First Solar (FSLR) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for First Solar (Germany)
Based on various researches at Oak Spring University , First Solar is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing energy prices, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, increasing government debt because of Covid-19 spendings,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that First Solar can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the First Solar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which First Solar 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 First Solar can be done for the following purposes –
1. Strategic planning of First Solar
2. Improving business portfolio management of First Solar
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 First Solar
Strengths of First Solar | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of First Solar are -
Ability to lead change in Semiconductors
– First Solar 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 First Solar in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– First Solar is present in almost all the verticals within the Semiconductors industry. This has provided First Solar 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 Semiconductors industry
– First Solar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of First Solar in the Technology sector have low bargaining power. First Solar has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps First Solar to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– First Solar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. First Solar 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.
High brand equity
– First Solar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled First Solar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of First Solar
– The covid-19 pandemic has put organizational resilience at the centre of everthing First Solar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– First Solar 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.
Highly skilled collaborators
– First Solar 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 First Solar have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of First Solar 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.
Innovation driven organization
– First Solar is one of the most innovative firm in Semiconductors sector.
Sustainable margins compare to other players in Semiconductors industry
– First Solar has clearly differentiated products in the market place. This has enabled First Solar to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped First Solar to invest into research and development (R&D) and innovation.
Weaknesses of First Solar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of First Solar are -
Need for greater diversity
– First Solar 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 dependence on First Solar ‘s star products
– The top 2 products and services of First Solar 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 First Solar has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, First Solar 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.
Aligning sales with marketing
– From the outside it seems that First Solar 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 First Solar can leverage the sales team experience to cultivate customer relationships as First Solar is planning to shift buying processes online.
No frontier risks strategy
– From the 10K / annual statement of First Solar, 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 bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in Germany, First Solar 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.
Low market penetration in new markets
– Outside its home market of Germany, First Solar needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of First Solar products
– To increase the profitability and margins on the products, First Solar needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at First Solar has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, First Solar 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.
Products dominated business model
– Even though First Solar 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. First Solar should strive to include more intangible value offerings along with its core products and services.
First Solar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of First Solar are -
Low interest rates
– Even though inflation is raising its head in most developed economies, First Solar 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, First Solar can use these opportunities to build new business models that can help the communities that First Solar operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, First Solar 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 First Solar to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– First Solar 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for First Solar 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.
Loyalty marketing
– First Solar 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.
Building a culture of innovation
– managers at First Solar 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.
Leveraging digital technologies
– First Solar 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.
Learning at scale
– Online learning technologies has now opened space for First Solar 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.
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 First Solar in the Semiconductors industry. Now First Solar 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 First Solar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help First Solar to increase its market reach. First Solar 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, First Solar is facing challenges because of the dominance of functional experts in the organization. First Solar 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.
Threats First Solar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of First Solar are -
Environmental challenges
– First Solar 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. First Solar can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
Technology acceleration in Forth Industrial Revolution
– First Solar has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, First Solar 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.
Consumer confidence and its impact on First Solar 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.
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 First Solar business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of First Solar
– 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 First Solar.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for First Solar 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.
Shortening product life cycle
– it is one of the major threat that First Solar is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. First Solar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– First Solar 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, First Solar 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 dependence on third party suppliers
– First Solar 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.
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 First Solar.
Weighted SWOT Analysis of First Solar Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at First Solar 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 First Solar 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 First Solar 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 First Solar 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 First Solar needs to make to build a sustainable competitive advantage.