SWOT Analysis / TOWS Matrix for Arco Platform (United States)
Based on various researches at Oak Spring University , Arco Platform is operating in a macro-environment that has been destablized by – there is backlash against globalization, geopolitical disruptions, increasing energy prices, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion,
customer relationship management is fast transforming because of increasing concerns over data privacy, 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 Arco Platform can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arco Platform, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arco Platform 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 Arco Platform can be done for the following purposes –
1. Strategic planning of Arco Platform
2. Improving business portfolio management of Arco Platform
3. Assessing feasibility of the new initiative in United States
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arco Platform
Strengths of Arco Platform | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arco Platform are -
Successful track record of launching new products
– Arco Platform has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arco Platform 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.
Sustainable margins compare to other players in Business Services industry
– Arco Platform has clearly differentiated products in the market place. This has enabled Arco Platform to fetch slight price premium compare to the competitors in the Business Services industry. The sustainable margins have also helped Arco Platform to invest into research and development (R&D) and innovation.
Analytics focus
– Arco Platform 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 Business Services 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.
High brand equity
– Arco Platform has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arco Platform to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Arco Platform is present in almost all the verticals within the Business Services industry. This has provided Arco Platform 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.
Operational resilience
– The operational resilience strategy of Arco Platform comprises – understanding the underlying the factors in the Business 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 Business Services
– Arco Platform is one of the leading players in the Business Services industry in United States. Over the years it has not only transformed the business landscape in the Business Services industry in United States but also across the existing markets. The ability to lead change has enabled Arco Platform in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Arco Platform 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 Arco Platform in Business Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Arco Platform
– The covid-19 pandemic has put organizational resilience at the centre of everthing Arco Platform does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Arco Platform 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.
Strong track record of project management in the Business Services industry
– Arco Platform is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Arco Platform | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arco Platform are -
Skills based hiring in Business Services industry
– The stress on hiring functional specialists at Arco Platform 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.
Slow decision making process
– As mentioned earlier in the report, Arco Platform has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Business Services industry over the last five years. Arco Platform 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 Arco Platform ‘s star products
– The top 2 products and services of Arco Platform still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though Arco Platform has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Arco Platform 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 Business Services industry using digital technology.
High cash cycle compare to competitors
Arco Platform has a high cash cycle compare to other players in the Business 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.
Employees’ less understanding of Arco Platform strategy
– From the outside it seems that the employees of Arco Platform 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.
Increasing silos among functional specialists
– The organizational structure of Arco Platform is dominated by functional specialists. It is not different from other players in the Business Services industry, but Arco Platform needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arco Platform to focus more on services in the Business Services industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United States, Arco Platform needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Arco Platform supply chain. Even after few cautionary changes, Arco Platform is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arco Platform vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Arco Platform has some of the most successful models in the Business Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Arco Platform should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Arco Platform 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.
Arco Platform Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arco Platform are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arco Platform is facing challenges because of the dominance of functional experts in the organization. Arco Platform can utilize new technology in the field of Business Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arco Platform 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arco Platform can use these opportunities to build new business models that can help the communities that Arco Platform operates in. Secondly it can use opportunities from government spending in Business Services sector.
Building a culture of innovation
– managers at Arco Platform 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 Business Services industry.
Use of Bitcoin and other crypto currencies for transactions in Business Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Arco Platform in the Business Services industry. Now Arco Platform 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 Arco Platform to increase its market reach. Arco Platform 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.
Buying journey improvements
– Arco Platform can improve the customer journey of consumers in the Business Services 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 Arco Platform 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.
Learning at scale
– Online learning technologies has now opened space for Arco Platform 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arco Platform 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 Arco Platform to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arco Platform 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 Arco Platform to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Business Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arco Platform 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. Arco Platform 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.
Manufacturing automation
– Arco Platform can use the latest technology developments to improve its manufacturing and designing process in Business Services 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.
Threats Arco Platform External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arco Platform are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arco Platform 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 Arco Platform prominent markets.
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 Arco Platform business can come under increasing regulations regarding data privacy, data security, etc.
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.
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. Arco Platform needs to understand the core reasons impacting the Business Services industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Arco Platform is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Arco Platform 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
– Arco Platform 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 Business Services industry regulations.
Easy access to finance
– Easy access to finance in Business Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arco Platform 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 Arco Platform in the Business Services sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arco Platform in Business Services industry. The Business Services 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents Arco Platform with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.
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. Arco Platform 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 Arco Platform Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Arco Platform 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 Arco Platform 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 Arco Platform 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 Arco Platform 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 Arco Platform needs to make to build a sustainable competitive advantage.