NVIDIA (NVDA) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for NVIDIA (Germany)
Based on various researches at Oak Spring University , NVIDIA is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, technology disruption, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, talent flight as more people leaving formal jobs, increasing commodity prices,
increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that NVIDIA can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the NVIDIA, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which NVIDIA 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 NVIDIA can be done for the following purposes –
1. Strategic planning of NVIDIA
2. Improving business portfolio management of NVIDIA
3. Assessing feasibility of the new initiative in Germany
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of NVIDIA
Strengths of NVIDIA | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of NVIDIA are -
Learning organization
- NVIDIA 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 NVIDIA is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at NVIDIA emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the NVIDIA 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 lead change in Semiconductors
– NVIDIA is one of the leading players in the Semiconductors industry in Germany. Over the years it has not only transformed the business landscape in the Semiconductors industry in Germany but also across the existing markets. The ability to lead change has enabled NVIDIA in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– NVIDIA 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.
Superior customer experience
– The customer experience strategy of NVIDIA in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For NVIDIA digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. NVIDIA 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.
Sustainable margins compare to other players in Semiconductors industry
– NVIDIA has clearly differentiated products in the market place. This has enabled NVIDIA to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped NVIDIA to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– NVIDIA 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 NVIDIA have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– NVIDIA has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – NVIDIA 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.
Innovation driven organization
– NVIDIA is one of the most innovative firm in Semiconductors sector.
Successful track record of launching new products
– NVIDIA has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. NVIDIA 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.
Operational resilience
– The operational resilience strategy of NVIDIA 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.
Weaknesses of NVIDIA | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NVIDIA are -
High operating costs
– Compare to the competitors, NVIDIA has high operating costs in the Semiconductors industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract NVIDIA lucrative customers.
High dependence on NVIDIA ‘s star products
– The top 2 products and services of NVIDIA still accounts for major business revenue. This dependence on star products in Semiconductors industry has resulted into insufficient focus on developing new products, even though NVIDIA has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, NVIDIA 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, NVIDIA is slow explore the new channels of communication. These new channels of communication can help NVIDIA to provide better information regarding Semiconductors products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of NVIDIA 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 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 NVIDIA supply chain. Even after few cautionary changes, NVIDIA is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left NVIDIA vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, NVIDIA 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.
Need for greater diversity
– NVIDIA 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.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in Germany, NVIDIA 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.
Increasing silos among functional specialists
– The organizational structure of NVIDIA is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but NVIDIA needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help NVIDIA to focus more on services in the Semiconductors industry rather than just following the product oriented approach.
Employees’ less understanding of NVIDIA strategy
– From the outside it seems that the employees of NVIDIA 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.
NVIDIA Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of NVIDIA are -
Buying journey improvements
– NVIDIA 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for NVIDIA 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 NVIDIA to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Semiconductors industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. NVIDIA 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. NVIDIA 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Semiconductors industry, but it has also influenced the consumer preferences. NVIDIA can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at NVIDIA 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, NVIDIA 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.
Better consumer reach
– The expansion of the 5G network will help NVIDIA to increase its market reach. NVIDIA 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects NVIDIA can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– NVIDIA 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.
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. NVIDIA can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 NVIDIA 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, NVIDIA 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 NVIDIA to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 NVIDIA in the Semiconductors industry. Now NVIDIA can target international markets with far fewer capital restrictions requirements than the existing system.
Threats NVIDIA External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of NVIDIA are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for NVIDIA in Semiconductors industry. The Semiconductors industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– NVIDIA 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents NVIDIA with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Environmental challenges
– NVIDIA 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. NVIDIA can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
Increasing wage structure of NVIDIA
– 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 NVIDIA.
Regulatory challenges
– NVIDIA 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.
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. NVIDIA 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.
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 NVIDIA in the Semiconductors sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, NVIDIA may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Semiconductors sector.
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. NVIDIA needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
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 NVIDIA.
Shortening product life cycle
– it is one of the major threat that NVIDIA is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on NVIDIA demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Semiconductors industry and other sectors.
Weighted SWOT Analysis of NVIDIA Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA needs to make to build a sustainable competitive advantage.