VMware, Inc., the first company to crack the software virtualization market, faces new challenges from competitors' plans to bundle free virtualization solutions in operating systems. VMware, acquired by data storage giant EMC Corp. in 2003, has delivered top-line growth from 2002 to 2005 that is comparable to the fastest-growing enterprise software companies in history. However, emerging competitive solutions from Microsoft and the open-source community threaten to hinder the company's long-term growth potential. Outlines virtualization technology and the dynamics that affect its market; covers the history of VMware; discusses key competitors; and analyzes potential strategic responses by VMware to emerging competitive threats.
Authors :: David B. Yoffie, Ward Bullard, Nikhil Raj, Suja Vaidyanathan
Swot Analysis of "VMware, Inc. (A)" written by David B. Yoffie, Ward Bullard, Nikhil Raj, Suja Vaidyanathan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Vmware Virtualization facing as an external strategic factors. Some of the topics covered in VMware, Inc. (A) case study are - Strategic Management Strategies, Intellectual property, Joint ventures, Strategic planning, Technology and Technology & Operations.
Some of the macro environment factors that can be used to understand the VMware, Inc. (A) casestudy better are - – talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, increasing transportation and logistics costs,
increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in VMware, Inc. (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vmware Virtualization, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vmware Virtualization 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 VMware, Inc. (A) can be done for the following purposes –
1. Strategic planning using facts provided in VMware, Inc. (A) case study
2. Improving business portfolio management of Vmware Virtualization
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vmware Virtualization
Strengths VMware, Inc. (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vmware Virtualization in VMware, Inc. (A) Harvard Business Review case study are -
Learning organization
- Vmware Virtualization 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 Vmware Virtualization is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in VMware, Inc. (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Vmware Virtualization has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in VMware, Inc. (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Vmware Virtualization has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in VMware, Inc. (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Vmware Virtualization is one of the leading recruiters in the industry. Managers in the VMware, Inc. (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Vmware Virtualization has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vmware Virtualization to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Vmware Virtualization 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.
Organizational Resilience of Vmware Virtualization
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Vmware Virtualization does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Vmware Virtualization is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David B. Yoffie, Ward Bullard, Nikhil Raj, Suja Vaidyanathan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Vmware Virtualization has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study VMware, Inc. (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Vmware Virtualization 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.
Low bargaining power of suppliers
– Suppliers of Vmware Virtualization in the sector have low bargaining power. VMware, Inc. (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vmware Virtualization to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Vmware Virtualization in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses VMware, Inc. (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of VMware, Inc. (A) are -
Need for greater diversity
– Vmware Virtualization 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.
Low market penetration in new markets
– Outside its home market of Vmware Virtualization, firm in the HBR case study VMware, Inc. (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Vmware Virtualization is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study VMware, Inc. (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Vmware Virtualization has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - VMware, Inc. (A) should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, David B. Yoffie, Ward Bullard, Nikhil Raj, Suja Vaidyanathan suggests that, Vmware Virtualization 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 industry.
High cash cycle compare to competitors
Vmware Virtualization has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study VMware, Inc. (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Vmware Virtualization 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the VMware, Inc. (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Vmware Virtualization has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Vmware Virtualization is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Vmware Virtualization needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Vmware Virtualization to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As VMware, Inc. (A) HBR case study mentions - Vmware Virtualization takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Vmware Virtualization 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 industry using digital technology.
Opportunities VMware, Inc. (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study VMware, Inc. (A) are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Vmware Virtualization in the consumer business. Now Vmware Virtualization can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Vmware Virtualization can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Vmware Virtualization can use these opportunities to build new business models that can help the communities that Vmware Virtualization operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
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 Vmware Virtualization 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 Vmware Virtualization 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 Vmware Virtualization to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Vmware Virtualization 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, as suggested in case study, VMware, Inc. (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Vmware Virtualization can develop new processes and procedures in Technology & Operations 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.
Using analytics as competitive advantage
– Vmware Virtualization has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study VMware, Inc. (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vmware Virtualization to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Vmware Virtualization can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Vmware Virtualization can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Vmware Virtualization has opened avenues for new revenue streams for the organization in the industry. This can help Vmware Virtualization to build a more holistic ecosystem as suggested in the VMware, Inc. (A) case study. Vmware Virtualization can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Vmware Virtualization 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. Vmware Virtualization 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vmware Virtualization can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats VMware, Inc. (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study VMware, Inc. (A) are -
Consumer confidence and its impact on Vmware Virtualization demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study VMware, Inc. (A), Vmware Virtualization may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Increasing wage structure of Vmware Virtualization
– 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 Vmware Virtualization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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 Vmware Virtualization business can come under increasing regulations regarding data privacy, data security, etc.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Vmware Virtualization in the Technology & Operations sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vmware Virtualization 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 prominent markets illustrated in HBR case study VMware, Inc. (A) .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Vmware Virtualization in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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. Vmware Virtualization 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.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Vmware Virtualization can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Vmware Virtualization 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. Vmware Virtualization can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Regulatory challenges
– Vmware Virtualization needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
Weighted SWOT Analysis of VMware, Inc. (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study VMware, Inc. (A) 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 the case study VMware, Inc. (A) 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 the Harvard case study VMware, Inc. (A) 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 VMware, Inc. (A) is 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 Vmware Virtualization needs to make to build a sustainable competitive advantage.
