Descartes Systems (DSG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Descartes Systems (Canada)

Based on various researches at Oak Spring University , Descartes Systems is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing energy prices, increasing commodity prices, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Descartes Systems

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Descartes Systems can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Descartes Systems, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Descartes Systems 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 Descartes Systems can be done for the following purposes –
1. Strategic planning of Descartes Systems
2. Improving business portfolio management of Descartes Systems
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 Descartes Systems

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Strengths of Descartes Systems | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Descartes Systems are -

Organizational Resilience of Descartes Systems

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

Digital Transformation in Software & Programming industry

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

Operational resilience

– The operational resilience strategy of Descartes Systems 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.

Highly skilled collaborators

– Descartes Systems has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of Descartes Systems have helped the firm to develop new products and bring them quickly to the marketplace.

Learning organization

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

Ability to recruit top talent

– Descartes Systems is one of the leading players in the Software & Programming industry in Canada. It is in a position to attract the best talent available in Canada. The firm has a robust talent identification program that helps in identifying the brightest.

High switching costs

– The high switching costs that Descartes Systems 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.

High brand equity

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

Diverse revenue streams

– Descartes Systems is present in almost all the verticals within the Software & Programming industry. This has provided Descartes Systems 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.

Training and development

– Descartes Systems has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Effective Research and Development (R&D)

– Descartes Systems has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Descartes Systems staying ahead in the Software & Programming industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Superior customer experience

– The customer experience strategy of Descartes Systems in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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Weaknesses of Descartes Systems | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Descartes Systems are -

Aligning sales with marketing

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

Workers concerns about automation

– As automation is fast increasing in the Software & Programming industry, Descartes Systems 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.

Increasing silos among functional specialists

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

Compensation and incentives

– The revenue per employee of Descartes Systems is just above the Software & Programming industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Skills based hiring in Software & Programming industry

– The stress on hiring functional specialists at Descartes Systems 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.

Slow to strategic competitive environment developments

– As Descartes Systems 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.

Employees’ less understanding of Descartes Systems strategy

– From the outside it seems that the employees of Descartes Systems 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.

Lack of clear differentiation of Descartes Systems products

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

Interest costs

– Compare to the competition, Descartes Systems has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Descartes Systems supply chain. Even after few cautionary changes, Descartes Systems is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Descartes Systems vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of Descartes Systems, 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.

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Descartes Systems Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Descartes Systems are -

Buying journey improvements

– Descartes Systems 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.

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. Descartes Systems can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Descartes Systems can use these opportunities to build new business models that can help the communities that Descartes Systems operates in. Secondly it can use opportunities from government spending in Software & Programming sector.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Descartes Systems in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Software & Programming industry, and it will provide faster access to the consumers.

Remote work and new talent hiring opportunities

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

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Descartes Systems 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, Descartes Systems is facing challenges because of the dominance of functional experts in the organization. Descartes Systems 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.

Harnessing reconfiguration of the global supply chains

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

Loyalty marketing

– Descartes Systems 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.

Manufacturing automation

– Descartes Systems can use the latest technology developments to improve its manufacturing and designing process in Software & Programming 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.

Leveraging digital technologies

– Descartes Systems 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 Descartes Systems to increase its market reach. Descartes Systems 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Descartes Systems can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Descartes Systems can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

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Threats Descartes Systems External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Descartes Systems are -

Easy access to finance

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

Regulatory challenges

– Descartes Systems 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.

Increasing wage structure of Descartes Systems

– 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 Descartes Systems.

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 Descartes Systems business can come under increasing regulations regarding data privacy, data security, etc.

High dependence on third party suppliers

– Descartes Systems 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.

Shortening product life cycle

– it is one of the major threat that Descartes Systems is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Descartes Systems in Software & Programming industry. The Software & Programming industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Descartes Systems needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.

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 Descartes Systems.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Descartes Systems 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.

Stagnating economy with rate increase

– Descartes Systems 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.

Consumer confidence and its impact on Descartes Systems demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Software & Programming industry and other sectors.

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Weighted SWOT Analysis of Descartes Systems Template, Example

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

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