SWOT Analysis / TOWS Matrix for Applied Materials (Hong Kong)
Based on various researches at Oak Spring University , Applied Materials is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, technology disruption,
supply chains are disrupted by pandemic , increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Applied Materials
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Applied Materials can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Applied Materials, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Applied Materials 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 Applied Materials can be done for the following purposes –
1. Strategic planning of Applied Materials
2. Improving business portfolio management of Applied Materials
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Applied Materials
Strengths of Applied Materials | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Applied Materials are -
Ability to lead change in Semiconductors
– Applied Materials is one of the leading players in the Semiconductors industry in Hong Kong. Over the years it has not only transformed the business landscape in the Semiconductors industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Applied Materials in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For Applied Materials digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Applied Materials 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.
Operational resilience
– The operational resilience strategy of Applied Materials 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
– Applied Materials is one of the most innovative firm in Semiconductors sector.
Effective Research and Development (R&D)
– Applied Materials has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Applied Materials 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.
Sustainable margins compare to other players in Semiconductors industry
– Applied Materials has clearly differentiated products in the market place. This has enabled Applied Materials to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped Applied Materials to invest into research and development (R&D) and innovation.
Organizational Resilience of Applied Materials
– The covid-19 pandemic has put organizational resilience at the centre of everthing Applied Materials does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Applied Materials 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.
Low bargaining power of suppliers
– Suppliers of Applied Materials in the Technology sector have low bargaining power. Applied Materials has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Applied Materials to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Applied Materials 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 Hong Kong 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
- Applied Materials 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 Applied Materials is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Applied Materials emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Applied Materials 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.
Weaknesses of Applied Materials | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Applied Materials are -
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, Applied Materials 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, Applied Materials is slow explore the new channels of communication. These new channels of communication can help Applied Materials to provide better information regarding Semiconductors products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in Hong Kong, Applied Materials 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.
Lack of clear differentiation of Applied Materials products
– To increase the profitability and margins on the products, Applied Materials needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Applied Materials 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. Applied Materials should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Applied Materials 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.
Slow decision making process
– As mentioned earlier in the report, Applied Materials 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. Applied Materials 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.
Aligning sales with marketing
– From the outside it seems that Applied Materials 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 Applied Materials can leverage the sales team experience to cultivate customer relationships as Applied Materials is planning to shift buying processes online.
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at Applied Materials 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.
Compensation and incentives
– The revenue per employee of Applied Materials 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.
Ability to respond to the competition
– As the decision making is very deliberative at Applied Materials, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. Applied Materials has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Applied Materials Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Applied Materials are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Applied Materials 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.
Buying journey improvements
– Applied Materials 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.
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 Applied Materials 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.
Creating value in data economy
– The success of analytics program of Applied Materials has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help Applied Materials to build a more holistic ecosystem for Applied Materials 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, Applied Materials 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.
Manufacturing automation
– Applied Materials 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.
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. Applied Materials 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. Applied Materials 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.
Leveraging digital technologies
– Applied Materials 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, Applied Materials is facing challenges because of the dominance of functional experts in the organization. Applied Materials 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Applied Materials can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Applied Materials 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 Applied Materials in the Semiconductors industry. Now Applied Materials can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Applied Materials 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.
Threats Applied Materials External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Applied Materials are -
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. Applied Materials 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.
Shortening product life cycle
– it is one of the major threat that Applied Materials is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Applied Materials 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.
Consumer confidence and its impact on Applied Materials 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.
Technology acceleration in Forth Industrial Revolution
– Applied Materials has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, Applied Materials 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.
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. Applied Materials needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Applied Materials 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 Applied Materials prominent markets.
Stagnating economy with rate increase
– Applied Materials 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.
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. Applied Materials can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Applied Materials 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.
Environmental challenges
– Applied Materials 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. Applied Materials can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Applied Materials 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.
Weighted SWOT Analysis of Applied Materials Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials needs to make to build a sustainable competitive advantage.
