Nextdc (NXT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nextdc (Australia)

Based on various researches at Oak Spring University , Nextdc is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing energy prices, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Nextdc

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nextdc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nextdc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nextdc 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Nextdc can be done for the following purposes –
1. Strategic planning of Nextdc
2. Improving business portfolio management of Nextdc
3. Assessing feasibility of the new initiative in Australia
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nextdc

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Strengths of Nextdc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Nextdc are -

Ability to recruit top talent

– Nextdc is one of the leading players in the Computer Services industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.

Analytics focus

– Nextdc 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 Computer Services industry. The technology infrastructure of Australia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Innovation driven organization

– Nextdc is one of the most innovative firm in Computer Services sector.

Learning organization

- Nextdc 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 Nextdc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nextdc emphasize – knowledge, initiative, and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Nextdc 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.

Diverse revenue streams

– Nextdc is present in almost all the verticals within the Computer Services industry. This has provided Nextdc a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

High brand equity

– Nextdc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nextdc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Effective Research and Development (R&D)

– Nextdc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nextdc staying ahead in the Computer Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Superior customer experience

– The customer experience strategy of Nextdc in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Operational resilience

– The operational resilience strategy of Nextdc comprises – understanding the underlying the factors in the Computer Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Sustainable margins compare to other players in Computer Services industry

– Nextdc has clearly differentiated products in the market place. This has enabled Nextdc to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Nextdc to invest into research and development (R&D) and innovation.

Organizational Resilience of Nextdc

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nextdc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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Weaknesses of Nextdc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nextdc are -

Low market penetration in new markets

– Outside its home market of Australia, Nextdc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High cash cycle compare to competitors

Nextdc has a high cash cycle compare to other players in the Computer Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nextdc is slow explore the new channels of communication. These new channels of communication can help Nextdc to provide better information regarding Computer Services products and services. It can also build an online community to further reach out to potential customers.

Slow decision making process

– As mentioned earlier in the report, Nextdc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Computer Services industry over the last five years. Nextdc even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Capital Spending Reduction

– Even during the low interest decade, Nextdc 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 Computer Services industry using digital technology.

Lack of clear differentiation of Nextdc products

– To increase the profitability and margins on the products, Nextdc needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Nextdc strategy

– From the outside it seems that the employees of Nextdc don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

High dependence on Nextdc ‘s star products

– The top 2 products and services of Nextdc still accounts for major business revenue. This dependence on star products in Computer Services industry has resulted into insufficient focus on developing new products, even though Nextdc has relatively successful track record of launching new products.

Compensation and incentives

– The revenue per employee of Nextdc is just above the Computer Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Aligning sales with marketing

– From the outside it seems that Nextdc needs to have more collaboration between its sales team and marketing team. Sales professionals in the Computer Services industry have deep experience in developing customer relationships. Marketing department at Nextdc can leverage the sales team experience to cultivate customer relationships as Nextdc is planning to shift buying processes online.

Skills based hiring in Computer Services industry

– The stress on hiring functional specialists at Nextdc has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

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Nextdc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nextdc are -

Building a culture of innovation

– managers at Nextdc can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Computer Services industry.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nextdc can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Nextdc 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 Nextdc to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nextdc 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 Nextdc to hire the very best people irrespective of their geographical location.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. Nextdc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Use of Bitcoin and other crypto currencies for transactions in Computer Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nextdc in the Computer Services industry. Now Nextdc can target international markets with far fewer capital restrictions requirements than the existing system.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Nextdc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nextdc 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.

Better consumer reach

– The expansion of the 5G network will help Nextdc to increase its market reach. Nextdc will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Developing new processes and practices

– Nextdc can develop new processes and procedures in Computer Services 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nextdc can use these opportunities to build new business models that can help the communities that Nextdc operates in. Secondly it can use opportunities from government spending in Computer Services sector.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Nextdc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Computer Services industry, and it will provide faster access to the consumers.

Using analytics as competitive advantage

– Nextdc has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Computer Services sector. This continuous investment in analytics has enabled Nextdc to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nextdc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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Threats Nextdc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nextdc are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nextdc in Computer Services industry. The Computer Services 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Nextdc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Computer Services sector.

Environmental challenges

– Nextdc 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. Nextdc can take advantage of this fund but it will also bring new competitors in the Computer Services industry.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nextdc needs to understand the core reasons impacting the Computer Services industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Nextdc 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 Nextdc prominent markets.

Easy access to finance

– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nextdc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing wage structure of Nextdc

– 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 Nextdc.

Stagnating economy with rate increase

– Nextdc can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Computer Services industry.

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 Nextdc in the Computer Services sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Nextdc high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Technology acceleration in Forth Industrial Revolution

– Nextdc has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Nextdc needs to keep up with the evolution of technology in the Computer Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Consumer confidence and its impact on Nextdc 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 Computer Services industry and other sectors.

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Weighted SWOT Analysis of Nextdc Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nextdc 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 Nextdc 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 Nextdc 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 Nextdc 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 Nextdc needs to make to build a sustainable competitive advantage.

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