STMicroelectronics (STM) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for STMicroelectronics (France)

Based on various researches at Oak Spring University , STMicroelectronics is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing commodity prices, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of STMicroelectronics

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

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

The strengths of STMicroelectronics are -

Successful track record of launching new products

– STMicroelectronics has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. STMicroelectronics has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Effective Research and Development (R&D)

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

Digital Transformation in Semiconductors industry

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

Highly skilled collaborators

– STMicroelectronics has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Semiconductors industry. Secondly the value chain collaborators of STMicroelectronics have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

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

Innovation driven organization

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

Cross disciplinary teams

– Horizontal connected teams at the STMicroelectronics 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.

Ability to recruit top talent

– STMicroelectronics is one of the leading players in the Semiconductors 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.

Training and development

– STMicroelectronics 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.

Analytics focus

– STMicroelectronics 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 Semiconductors 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.

Learning organization

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

Operational resilience

– The operational resilience strategy of STMicroelectronics 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 STMicroelectronics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of STMicroelectronics are -

Workers concerns about automation

– As automation is fast increasing in the Semiconductors industry, STMicroelectronics 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.

Increasing silos among functional specialists

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

Products dominated business model

– Even though STMicroelectronics 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. STMicroelectronics should strive to include more intangible value offerings along with its core products and services.

High bargaining power of channel partners in Semiconductors industry

– because of the regulatory requirements in France, STMicroelectronics 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 Semiconductors industry.

Ability to respond to the competition

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

Compensation and incentives

– The revenue per employee of STMicroelectronics is just above the Semiconductors 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

STMicroelectronics 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.

Low market penetration in new markets

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

Aligning sales with marketing

– From the outside it seems that STMicroelectronics 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 STMicroelectronics can leverage the sales team experience to cultivate customer relationships as STMicroelectronics is planning to shift buying processes online.

Employees’ less understanding of STMicroelectronics strategy

– From the outside it seems that the employees of STMicroelectronics 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.

Need for greater diversity

– STMicroelectronics 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.

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

The opportunities of STMicroelectronics are -

Leveraging digital technologies

– STMicroelectronics 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, STMicroelectronics is facing challenges because of the dominance of functional experts in the organization. STMicroelectronics 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for STMicroelectronics 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.

Developing new processes and practices

– STMicroelectronics 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.

Using analytics as competitive advantage

– STMicroelectronics has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Semiconductors sector. This continuous investment in analytics has enabled STMicroelectronics to build a competitive advantage using analytics. The analytics driven competitive advantage can help STMicroelectronics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Building a culture of innovation

– managers at STMicroelectronics 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.

Use of Bitcoin and other crypto currencies for transactions in Semiconductors industry

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

Harnessing reconfiguration of the global supply chains

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

Increase in government spending

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

Low interest rates

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

Buying journey improvements

– STMicroelectronics can improve the customer journey of consumers in the Semiconductors 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.

Learning at scale

– Online learning technologies has now opened space for STMicroelectronics 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for STMicroelectronics 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 STMicroelectronics to hire the very best people irrespective of their geographical location.

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

The threats of STMicroelectronics are -

Technology acceleration in Forth Industrial Revolution

– STMicroelectronics has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, STMicroelectronics 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.

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.

Shortening product life cycle

– it is one of the major threat that STMicroelectronics is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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

High dependence on third party suppliers

– STMicroelectronics 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.

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.

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. STMicroelectronics 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.

Barriers of entry lowering

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

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 STMicroelectronics.

Environmental challenges

– STMicroelectronics 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. STMicroelectronics can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.

Stagnating economy with rate increase

– STMicroelectronics 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 Semiconductors industry.

Regulatory challenges

– STMicroelectronics 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.

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. STMicroelectronics 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 STMicroelectronics Template, Example

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

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