Applied Materials SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Applied Materials managers to do a situational analysis of the company . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Applied Materials is facing in its current business environment.

The Applied Materials is one of the leading companies in its industry. Applied Materials maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Applied Materials to develop four types of strategies:

• SO (strengths-opportunities) Strategies
• WO (weaknesses-opportunities) Strategies
• ST (strengths-threats) Strategies
•  WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The main purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Applied Materials strengths, and eradicate its weaknesses.

Step by Step Guide to Applied Materials SWOT Analysis

Strengths of Applied Materials – Internal Strategic Factors

As one of the leading organizations in its industry, Applied Materials has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Applied Materials are –

• High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
• Successful track record of developing new products – product innovation.
• Highly successful at Go To Market strategies for its products.
• Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
• Strong Brand Portfolio – Over the years Applied Materials has invested in building a strong brand portfolio. The SWOT analysis of Applied Materials just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
• Automation of activities brought consistency of quality to Applied Materials products and has enabled the company to scale up and scale down based on the demand conditions in the market.
• Strong Free Cash Flow – Applied Materials has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.

Weakness of Applied Materials – Internal Strategic Factors

Weakness are the areas where Applied Materials can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

• Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
• The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
• The profitability ratio and Net Contribution % of Applied Materials are below the industry average.
• Limited success outside core business – Even though Applied Materials is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Applied Materials is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• Not highly successful at integrating firms with different work culture. As mentioned earlier even though Applied Materials is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities for Applied Materials – External Strategic Factors

• Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Applied Materials in other product categories.
• The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Applied Materials to increase its profitability.
• New trends in the consumer behavior can open up new market for the Applied Materials . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Applied Materials.
• The market development will lead to dilution of competitor’s advantage and enable Applied Materials to increase its competitiveness compare to the other competitors.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Applied Materials an opportunity to enter a new emerging market.
• The new technology provides an opportunity to Applied Materials to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
• New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Applied Materials to drive home its advantage in new technology and gain market share in the new product category.

Threats Applied Materials Facing - External Strategic Factors

• New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
• Imitation of the counterfeit and low quality product is also a threat to Applied Materials’s product especially in the emerging markets and low income markets.
• Liability laws in different countries are different and Applied Materials may be exposed to various liability claims given change in policies in those markets.
• Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Applied Materials   in those markets.
• Rising raw material can pose a threat to the Applied Materials profitability.
• As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.

Limitations of SWOT Analysis for Applied Materials

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

• Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
• SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
• The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Applied Materials
• SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
• SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Applied Materials

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Applied Materials managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Applied Materials

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

• M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
• A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
• O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
• L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
• R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)