help the communities that Thales operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.

Manufacturing automation

– Thales can use the latest technology developments to improve its manufacturing and designing process in Communications Equipment 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.

Low interest rates

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

Harnessing reconfiguration of the global supply chains

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

Leveraging digital technologies

– Thales 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Communications Equipment industry, but it has also influenced the consumer preferences. Thales can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Creating value in data economy

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

Buying journey improvements

– Thales can improve the customer journey of consumers in the Communications Equipment 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.

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 Thales 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.

Better consumer reach

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

Redefining models of collaboration and team work

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

Learning at scale

– Online learning technologies has now opened space for Thales 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.

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

The threats of Thales are -

Increasing international competition and downward pressure on margins

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

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Thales may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Equipment sector.

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. Thales 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.

High dependence on third party suppliers

– Thales 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.

Technology acceleration in Forth Industrial Revolution

– Thales has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, Thales needs to keep up with the evolution of technology in the Communications Equipment 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 Thales business can come under increasing regulations regarding data privacy, data security, etc.

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 Thales.

Consumer confidence and its impact on Thales 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 Communications Equipment industry and other sectors.

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 Thales in the Communications Equipment sector and impact the bottomline of the organization.

Regulatory challenges

– Thales 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 Communications Equipment 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. Thales needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.

Stagnating economy with rate increase

– Thales 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 Communications Equipment industry.

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Weighted SWOT Analysis of Thales Template, Example

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

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