KLA-Tencor SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by KLA-Tencor managers to do a situational analysis of the firm . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) KLA-Tencor is facing in its current business environment.

The KLA-Tencor is one of the leading companies in its industry. KLA-Tencor maintains its dominant position in market by critically 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 enables 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 KLA-Tencor to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
KLA-Tencor swot analysis / matrix

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 KLA-Tencor strengths, and eradicate its weaknesses.

Step by Step Guide to KLA-Tencor SWOT Analysis

Strengths of KLA-Tencor – Internal Strategic Factors

As one of the leading companies in its industry, KLA-Tencor has numerous strengths that help 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 KLA-Tencor are –

  • Strong Free Cash Flow – KLA-Tencor has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Strong Brand Portfolio – Over the years KLA-Tencor has invested in building a strong brand portfolio. The SWOT analysis of KLA-Tencor just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
  • Highly skilled workforce through successful training and learning programs. KLA-Tencor is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
  • Successful track record of developing new products – product innovation.
  • Highly successful at Go To Market strategies for its products.
  • 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.
  • Good Returns on Capital Expenditure – KLA-Tencor is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Strong distribution network – Over the years KLA-Tencor has built a reliable distribution network that can reach majority of its potential market.

Weakness of KLA-Tencor – Internal Strategic Factors

Weakness are the areas where KLA-Tencor can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • The profitability ratio and Net Contribution % of KLA-Tencor are below the industry average.
  • Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of KLA-Tencor
  • There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
  • The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. KLA-Tencor has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, KLA-Tencor needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though KLA-Tencor is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.

Opportunities for KLA-Tencor – External Strategic Factors

  • Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of KLA-Tencor’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
  • Government green drive also opens an opportunity for procurement of KLA-Tencor products by the state as well as federal government contractors.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for KLA-Tencor to capture new customers and increase its market share.
  • New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for KLA-Tencor. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • 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 KLA-Tencor in other product categories.
  • 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 KLA-Tencor to drive home its advantage in new technology and gain market share in the new product category.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided KLA-Tencor an opportunity to enter a new emerging market.

Threats KLA-Tencor Facing - External Strategic Factors

  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for KLA-Tencor   in those markets.
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • Liability laws in different countries are different and KLA-Tencor may be exposed to various liability claims given change in policies in those markets.
  • 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.
  • New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
  • 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 KLA-Tencor

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 KLA-Tencor
  • 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 KLA-Tencor

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 KLA-Tencor 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 KLA-Tencor

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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SWOT Worksheet & Template

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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)