Akamai (AKAM) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Akamai (United States)
Based on various researches at Oak Spring University , Akamai is operating in a macro-environment that has been destablized by – increasing commodity prices, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, increasing energy prices, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation,
there is increasing trade war between United States & China, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Akamai can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Akamai, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Akamai 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 Akamai can be done for the following purposes –
1. Strategic planning of Akamai
2. Improving business portfolio management of Akamai
3. Assessing feasibility of the new initiative in United States
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Akamai
Strengths of Akamai | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Akamai are -
Low bargaining power of suppliers
– Suppliers of Akamai in the Technology sector have low bargaining power. Akamai has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Akamai to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Software & Programming industry
– Akamai has clearly differentiated products in the market place. This has enabled Akamai to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Akamai to invest into research and development (R&D) and innovation.
Learning organization
- Akamai 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 Akamai is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Akamai emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Akamai comprises – understanding the underlying the factors in the Software & Programming 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.
Analytics focus
– Akamai 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 United States 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.
Successful track record of launching new products
– Akamai has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Akamai 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.
Ability to lead change in Software & Programming
– Akamai is one of the leading players in the Software & Programming industry in United States. Over the years it has not only transformed the business landscape in the Software & Programming industry in United States but also across the existing markets. The ability to lead change has enabled Akamai in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Akamai 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 Akamai have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Akamai digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Akamai 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.
Cross disciplinary teams
– Horizontal connected teams at the Akamai 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.
Innovation driven organization
– Akamai is one of the most innovative firm in Software & Programming sector.
High brand equity
– Akamai has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Akamai to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Akamai | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Akamai are -
Capital Spending Reduction
– Even during the low interest decade, Akamai 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.
Slow to strategic competitive environment developments
– As Akamai 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.
High operating costs
– Compare to the competitors, Akamai 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 Akamai lucrative customers.
Employees’ less understanding of Akamai strategy
– From the outside it seems that the employees of Akamai 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.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, Akamai 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.
Need for greater diversity
– Akamai 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.
Interest costs
– Compare to the competition, Akamai 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 Akamai 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.
No frontier risks strategy
– From the 10K / annual statement of Akamai, it seems that company is thinking out the frontier risks that can impact Software & Programming industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Akamai 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. Akamai should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Akamai is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Akamai needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Akamai to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Akamai Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Akamai are -
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 Akamai in the Software & Programming industry. Now Akamai can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Akamai to increase its market reach. Akamai 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.
Manufacturing automation
– Akamai 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.
Creating value in data economy
– The success of analytics program of Akamai has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Akamai to build a more holistic ecosystem for Akamai products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Akamai can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Akamai 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Akamai can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Akamai 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.
Developing new processes and practices
– Akamai 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.
Leveraging digital technologies
– Akamai 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.
Building a culture of innovation
– managers at Akamai 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.
Using analytics as competitive advantage
– Akamai 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 Akamai to build a competitive advantage using analytics. The analytics driven competitive advantage can help Akamai to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Akamai 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.
Threats Akamai External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Akamai are -
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. Akamai 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.
Environmental challenges
– Akamai 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. Akamai can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
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 Akamai business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Akamai
– 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 Akamai.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Akamai with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
Regulatory challenges
– Akamai 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 Akamai in the Software & Programming sector and impact the bottomline of the organization.
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. Akamai needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Akamai 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
– Akamai 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.
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. Akamai can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Akamai has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Akamai 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.
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 Akamai.
Weighted SWOT Analysis of Akamai Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Akamai 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 Akamai 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 Akamai 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 Akamai 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 Akamai needs to make to build a sustainable competitive advantage.