SWOT Analysis / TOWS Matrix for Appen Ltd (Australia)
Based on various researches at Oak Spring University , Appen Ltd is operating in a macro-environment that has been destablized by – increasing energy prices, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, geopolitical disruptions,
increasing commodity prices, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Appen Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Appen Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Appen Ltd 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 Appen Ltd can be done for the following purposes –
1. Strategic planning of Appen Ltd
2. Improving business portfolio management of Appen Ltd
3. Assessing feasibility of the new initiative in Australia
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Appen Ltd
Strengths of Appen Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Appen Ltd are -
Training and development
– Appen Ltd has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Appen Ltd in the Technology sector have low bargaining power. Appen Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Appen Ltd to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Appen Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Appen Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Appen Ltd has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of Appen Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Appen Ltd in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Appen Ltd is present in almost all the verticals within the Software & Programming industry. This has provided Appen Ltd 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.
Ability to lead change in Software & Programming
– Appen Ltd is one of the leading players in the Software & Programming industry in Australia. Over the years it has not only transformed the business landscape in the Software & Programming industry in Australia but also across the existing markets. The ability to lead change has enabled Appen Ltd 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 Software & Programming industry
– Appen Ltd has clearly differentiated products in the market place. This has enabled Appen Ltd to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Appen Ltd to invest into research and development (R&D) and innovation.
Innovation driven organization
– Appen Ltd is one of the most innovative firm in Software & Programming sector.
Ability to recruit top talent
– Appen Ltd is one of the leading players in the Software & Programming 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.
Effective Research and Development (R&D)
– Appen Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Appen Ltd staying ahead in the Software & Programming industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Appen Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Appen Ltd has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses of Appen Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Appen Ltd are -
Capital Spending Reduction
– Even during the low interest decade, Appen Ltd 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 Software & Programming industry using digital technology.
Lack of clear differentiation of Appen Ltd products
– To increase the profitability and margins on the products, Appen Ltd needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Appen Ltd has high operating costs in the Software & Programming industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Appen Ltd lucrative customers.
High cash cycle compare to competitors
Appen Ltd has a high cash cycle compare to other players in the Software & Programming 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 strategic competitive environment developments
– As Appen Ltd is one of the leading players in the Software & Programming industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Software & Programming industry in last five years.
Compensation and incentives
– The revenue per employee of Appen Ltd is just above the Software & Programming 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 bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in Australia, Appen Ltd 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 Software & Programming industry.
Products dominated business model
– Even though Appen Ltd has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Appen Ltd should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Australia, Appen Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Appen Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Software & Programming industry over the last five years. Appen Ltd 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 Software & Programming industry
– The stress on hiring functional specialists at Appen Ltd 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.
Appen Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Appen Ltd are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Appen Ltd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Software & Programming industry, but it has also influenced the consumer preferences. Appen Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Appen Ltd 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 Appen Ltd 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
– Appen Ltd can develop new processes and procedures in Software & Programming 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.
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. Appen Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Appen Ltd can use these opportunities to build new business models that can help the communities that Appen Ltd operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Buying journey improvements
– Appen Ltd can improve the customer journey of consumers in the Software & Programming industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Appen Ltd 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.
Loyalty marketing
– Appen Ltd has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Better consumer reach
– The expansion of the 5G network will help Appen Ltd to increase its market reach. Appen Ltd 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.
Building a culture of innovation
– managers at Appen Ltd 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 Software & Programming industry.
Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Appen Ltd in the Software & Programming industry. Now Appen Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Appen Ltd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Software & Programming industry, and it will provide faster access to the consumers.
Threats Appen Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Appen Ltd are -
Regulatory challenges
– Appen Ltd 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 Software & Programming industry regulations.
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. Appen Ltd needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
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, Appen Ltd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.
Consumer confidence and its impact on Appen Ltd 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 Software & Programming industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Appen Ltd has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Appen Ltd needs to keep up with the evolution of technology in the Software & Programming 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Appen Ltd in Software & Programming industry. The Software & Programming 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.
Easy access to finance
– Easy access to finance in Software & Programming industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Appen Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Appen Ltd in the Software & Programming sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Appen Ltd 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.
Stagnating economy with rate increase
– Appen Ltd 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 Software & Programming industry.
Environmental challenges
– Appen Ltd 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. Appen Ltd can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Appen Ltd 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 Appen Ltd prominent markets.
Weighted SWOT Analysis of Appen Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Appen Ltd 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 Appen Ltd 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 Appen Ltd 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 Appen Ltd 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 Appen Ltd needs to make to build a sustainable competitive advantage.
