SABESP ON (SBSP3) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for SABESP ON (Brazil)

Based on various researches at Oak Spring University , SABESP ON is operating in a macro-environment that has been destablized by – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of SABESP ON

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SABESP ON can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SABESP ON, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SABESP ON 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 SABESP ON can be done for the following purposes –
1. Strategic planning of SABESP ON
2. Improving business portfolio management of SABESP ON
3. Assessing feasibility of the new initiative in Brazil
4. Making a Water Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of SABESP ON

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

The strengths of SABESP ON are -

Digital Transformation in Water Utilities industry

- digital transformation varies from industry to industry. For SABESP ON digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. SABESP ON 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.

Learning organization

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

Superior customer experience

– The customer experience strategy of SABESP ON in Water Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High brand equity

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

Ability to lead change in Water Utilities

– SABESP ON is one of the leading players in the Water Utilities industry in Brazil. Over the years it has not only transformed the business landscape in the Water Utilities industry in Brazil but also across the existing markets. The ability to lead change has enabled SABESP ON in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Highly skilled collaborators

– SABESP ON has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Water Utilities industry. Secondly the value chain collaborators of SABESP ON have helped the firm to develop new products and bring them quickly to the marketplace.

Strong track record of project management in the Water Utilities industry

– SABESP ON is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

– SABESP ON has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. SABESP ON 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 SABESP ON 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.

Effective Research and Development (R&D)

– SABESP ON has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – SABESP ON staying ahead in the Water Utilities 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 SABESP ON comprises – understanding the underlying the factors in the Water Utilities 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.

High switching costs

– The high switching costs that SABESP ON 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.

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

The weaknesses of SABESP ON are -

High dependence on SABESP ON ‘s star products

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

Skills based hiring in Water Utilities industry

– The stress on hiring functional specialists at SABESP ON 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.

Need for greater diversity

– SABESP ON 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.

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 SABESP ON supply chain. Even after few cautionary changes, SABESP ON is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left SABESP ON vulnerable to further global disruptions in South East Asia.

Slow to strategic competitive environment developments

– As SABESP ON is one of the leading players in the Water Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Water Utilities industry in last five years.

Low market penetration in new markets

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

Ability to respond to the competition

– As the decision making is very deliberative at SABESP ON, in the dynamic environment of Water Utilities industry it has struggled to respond to the nimble upstart competition. SABESP ON has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Slow decision making process

– As mentioned earlier in the report, SABESP ON has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Water Utilities industry over the last five years. SABESP ON 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.

Products dominated business model

– Even though SABESP ON has some of the most successful models in the Water Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. SABESP ON should strive to include more intangible value offerings along with its core products and services.

Capital Spending Reduction

– Even during the low interest decade, SABESP ON 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 Water Utilities industry using digital technology.

Aligning sales with marketing

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

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

The opportunities of SABESP ON are -

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 SABESP ON 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.

Finding new ways to collaborate

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

Using analytics as competitive advantage

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

Developing new processes and practices

– SABESP ON can develop new processes and procedures in Water Utilities 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. SABESP ON can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Redefining models of collaboration and team work

– As explained in the weaknesses section, SABESP ON is facing challenges because of the dominance of functional experts in the organization. SABESP ON can utilize new technology in the field of Water Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Creating value in data economy

– The success of analytics program of SABESP ON has opened avenues for new revenue streams for the organization in Water Utilities industry. This can help SABESP ON to build a more holistic ecosystem for SABESP ON products in the Water Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Lowering marketing communication costs

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

Increase in government spending

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

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, SABESP ON 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 SABESP ON 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 SABESP ON 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 SABESP ON to hire the very best people irrespective of their geographical location.

Low interest rates

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

Reforming the budgeting process

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

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

The threats of SABESP ON are -

Regulatory challenges

– SABESP ON 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 Water Utilities industry regulations.

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 SABESP ON business can come under increasing regulations regarding data privacy, data security, 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. SABESP ON 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Water Utilities industry are lowering. It can presents SABESP ON with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Water Utilities sector.

Learning curve for new practices

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

Easy access to finance

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

Stagnating economy with rate increase

– SABESP ON 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 Water Utilities industry.

Shortening product life cycle

– it is one of the major threat that SABESP ON is facing in Water Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Consumer confidence and its impact on SABESP ON 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 Water Utilities industry and other sectors.

Environmental challenges

– SABESP ON 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. SABESP ON can take advantage of this fund but it will also bring new competitors in the Water Utilities 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. SABESP ON needs to understand the core reasons impacting the Water Utilities 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, SABESP ON 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 SABESP ON prominent markets.

Increasing wage structure of SABESP ON

– 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 SABESP ON.

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Weighted SWOT Analysis of SABESP ON Template, Example

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

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