Pegasystems (PEGA) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Pegasystems (United States)

Based on various researches at Oak Spring University , Pegasystems is operating in a macro-environment that has been destablized by – geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, there is increasing trade war between United States & China, there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of Pegasystems

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

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

The strengths of Pegasystems are -

Training and development

– Pegasystems 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.

Digital Transformation in Software & Programming industry

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

Diverse revenue streams

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

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

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

Successful track record of launching new products

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

High switching costs

– The high switching costs that Pegasystems 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

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

Ability to recruit top talent

– Pegasystems 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.

Analytics focus

– Pegasystems 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.

Low bargaining power of suppliers

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

Sustainable margins compare to other players in Software & Programming industry

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

Learning organization

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

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

The weaknesses of Pegasystems are -

Compensation and incentives

– The revenue per employee of Pegasystems 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 Pegasystems 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.

Increasing silos among functional specialists

– The organizational structure of Pegasystems is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Pegasystems needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pegasystems 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, Pegasystems 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.

Low market penetration in new markets

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

No frontier risks strategy

– From the 10K / annual statement of Pegasystems, 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.

Workers concerns about automation

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

High cash cycle compare to competitors

Pegasystems 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.

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 Pegasystems supply chain. Even after few cautionary changes, Pegasystems is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pegasystems vulnerable to further global disruptions in South East Asia.

Slow to strategic competitive environment developments

– As Pegasystems 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.

Lack of clear differentiation of Pegasystems products

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

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

The opportunities of Pegasystems are -

Better consumer reach

– The expansion of the 5G network will help Pegasystems to increase its market reach. Pegasystems 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. Pegasystems can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Low interest rates

– Even though inflation is raising its head in most developed economies, Pegasystems 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.

Increase in government spending

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

Using analytics as competitive advantage

– Pegasystems has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Software & Programming sector. This continuous investment in analytics has enabled Pegasystems to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pegasystems to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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

Manufacturing automation

– Pegasystems 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.

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

Creating value in data economy

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

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. Pegasystems 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. Pegasystems 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.

Remote work and new talent hiring opportunities

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

Building a culture of innovation

– managers at Pegasystems 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Pegasystems is facing challenges because of the dominance of functional experts in the organization. Pegasystems 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.

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

The threats of Pegasystems are -

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. Pegasystems needs to understand the core reasons impacting the Software & Programming 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, Pegasystems 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 Pegasystems prominent markets.

Environmental challenges

– Pegasystems 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. Pegasystems can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.

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.

Trade war between China and United States

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

Learning curve for new practices

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

Shortening product life cycle

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

Technology acceleration in Forth Industrial Revolution

– Pegasystems has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Pegasystems 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.

Stagnating economy with rate increase

– Pegasystems 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.

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

Consumer confidence and its impact on Pegasystems 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.

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.

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. Pegasystems 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.

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Weighted SWOT Analysis of Pegasystems Template, Example

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

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