SWOT Analysis / TOWS Matrix for Spotify Tech (United Kingdom)
Based on various researches at Oak Spring University , Spotify Tech is operating in a macro-environment that has been destablized by – increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing government debt because of Covid-19 spendings, there is backlash against globalization, wage bills are increasing,
increasing commodity prices, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Spotify Tech can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spotify Tech, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spotify Tech 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 Spotify Tech can be done for the following purposes –
1. Strategic planning of Spotify Tech
2. Improving business portfolio management of Spotify Tech
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Spotify Tech
Strengths of Spotify Tech | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spotify Tech are -
Organizational Resilience of Spotify Tech
– The covid-19 pandemic has put organizational resilience at the centre of everthing Spotify Tech does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Spotify Tech is present in almost all the verticals within the Computer Services industry. This has provided Spotify Tech 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.
Superior customer experience
– The customer experience strategy of Spotify Tech in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Spotify Tech has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Services industry. Secondly the value chain collaborators of Spotify Tech have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Spotify Tech is one of the leading players in the Computer Services industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Spotify Tech 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.
Effective Research and Development (R&D)
– Spotify Tech has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Spotify Tech 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.
Operational resilience
– The operational resilience strategy of Spotify Tech 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.
Ability to lead change in Computer Services
– Spotify Tech is one of the leading players in the Computer Services industry in United Kingdom. Over the years it has not only transformed the business landscape in the Computer Services industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Spotify Tech in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Computer Services industry
– Spotify Tech has clearly differentiated products in the market place. This has enabled Spotify Tech to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Spotify Tech to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Spotify Tech in the Technology sector have low bargaining power. Spotify Tech has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Spotify Tech to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Spotify Tech has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Spotify Tech to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Spotify Tech | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spotify Tech are -
Capital Spending Reduction
– Even during the low interest decade, Spotify Tech 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.
High dependence on Spotify Tech ‘s star products
– The top 2 products and services of Spotify Tech 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 Spotify Tech has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Spotify Tech has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Spotify Tech products
– To increase the profitability and margins on the products, Spotify Tech needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Spotify Tech 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.
High cash cycle compare to competitors
Spotify Tech 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.
Workers concerns about automation
– As automation is fast increasing in the Computer Services industry, Spotify Tech needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Spotify Tech is slow explore the new channels of communication. These new channels of communication can help Spotify Tech 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, Spotify Tech 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. Spotify Tech 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.
Skills based hiring in Computer Services industry
– The stress on hiring functional specialists at Spotify Tech 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.
Increasing silos among functional specialists
– The organizational structure of Spotify Tech is dominated by functional specialists. It is not different from other players in the Computer Services industry, but Spotify Tech needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Spotify Tech to focus more on services in the Computer Services industry rather than just following the product oriented approach.
Spotify Tech Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Spotify Tech are -
Better consumer reach
– The expansion of the 5G network will help Spotify Tech to increase its market reach. Spotify Tech 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.
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 Spotify Tech 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Spotify Tech 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Spotify Tech 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. Spotify Tech 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.
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. Spotify Tech can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Spotify Tech has opened avenues for new revenue streams for the organization in Computer Services industry. This can help Spotify Tech to build a more holistic ecosystem for Spotify Tech products in the Computer Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Spotify Tech to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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 Spotify Tech in the Computer Services industry. Now Spotify Tech can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Spotify Tech 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 Spotify Tech 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
– Spotify Tech 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.
Using analytics as competitive advantage
– Spotify Tech 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 Spotify Tech to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spotify Tech to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Spotify Tech can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Spotify Tech 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.
Threats Spotify Tech External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Spotify Tech are -
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.
Increasing wage structure of Spotify Tech
– 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 Spotify Tech.
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 Spotify Tech in the Computer Services sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Spotify Tech 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 Spotify Tech prominent markets.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Spotify Tech.
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. Spotify Tech can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Spotify Tech with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
Stagnating economy with rate increase
– Spotify Tech 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.
High dependence on third party suppliers
– Spotify Tech 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Spotify Tech 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.
Shortening product life cycle
– it is one of the major threat that Spotify Tech is facing in Computer Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Spotify Tech 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.
Weighted SWOT Analysis of Spotify Tech Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Spotify Tech 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 Spotify Tech 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 Spotify Tech 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 Spotify Tech 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 Spotify Tech needs to make to build a sustainable competitive advantage.
