American Water Works (AWK) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for American Water Works (United States)

Based on various researches at Oak Spring University , American Water Works is operating in a macro-environment that has been destablized by – wage bills are increasing, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , increasing commodity prices, etc

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Introduction to SWOT Analysis of American Water Works

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

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Strengths of American Water Works | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of American Water Works are -

Low bargaining power of suppliers

– Suppliers of American Water Works in the Utilities sector have low bargaining power. American Water Works has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps American Water Works to manage not only supply disruptions but also source products at highly competitive prices.

Highly skilled collaborators

– American Water Works 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 American Water Works have helped the firm to develop new products and bring them quickly to the marketplace.

Effective Research and Development (R&D)

– American Water Works has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – American Water Works 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 American Water Works 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.

Analytics focus

– American Water Works 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 Water Utilities 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.

Learning organization

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

Diverse revenue streams

– American Water Works is present in almost all the verticals within the Water Utilities industry. This has provided American Water Works 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.

Organizational Resilience of American Water Works

– The covid-19 pandemic has put organizational resilience at the centre of everthing American Water Works does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High brand equity

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

Digital Transformation in Water Utilities industry

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

Sustainable margins compare to other players in Water Utilities industry

– American Water Works has clearly differentiated products in the market place. This has enabled American Water Works to fetch slight price premium compare to the competitors in the Water Utilities industry. The sustainable margins have also helped American Water Works to invest into research and development (R&D) and innovation.

High switching costs

– The high switching costs that American Water Works 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 American Water Works | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of American Water Works are -

Compensation and incentives

– The revenue per employee of American Water Works is just above the Water Utilities 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.

Employees’ less understanding of American Water Works strategy

– From the outside it seems that the employees of American Water Works 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.

No frontier risks strategy

– From the 10K / annual statement of American Water Works, it seems that company is thinking out the frontier risks that can impact Water Utilities 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.

Skills based hiring in Water Utilities industry

– The stress on hiring functional specialists at American Water Works 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.

High dependence on American Water Works ‘s star products

– The top 2 products and services of American Water Works 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 American Water Works has relatively successful track record of launching new products.

Slow decision making process

– As mentioned earlier in the report, American Water Works 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. American Water Works 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.

Slow to strategic competitive environment developments

– As American Water Works 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.

Products dominated business model

– Even though American Water Works 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. American Water Works should strive to include more intangible value offerings along with its core products and services.

Workers concerns about automation

– As automation is fast increasing in the Water Utilities industry, American Water Works 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

– American Water Works 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 bargaining power of channel partners in Water Utilities industry

– because of the regulatory requirements in United States, American Water Works 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 Water Utilities industry.

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American Water Works Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of American Water Works are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, American Water Works is facing challenges because of the dominance of functional experts in the organization. American Water Works 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for American Water Works 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 American Water Works to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for American Water Works 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.

Better consumer reach

– The expansion of the 5G network will help American Water Works to increase its market reach. American Water Works 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, American Water Works 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, American Water Works can use these opportunities to build new business models that can help the communities that American Water Works operates in. Secondly it can use opportunities from government spending in Water Utilities sector.

Developing new processes and practices

– American Water Works 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. American Water Works can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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. American Water Works 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

– American Water Works 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 American Water Works to build a competitive advantage using analytics. The analytics driven competitive advantage can help American Water Works to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Learning at scale

– Online learning technologies has now opened space for American Water Works 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.

Use of Bitcoin and other crypto currencies for transactions in Water Utilities industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for American Water Works in the Water Utilities industry. Now American Water Works can target international markets with far fewer capital restrictions requirements than the existing system.

Leveraging digital technologies

– American Water Works 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.

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Threats American Water Works External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of American Water Works are -

Technology acceleration in Forth Industrial Revolution

– American Water Works has witnessed rapid integration of technology during Covid-19 in the Water Utilities industry. As one of the leading players in the industry, American Water Works needs to keep up with the evolution of technology in the Water Utilities 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.

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. American Water Works needs to understand the core reasons impacting the Water Utilities industry. This will help it in building a better workplace.

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. American Water Works 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.

High dependence on third party suppliers

– American Water Works 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.

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 American Water Works business can come under increasing regulations regarding data privacy, data security, etc.

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 American Water Works in the Water Utilities sector and impact the bottomline of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, American Water Works 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.

Barriers of entry lowering

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

Shortening product life cycle

– it is one of the major threat that American Water Works 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 American Water Works 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.

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.

Regulatory challenges

– American Water Works 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.

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Weighted SWOT Analysis of American Water Works Template, Example

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

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