SWOT Analysis / TOWS Matrix for AAC Technologies (Hong Kong)
Based on various researches at Oak Spring University , AAC Technologies is operating in a macro-environment that has been destablized by – technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, 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 AAC Technologies can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AAC Technologies, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AAC Technologies 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 AAC Technologies can be done for the following purposes –
1. Strategic planning of AAC Technologies
2. Improving business portfolio management of AAC Technologies
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AAC Technologies
Strengths of AAC Technologies | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AAC Technologies are -
Diverse revenue streams
– AAC Technologies is present in almost all the verticals within the Electronic Instr. & Controls industry. This has provided AAC Technologies 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.
Digital Transformation in Electronic Instr. & Controls industry
- digital transformation varies from industry to industry. For AAC Technologies digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AAC Technologies 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.
Low bargaining power of suppliers
– Suppliers of AAC Technologies in the Technology sector have low bargaining power. AAC Technologies has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AAC Technologies to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– AAC Technologies has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electronic Instr. & Controls industry. Secondly the value chain collaborators of AAC Technologies have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– AAC Technologies has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AAC Technologies to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– AAC Technologies has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AAC Technologies staying ahead in the Electronic Instr. & Controls industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that AAC Technologies 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.
Cross disciplinary teams
– Horizontal connected teams at the AAC Technologies 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.
Organizational Resilience of AAC Technologies
– The covid-19 pandemic has put organizational resilience at the centre of everthing AAC Technologies does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- AAC Technologies 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 AAC Technologies is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AAC Technologies emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– AAC Technologies is one of the most innovative firm in Electronic Instr. & Controls sector.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– AAC Technologies has clearly differentiated products in the market place. This has enabled AAC Technologies to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped AAC Technologies to invest into research and development (R&D) and innovation.
Weaknesses of AAC Technologies | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AAC Technologies are -
Interest costs
– Compare to the competition, AAC Technologies 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.
Capital Spending Reduction
– Even during the low interest decade, AAC Technologies 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 Electronic Instr. & Controls industry using digital technology.
Need for greater diversity
– AAC Technologies 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 AAC Technologies ‘s star products
– The top 2 products and services of AAC Technologies still accounts for major business revenue. This dependence on star products in Electronic Instr. & Controls industry has resulted into insufficient focus on developing new products, even though AAC Technologies has relatively successful track record of launching new products.
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 AAC Technologies supply chain. Even after few cautionary changes, AAC Technologies is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AAC Technologies vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of AAC Technologies is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but AAC Technologies needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AAC Technologies to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in Hong Kong, AAC Technologies 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 Electronic Instr. & Controls industry.
Lack of clear differentiation of AAC Technologies products
– To increase the profitability and margins on the products, AAC Technologies needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Electronic Instr. & Controls industry
– The stress on hiring functional specialists at AAC Technologies 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 AAC Technologies is just above the Electronic Instr. & Controls 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 operating costs
– Compare to the competitors, AAC Technologies has high operating costs in the Electronic Instr. & Controls industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract AAC Technologies lucrative customers.
AAC Technologies Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AAC Technologies are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Electronic Instr. & Controls industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AAC Technologies 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. AAC Technologies 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.
Developing new processes and practices
– AAC Technologies can develop new processes and procedures in Electronic Instr. & Controls 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.
Manufacturing automation
– AAC Technologies can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, AAC Technologies is facing challenges because of the dominance of functional experts in the organization. AAC Technologies can utilize new technology in the field of Electronic Instr. & Controls industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for AAC Technologies 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.
Leveraging digital technologies
– AAC Technologies 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AAC Technologies in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electronic Instr. & Controls industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AAC Technologies in the Electronic Instr. & Controls industry. Now AAC Technologies can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AAC Technologies can use these opportunities to build new business models that can help the communities that AAC Technologies operates in. Secondly it can use opportunities from government spending in Electronic Instr. & Controls sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, AAC Technologies 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 AAC Technologies to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 AAC Technologies 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for AAC Technologies 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 AAC Technologies to hire the very best people irrespective of their geographical location.
Buying journey improvements
– AAC Technologies can improve the customer journey of consumers in the Electronic Instr. & Controls 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.
Threats AAC Technologies External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AAC Technologies are -
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. AAC Technologies needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
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. AAC Technologies 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.
High dependence on third party suppliers
– AAC Technologies 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, AAC Technologies may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
Stagnating economy with rate increase
– AAC Technologies 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 Electronic Instr. & Controls industry.
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.
Increasing wage structure of AAC Technologies
– 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 AAC Technologies.
Easy access to finance
– Easy access to finance in Electronic Instr. & Controls industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AAC Technologies can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AAC Technologies 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 AAC Technologies prominent markets.
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 AAC Technologies business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– AAC Technologies 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. AAC Technologies can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents AAC Technologies with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electronic Instr. & Controls 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 AAC Technologies.
Weighted SWOT Analysis of AAC Technologies Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AAC Technologies 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 AAC Technologies 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 AAC Technologies 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 AAC Technologies 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 AAC Technologies needs to make to build a sustainable competitive advantage.