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 – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing commodity prices, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -

Innovation driven organization

– American Water Works is one of the most innovative firm in Water Utilities sector.

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.

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.

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.

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.

Cross disciplinary teams

– Horizontal connected teams at the American Water Works 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.

Training and development

– American Water Works has one of the best training and development program in Utilities 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.

Ability to lead change in Water Utilities

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

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.

Superior customer experience

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

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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 -

Ability to respond to the competition

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

Increasing silos among functional specialists

– The organizational structure of American Water Works is dominated by functional specialists. It is not different from other players in the Water Utilities industry, but American Water Works needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help American Water Works to focus more on services in the Water Utilities industry rather than just following the product oriented approach.

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.

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

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.

Capital Spending Reduction

– Even during the low interest decade, American Water Works has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Water Utilities industry using digital technology.

Lack of clear differentiation of American Water Works products

– To increase the profitability and margins on the products, American Water Works needs to provide more differentiated products than what it is currently offering in the marketplace.

Aligning sales with marketing

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

Low market penetration in new markets

– Outside its home market of United States, American Water Works needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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.

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.

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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 -

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.

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.

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.

Buying journey improvements

– American Water Works can improve the customer journey of consumers in the Water Utilities 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.

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.

Manufacturing automation

– American Water Works can use the latest technology developments to improve its manufacturing and designing process in Water Utilities 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.

Loyalty marketing

– American Water Works 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.

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.

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.

Reforming the budgeting process

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

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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, American Water Works 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 American Water Works to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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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 -

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.

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.

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 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.

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.

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.

Stagnating economy with rate increase

– American Water Works can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Water Utilities industry.

Easy access to finance

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for American Water Works in Water Utilities industry. The Water Utilities 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.

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.

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.

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.

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.

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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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