Based on various researches at Oak Spring University , Palo Alto Networks is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy,
technology disruption, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Palo Alto Networks
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Palo Alto Networks can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Palo Alto Networks, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Palo Alto Networks 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 Palo Alto Networks can be done for the following purposes –
1. Strategic planning of Palo Alto Networks
2. Improving business portfolio management of Palo Alto Networks
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 Palo Alto Networks
Strengths of Palo Alto Networks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Palo Alto Networks are -
Diverse revenue streams
– Palo Alto Networks is present in almost all the verticals within the Software & Programming industry. This has provided Palo Alto Networks 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.
Highly skilled collaborators
– Palo Alto Networks 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 Palo Alto Networks have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Palo Alto Networks 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 Software & Programming 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.
High switching costs
– The high switching costs that Palo Alto Networks 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.
Cross disciplinary teams
– Horizontal connected teams at the Palo Alto Networks 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.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Palo Alto Networks digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Palo Alto Networks 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.
Effective Research and Development (R&D)
– Palo Alto Networks has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Palo Alto Networks 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.
Operational resilience
– The operational resilience strategy of Palo Alto Networks 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.
Training and development
– Palo Alto Networks 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.
Successful track record of launching new products
– Palo Alto Networks has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Palo Alto Networks 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.
Ability to lead change in Software & Programming
– Palo Alto Networks is one of the leading players in the Software & Programming industry in United States. Over the years it has not only transformed the business landscape in the Software & Programming industry in United States but also across the existing markets. The ability to lead change has enabled Palo Alto Networks in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Palo Alto Networks is one of the most innovative firm in Software & Programming sector.
Weaknesses of Palo Alto Networks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Palo Alto Networks are -
Low market penetration in new markets
– Outside its home market of United States, Palo Alto Networks needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Palo Alto Networks ‘s star products
– The top 2 products and services of Palo Alto Networks 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 Palo Alto Networks has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, Palo Alto Networks 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 Palo Alto Networks 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 Palo Alto Networks can leverage the sales team experience to cultivate customer relationships as Palo Alto Networks is planning to shift buying processes online.
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at Palo Alto Networks 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.
No frontier risks strategy
– From the 10K / annual statement of Palo Alto Networks, 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.
Slow decision making process
– As mentioned earlier in the report, Palo Alto Networks 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. Palo Alto Networks 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 Palo Alto Networks 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.
Ability to respond to the competition
– As the decision making is very deliberative at Palo Alto Networks, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Palo Alto Networks 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 Palo Alto Networks is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Palo Alto Networks needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Palo Alto Networks to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
High bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in United States, Palo Alto Networks 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.
Palo Alto Networks Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Palo Alto Networks are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Palo Alto Networks can use these opportunities to build new business models that can help the communities that Palo Alto Networks operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Loyalty marketing
– Palo Alto Networks 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Palo Alto Networks 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.
Learning at scale
– Online learning technologies has now opened space for Palo Alto Networks 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.
Buying journey improvements
– Palo Alto Networks 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.
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. Palo Alto Networks can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Palo Alto Networks to increase its market reach. Palo Alto Networks 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.
Building a culture of innovation
– managers at Palo Alto Networks 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Palo Alto Networks 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 Palo Alto Networks 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 Palo Alto Networks to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Palo Alto Networks 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.
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. Palo Alto Networks can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Palo Alto Networks in the Software & Programming industry. Now Palo Alto Networks can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Palo Alto Networks External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Palo Alto Networks are -
Regulatory challenges
– Palo Alto Networks 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.
High dependence on third party suppliers
– Palo Alto Networks 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.
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 Palo Alto Networks in the Software & Programming sector and impact the bottomline of the organization.
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. Palo Alto Networks can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Palo Alto Networks 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. Palo Alto Networks can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
Increasing wage structure of Palo Alto Networks
– 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 Palo Alto Networks.
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.
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. Palo Alto Networks needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Palo Alto Networks has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Palo Alto Networks needs to keep up with the evolution of technology in the Software & Programming sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Consumer confidence and its impact on Palo Alto Networks 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.
Shortening product life cycle
– it is one of the major threat that Palo Alto Networks is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Palo Alto Networks business can come under increasing regulations regarding data privacy, data security, etc.
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 Palo Alto Networks.
Weighted SWOT Analysis of Palo Alto Networks Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Palo Alto Networks 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 Palo Alto Networks 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 Palo Alto Networks 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 Palo Alto Networks 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 Palo Alto Networks needs to make to build a sustainable competitive advantage.