SWOT Analysis / TOWS Matrix for ASML Holding (Germany)
Based on various researches at Oak Spring University , ASML Holding is operating in a macro-environment that has been destablized by – geopolitical disruptions, supply chains are disrupted by pandemic , increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies,
technology disruption, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ASML Holding can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ASML Holding, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ASML Holding 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 ASML Holding can be done for the following purposes –
1. Strategic planning of ASML Holding
2. Improving business portfolio management of ASML Holding
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 ASML Holding
Strengths of ASML Holding | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ASML Holding are -
Highly skilled collaborators
– ASML Holding 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 ASML Holding have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– ASML Holding is one of the most innovative firm in Semiconductors sector.
Successful track record of launching new products
– ASML Holding has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ASML Holding 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.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For ASML Holding digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ASML Holding 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.
Ability to lead change in Semiconductors
– ASML Holding 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 ASML Holding in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- ASML Holding 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 ASML Holding is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at ASML Holding emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that ASML Holding 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.
Strong track record of project management in the Semiconductors industry
– ASML Holding is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Semiconductors industry
– ASML Holding has clearly differentiated products in the market place. This has enabled ASML Holding to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped ASML Holding to invest into research and development (R&D) and innovation.
Training and development
– ASML Holding 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.
Cross disciplinary teams
– Horizontal connected teams at the ASML Holding 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.
Superior customer experience
– The customer experience strategy of ASML Holding in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of ASML Holding | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ASML Holding are -
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in Germany, ASML Holding 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.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, ASML Holding 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 decision making process
– As mentioned earlier in the report, ASML Holding has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Semiconductors industry over the last five years. ASML Holding 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 operating costs
– Compare to the competitors, ASML Holding 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 ASML Holding lucrative customers.
Interest costs
– Compare to the competition, ASML Holding 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.
No frontier risks strategy
– From the 10K / annual statement of ASML Holding, it seems that company is thinking out the frontier risks that can impact Semiconductors industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on ASML Holding ‘s star products
– The top 2 products and services of ASML Holding 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 ASML Holding has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, ASML Holding 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 Semiconductors industry using digital technology.
Lack of clear differentiation of ASML Holding products
– To increase the profitability and margins on the products, ASML Holding needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As ASML Holding is one of the leading players in the Semiconductors industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Semiconductors industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at ASML Holding, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. ASML Holding has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
ASML Holding Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ASML Holding are -
Better consumer reach
– The expansion of the 5G network will help ASML Holding to increase its market reach. ASML Holding 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.
Buying journey improvements
– ASML Holding 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.
Loyalty marketing
– ASML Holding 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for ASML Holding 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.
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. ASML Holding can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– ASML Holding can use the latest technology developments to improve its manufacturing and designing process in Semiconductors 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, ASML Holding 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 ASML Holding to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. ASML Holding 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 ASML Holding has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help ASML Holding to build a more holistic ecosystem for ASML Holding products in the Semiconductors industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, ASML Holding 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.
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 ASML Holding in the Semiconductors industry. Now ASML Holding can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– ASML Holding 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ASML Holding can use these opportunities to build new business models that can help the communities that ASML Holding operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
Threats ASML Holding External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ASML Holding are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, ASML Holding 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 ASML Holding prominent markets.
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.
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 ASML Holding.
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. ASML Holding needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
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 ASML Holding business can come under increasing regulations regarding data privacy, data security, etc.
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 ASML Holding in the Semiconductors sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– ASML Holding has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, ASML Holding 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.
Stagnating economy with rate increase
– ASML Holding 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.
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. ASML Holding 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.
Increasing wage structure of ASML Holding
– 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 ASML Holding.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for ASML Holding 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.
Regulatory challenges
– ASML Holding 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.
High dependence on third party suppliers
– ASML Holding 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.
Weighted SWOT Analysis of ASML Holding Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ASML Holding 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 ASML Holding 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 ASML Holding 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 ASML Holding 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 ASML Holding needs to make to build a sustainable competitive advantage.
