American Water Works (AWK) SWOT Analysis / TOWS Matrix / MBA Resources
Water Utilities
Strategy / 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 – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices,
increasing energy prices, challanges to central banks by blockchain based private currencies, etc
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.
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
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
High cash cycle compare to competitors
American Water Works has a high cash cycle compare to other players in the Water Utilities industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
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.
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.
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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, American Water Works is slow explore the new channels of communication. These new channels of communication can help American Water Works to provide better information regarding Water Utilities products and services. It can also build an online community to further reach out to potential customers.
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 -
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.
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.
Building a culture of innovation
– managers at American Water Works 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 Water Utilities industry.
Creating value in data economy
– The success of analytics program of American Water Works has opened avenues for new revenue streams for the organization in Water Utilities industry. This can help American Water Works to build a more holistic ecosystem for American Water Works products in the Water Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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 American Water Works 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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
Environmental challenges
– American Water Works 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. American Water Works can take advantage of this fund but it will also bring new competitors in the Water Utilities industry.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, American Water Works 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 American Water Works prominent markets.
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.
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.
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.
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.
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.
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.