SWOT Analysis / TOWS Matrix for Activision Blizzard (United States)
Based on various researches at Oak Spring University , Activision Blizzard is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions,
there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Activision Blizzard
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Activision Blizzard can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Activision Blizzard, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Activision Blizzard 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 Activision Blizzard can be done for the following purposes –
1. Strategic planning of Activision Blizzard
2. Improving business portfolio management of Activision Blizzard
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 Activision Blizzard
Strengths of Activision Blizzard | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Activision Blizzard are -
Sustainable margins compare to other players in Software & Programming industry
– Activision Blizzard has clearly differentiated products in the market place. This has enabled Activision Blizzard to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Activision Blizzard to invest into research and development (R&D) and innovation.
Training and development
– Activision Blizzard 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.
Analytics focus
– Activision Blizzard 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.
Low bargaining power of suppliers
– Suppliers of Activision Blizzard in the Technology sector have low bargaining power. Activision Blizzard has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Activision Blizzard to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Activision Blizzard 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.
Learning organization
- Activision Blizzard 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 Activision Blizzard is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Activision Blizzard emphasize – knowledge, initiative, and innovation.
High brand equity
– Activision Blizzard has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Activision Blizzard to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Activision Blizzard 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 Activision Blizzard have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Activision Blizzard has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Activision Blizzard 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.
Strong track record of project management in the Software & Programming industry
– Activision Blizzard is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Activision Blizzard has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Activision Blizzard 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.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Activision Blizzard digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Activision Blizzard 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.
Weaknesses of Activision Blizzard | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Activision Blizzard are -
High operating costs
– Compare to the competitors, Activision Blizzard 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 Activision Blizzard lucrative customers.
Compensation and incentives
– The revenue per employee of Activision Blizzard 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.
Increasing silos among functional specialists
– The organizational structure of Activision Blizzard is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Activision Blizzard needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Activision Blizzard to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
High bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in United States, Activision Blizzard 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.
Slow decision making process
– As mentioned earlier in the report, Activision Blizzard 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. Activision Blizzard 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 cash cycle compare to competitors
Activision Blizzard 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.
No frontier risks strategy
– From the 10K / annual statement of Activision Blizzard, 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.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, Activision Blizzard 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.
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at Activision Blizzard 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.
Interest costs
– Compare to the competition, Activision Blizzard 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.
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 Activision Blizzard supply chain. Even after few cautionary changes, Activision Blizzard is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Activision Blizzard vulnerable to further global disruptions in South East Asia.
Activision Blizzard Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Activision Blizzard are -
Building a culture of innovation
– managers at Activision Blizzard 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Activision Blizzard can use these opportunities to build new business models that can help the communities that Activision Blizzard operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Activision Blizzard 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.
Developing new processes and practices
– Activision Blizzard 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.
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. Activision Blizzard 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. Activision Blizzard 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.
Loyalty marketing
– Activision Blizzard 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.
Using analytics as competitive advantage
– Activision Blizzard 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 Activision Blizzard to build a competitive advantage using analytics. The analytics driven competitive advantage can help Activision Blizzard to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Activision Blizzard can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Activision Blizzard 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.
Learning at scale
– Online learning technologies has now opened space for Activision Blizzard 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.
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 Activision Blizzard 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.
Creating value in data economy
– The success of analytics program of Activision Blizzard has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Activision Blizzard to build a more holistic ecosystem for Activision Blizzard products in the Software & Programming 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 Activision Blizzard 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 Activision Blizzard External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Activision Blizzard are -
Technology acceleration in Forth Industrial Revolution
– Activision Blizzard has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Activision Blizzard 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 Activision Blizzard.
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.
Environmental challenges
– Activision Blizzard 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. Activision Blizzard can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
Increasing wage structure of Activision Blizzard
– 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 Activision Blizzard.
Consumer confidence and its impact on Activision Blizzard 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.
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 Activision Blizzard business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Activision Blizzard 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.
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. Activision Blizzard needs to understand the core reasons impacting the Software & Programming 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, Activision Blizzard 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 Activision Blizzard prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Activision Blizzard 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
– Activision Blizzard 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 Activision Blizzard in the Software & Programming sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Activision Blizzard Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Activision Blizzard 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 Activision Blizzard 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 Activision Blizzard 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 Activision Blizzard 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 Activision Blizzard needs to make to build a sustainable competitive advantage.