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 – customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing energy prices,
talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Strong track record of project management in the Software & Programming industry
– Appen Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Appen Ltd 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.
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.
Analytics focus
– Appen Ltd 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 Software & Programming 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.
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.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Appen Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Appen Ltd has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
High switching costs
– The high switching costs that Appen Ltd 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.
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.
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.
Weaknesses of Appen Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Appen Ltd are -
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Appen Ltd supply chain. Even after few cautionary changes, Appen Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Appen Ltd vulnerable to further global disruptions in South East Asia.
High dependence on Appen Ltd ‘s star products
– The top 2 products and services of Appen Ltd still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though Appen Ltd has relatively successful track record of launching new products.
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.
Interest costs
– Compare to the competition, Appen Ltd 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Appen Ltd, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Appen Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Increasing silos among functional specialists
– The organizational structure of Appen Ltd is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Appen Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Appen Ltd to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, Appen Ltd 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.
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.
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.
Using analytics as competitive advantage
– Appen Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Software & Programming sector. This continuous investment in analytics has enabled Appen Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Appen Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Appen Ltd 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 Appen Ltd to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Appen Ltd can use the latest technology developments to improve its manufacturing and designing process in Software & Programming sector. 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.
Leveraging digital technologies
– Appen Ltd can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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 Appen Ltd 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.
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.
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.
Creating value in data economy
– The success of analytics program of Appen Ltd has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Appen Ltd to build a more holistic ecosystem for Appen Ltd products in the Software & Programming industry by providing – 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 Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Appen Ltd 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. Appen Ltd 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.
Threats Appen Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Appen Ltd are -
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.
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 Appen Ltd.
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.
Shortening product life cycle
– it is one of the major threat that Appen Ltd is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
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.
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.
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.
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.