SWOT Analysis / TOWS Matrix for Constellation Software (Canada)
Based on various researches at Oak Spring University , Constellation Software is operating in a macro-environment that has been destablized by – increasing energy prices, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, technology disruption, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, wage bills are increasing,
increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Constellation Software
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Constellation Software can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Constellation Software, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Constellation Software 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 Constellation Software can be done for the following purposes –
1. Strategic planning of Constellation Software
2. Improving business portfolio management of Constellation Software
3. Assessing feasibility of the new initiative in Canada
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Constellation Software
Strengths of Constellation Software | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Constellation Software are -
Low bargaining power of suppliers
– Suppliers of Constellation Software in the Technology sector have low bargaining power. Constellation Software has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Constellation Software to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Constellation Software has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Constellation Software to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Constellation Software is present in almost all the verticals within the Software & Programming industry. This has provided Constellation Software a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of Constellation Software comprises – understanding the underlying the factors in the Software & Programming 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.
High switching costs
– The high switching costs that Constellation Software 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.
Innovation driven organization
– Constellation Software is one of the most innovative firm in Software & Programming sector.
Cross disciplinary teams
– Horizontal connected teams at the Constellation Software 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.
Ability to lead change in Software & Programming
– Constellation Software is one of the leading players in the Software & Programming industry in Canada. Over the years it has not only transformed the business landscape in the Software & Programming industry in Canada but also across the existing markets. The ability to lead change has enabled Constellation Software in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Software & Programming industry
– Constellation Software has clearly differentiated products in the market place. This has enabled Constellation Software to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Constellation Software to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Constellation Software has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Constellation Software 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
– Constellation Software is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Constellation Software 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 Constellation Software is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Constellation Software emphasize – knowledge, initiative, and innovation.
Weaknesses of Constellation Software | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Constellation Software are -
Increasing silos among functional specialists
– The organizational structure of Constellation Software is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Constellation Software needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Constellation Software to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Constellation Software 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 Software & Programming industry using digital technology.
Products dominated business model
– Even though Constellation Software has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Constellation Software should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Constellation Software 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.
Slow to strategic competitive environment developments
– As Constellation Software is one of the leading players in the Software & Programming industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Software & Programming industry in last five years.
Low market penetration in new markets
– Outside its home market of Canada, Constellation Software needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Constellation Software ‘s star products
– The top 2 products and services of Constellation Software still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though Constellation Software has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Constellation Software 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 Constellation Software lucrative customers.
High bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in Canada, Constellation Software 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.
No frontier risks strategy
– From the 10K / annual statement of Constellation Software, 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.
Lack of clear differentiation of Constellation Software products
– To increase the profitability and margins on the products, Constellation Software needs to provide more differentiated products than what it is currently offering in the marketplace.
Constellation Software Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Constellation Software are -
Leveraging digital technologies
– Constellation Software 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 Software & Programming industry, but it has also influenced the consumer preferences. Constellation Software can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Constellation Software can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Constellation Software in the Software & Programming industry. Now Constellation Software can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Constellation Software can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Constellation Software is facing challenges because of the dominance of functional experts in the organization. Constellation Software can utilize new technology in the field of Software & Programming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Constellation Software can improve the customer journey of consumers in the Software & Programming 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.
Creating value in data economy
– The success of analytics program of Constellation Software has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Constellation Software to build a more holistic ecosystem for Constellation Software products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Constellation Software 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Constellation Software 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 Constellation Software 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, Constellation Software 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 Constellation Software to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Constellation Software 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.
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 Constellation Software 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.
Threats Constellation Software External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Constellation Software are -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Constellation Software 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 Constellation Software prominent markets.
Regulatory challenges
– Constellation Software 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Constellation Software with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
Environmental challenges
– Constellation Software 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. Constellation Software can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
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. Constellation Software needs to understand the core reasons impacting the Software & Programming 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. Constellation Software 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.
Increasing wage structure of Constellation Software
– 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 Constellation Software.
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 Constellation Software business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Constellation Software is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Constellation Software may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming 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 Constellation Software.
Stagnating economy with rate increase
– Constellation Software 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 Software & Programming industry.
Weighted SWOT Analysis of Constellation Software Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Constellation Software 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 Constellation Software 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 Constellation Software 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 Constellation Software 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 Constellation Software needs to make to build a sustainable competitive advantage.
