Flextronics SWOT and PESTLE Analysis.

Strength

1. Strong workforce and global presence: Flextronics has a presence in 30 countries all over the world and has more than a hundred sites across all four domains namely manufacturing, mechanicals, design and global services. Flex has a base of over two lakh employees who are committed to present flawless service to the customer at all possible costs. With more than 3000 design engineers and an unbeatable 50 million sq. ft. of manufacturing and design space, its supply chain and the service networks are all so interconnected and integrated providing economies of scale to the company with a competitive edge over other competitors.

2. Versatile and balanced product portfolio: The company has a huge diversified product portfolio ranging from High Reliability Solutions(HRS) including medical and automotive sector to Industrial and Emerging Industries(IEI), Communications and enterprise compute and consumer technology group. Also HRS and IEI which once accounted a share of 19% in 2010 now accounts to 38% share in the product portfolio and the company expects to further increase the share to 45% by 2020. The portfolio evolution has resulted to higher profit margins.

3. Huge focus on innovation and strong partnerships: Flex has an innovative partnership with top colleges of the world. Flex is one of those brands in the world which are known to be pioneers of all new innovations that enter the market. Recently the company collaborated with North-eastern University to develop a nano sweat sensor. Also, MIT, Stanford University, Georgia Tech, University of Michigan and University South of South Carolina collaborated with Flex to solve the world’s most pressing challenges. Flex promotes start-up culture within the organisation and has huge R&D budgets. Flex increased its R&D budget by more than 30% from 93 million dollars in FY 2016 to 122 million dollars in FY 2017.

4. Low operation costs and economies of scale: Another remarkable feature that distinguishes Flex from its competitors is its increase in process efficiency and huge processing of orders leading to large scale economies of cost. The entire company portfolio is divided into three groups which are ice, strategic and core in which the current operating profits are 6%, 4% and 3% respectively. Year 2018 is projected as the investment year in operations which would reap 3-5% profits in FY19 and FY20.

Weakness

1. Highly dependent on concentrated customers: Ten years back the top 10% of the customers like Sony, HP, etc. brought the company about 64% of the revenue. Though the company is trying hard to improve upon the customer diversification but only 43% of the revenue is generated by top 10% customers. A sudden fluctuation in demand may affect the company’s manufacturing units and also the bargaining power of the customers could increase. Tough efforts have been put in to diversify the customers. It is a weakness that it has not been able to achieve significant targets over the years.

2. Problems of price fluctuation may arise as China is the manufacturing hub: High concentration of Flex’s manufacturing facilities in China and fluctuations in labour policies of China will considerably affect its operations. Flex has a high density of manufacturing facilities in China. Any problem of price fluctuation can adversely affect the operations of Flex. China had been the crown of its manufacturing hub since decades because of very low labour costs and economies of scale but with time labour laws in China have grown stricter and humanitarianism is gaining prominence. Thus China is losing advantage in terms of cheap labour. To overcome this effect and still manufacture at low costs, there may be a compromise on quality which could be detrimental to the brand image of Flextronics

Opportunity

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Threat

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Political

1. Laws regarding labour reforms in manufacturing countries like China: China had the crown of manufacturing hub since decades because of very less labour costs and economies of scale but with time labour laws in China have grown stricter and humanitarianism is gaining prominence. Thus China is losing advantage in terms of cheap labour. The Chinese Government has come with a lot of labour relief schemes and labourers now in China are paid higher and no longer works in inhuman conditions. To a manufacturing hub it adds to the cost of the product. To overcome this effect and still manufacture at low costs, there may be a compromise on quality which could be detrimental to the brand image of Flextronics.

Economic

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Social

1. CSR activities in China- solving of socio economic issues: Flextronics is a founding member of EICC, which is an association which forms code of conduct for socially responsible corporate. Flextronics pledges each year to work for capacity building of Chinese labours and ensure community participations. In terms of social responsibility flex is rated as one of the “World’s most admired countries” by the Fortune magazine of China. It also ranks significantly high amongst the top 30 companies in the list of top 100 foreign companies by the China CSR Research centre.

Technological

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Legal

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Environmental

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