Five9 (FIVN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Five9 (United States)

Based on various researches at Oak Spring University , Five9 is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Five9

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Five9 can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Five9, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Five9 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 Five9 can be done for the following purposes –
1. Strategic planning of Five9
2. Improving business portfolio management of Five9
3. Assessing feasibility of the new initiative in United States
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Five9

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Strengths of Five9 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Five9 are -

Strong track record of project management in the Software & Programming industry

– Five9 is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Effective Research and Development (R&D)

– Five9 has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Five9 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.

Ability to recruit top talent

– Five9 is one of the leading players in the Software & Programming industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Low bargaining power of suppliers

– Suppliers of Five9 in the Technology sector have low bargaining power. Five9 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Five9 to manage not only supply disruptions but also source products at highly competitive prices.

Sustainable margins compare to other players in Software & Programming industry

– Five9 has clearly differentiated products in the market place. This has enabled Five9 to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Five9 to invest into research and development (R&D) and innovation.

Training and development

– Five9 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.

Innovation driven organization

– Five9 is one of the most innovative firm in Software & Programming sector.

High brand equity

– Five9 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Five9 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

High switching costs

– The high switching costs that Five9 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.

Successful track record of launching new products

– Five9 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Five9 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.

Organizational Resilience of Five9

– The covid-19 pandemic has put organizational resilience at the centre of everthing Five9 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Learning organization

- Five9 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 Five9 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Five9 emphasize – knowledge, initiative, and innovation.

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Weaknesses of Five9 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Five9 are -

High cash cycle compare to competitors

Five9 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.

Low market penetration in new markets

– Outside its home market of United States, Five9 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High bargaining power of channel partners in Software & Programming industry

– because of the regulatory requirements in United States, Five9 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.

Interest costs

– Compare to the competition, Five9 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.

Employees’ less understanding of Five9 strategy

– From the outside it seems that the employees of Five9 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.

Workers concerns about automation

– As automation is fast increasing in the Software & Programming industry, Five9 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 Five9 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 Five9 can leverage the sales team experience to cultivate customer relationships as Five9 is planning to shift buying processes online.

Slow decision making process

– As mentioned earlier in the report, Five9 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Software & Programming industry over the last five years. Five9 even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Compensation and incentives

– The revenue per employee of Five9 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.

High operating costs

– Compare to the competitors, Five9 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 Five9 lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, Five9 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.

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Five9 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Five9 are -

Creating value in data economy

– The success of analytics program of Five9 has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Five9 to build a more holistic ecosystem for Five9 products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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 Five9 in the Software & Programming industry. Now Five9 can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Five9 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Five9 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.

Building a culture of innovation

– managers at Five9 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.

Learning at scale

– Online learning technologies has now opened space for Five9 to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Better consumer reach

– The expansion of the 5G network will help Five9 to increase its market reach. Five9 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.

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. Five9 can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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. Five9 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. Five9 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Five9 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, Five9 is facing challenges because of the dominance of functional experts in the organization. Five9 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Five9 can use these opportunities to build new business models that can help the communities that Five9 operates in. Secondly it can use opportunities from government spending in Software & Programming sector.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Five9 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 Five9 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 Five9 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Five9 are -

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.

Consumer confidence and its impact on Five9 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Five9 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.

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 Five9.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Five9 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.

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 Five9 business can come under increasing regulations regarding data privacy, data security, etc.

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. Five9 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

– Five9 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.

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. Five9 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.

Shortening product life cycle

– it is one of the major threat that Five9 is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing wage structure of Five9

– 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 Five9.

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 Five9 in the Software & Programming sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Five9 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.

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Weighted SWOT Analysis of Five9 Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Five9 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 Five9 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 Five9 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 Five9 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 Five9 needs to make to build a sustainable competitive advantage.

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