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Applied Materials, Inc. SWOT Analysis / Matrix
Business Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Applied Materials, Inc. managers to do a situational analysis of the company . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Applied Materials, Inc. is facing in its current business environment.
The Applied Materials, Inc. is one of the leading firms in its industry. Applied Materials, Inc. maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.
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The SWOT Analysis framework helps 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, Inc. 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 core purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Applied Materials, Inc. strengths, and eradicate its weaknesses.
Step by Step Guide to Applied Materials, Inc. SWOT Analysis
Strengths of Applied Materials, Inc. – Internal Strategic Factors
As one of the leading organizations in its industry, Applied Materials, Inc. 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, Inc. are –
Read - Applied Materials, Inc. Porter 5 Forces Analysis & Industry Analysis
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- Successful track record of developing new products – product innovation.
- Good Returns on Capital Expenditure – Applied Materials, Inc. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong Free Cash Flow – Applied Materials, Inc. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong distribution network – Over the years Applied Materials, Inc. has built a reliable distribution network that can reach majority of its potential market.
- Strong Brand Portfolio – Over the years Applied Materials, Inc. has invested in building a strong brand portfolio. The SWOT analysis of Applied Materials, Inc. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- 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.
- Automation of activities brought consistency of quality to Applied Materials, Inc. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- 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.
Weakness of Applied Materials, Inc. – Internal Strategic Factors
Weakness are the areas where Applied Materials, Inc. can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
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- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Applied Materials, Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- 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. Applied Materials, Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Applied Materials, Inc. 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.
- High attrition rate in work force – compare to other organizations in the industry Applied Materials, Inc. has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Applied Materials, Inc. 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.
- Limited success outside core business – Even though Applied Materials, Inc. is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- The profitability ratio and Net Contribution % of Applied Materials, Inc. are below the industry average.
Opportunities for Applied Materials, Inc. – External Strategic Factors
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- New trends in the consumer behavior can open up new market for the Applied Materials, Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- 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, Inc. to drive home its advantage in new technology and gain market share in the new product category.
- 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, Inc..
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Applied Materials, Inc. to increase its profitability.
- The market development will lead to dilution of competitor’s advantage and enable Applied Materials, Inc. to increase its competitiveness compare to the other competitors.
- 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, Inc. in other product categories.
- The new technology provides an opportunity to Applied Materials, Inc. 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.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Applied Materials, Inc. to capture new customers and increase its market share.
Threats Applied Materials, Inc. Facing - External Strategic Factors
- 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 environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Applied Materials, Inc. in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Applied Materials, Inc.
Limitations of SWOT Analysis for Applied Materials, Inc.
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, Inc.
- 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.
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Weighted SWOT Analysis of Applied Materials, Inc.
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, Inc. 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, Inc.
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
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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)
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