SWOT Analysis / TOWS Matrix for SPS Commerce (United States)
Based on various researches at Oak Spring University , SPS Commerce is operating in a macro-environment that has been destablized by – increasing energy prices, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China,
increasing commodity prices, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SPS Commerce can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SPS Commerce, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SPS Commerce 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 SPS Commerce can be done for the following purposes –
1. Strategic planning of SPS Commerce
2. Improving business portfolio management of SPS Commerce
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 SPS Commerce
Strengths of SPS Commerce | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SPS Commerce are -
Operational resilience
– The operational resilience strategy of SPS Commerce comprises – understanding the underlying the factors in the Software & Programming industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– SPS Commerce has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled SPS Commerce to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– SPS Commerce 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 SPS Commerce 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.
Training and development
– SPS Commerce 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.
Low bargaining power of suppliers
– Suppliers of SPS Commerce in the Technology sector have low bargaining power. SPS Commerce has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps SPS Commerce to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– SPS Commerce 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 SPS Commerce have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the SPS Commerce 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.
Innovation driven organization
– SPS Commerce is one of the most innovative firm in Software & Programming sector.
Organizational Resilience of SPS Commerce
– The covid-19 pandemic has put organizational resilience at the centre of everthing SPS Commerce does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- SPS Commerce 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 SPS Commerce is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SPS Commerce emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of SPS Commerce in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of SPS Commerce | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SPS Commerce are -
Low market penetration in new markets
– Outside its home market of United States, SPS Commerce needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
SPS Commerce 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.
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at SPS Commerce 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.
High operating costs
– Compare to the competitors, SPS Commerce 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 SPS Commerce lucrative customers.
Interest costs
– Compare to the competition, SPS Commerce 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.
Lack of clear differentiation of SPS Commerce products
– To increase the profitability and margins on the products, SPS Commerce needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though SPS Commerce has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. SPS Commerce should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, SPS Commerce is slow explore the new channels of communication. These new channels of communication can help SPS Commerce to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of SPS Commerce 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.
Aligning sales with marketing
– From the outside it seems that SPS Commerce 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 SPS Commerce can leverage the sales team experience to cultivate customer relationships as SPS Commerce is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, SPS Commerce 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.
SPS Commerce Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SPS Commerce are -
Low interest rates
– Even though inflation is raising its head in most developed economies, SPS Commerce 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.
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 SPS Commerce in the Software & Programming industry. Now SPS Commerce can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– SPS Commerce 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 SPS Commerce to build a competitive advantage using analytics. The analytics driven competitive advantage can help SPS Commerce to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. SPS Commerce 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. SPS Commerce 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.
Developing new processes and practices
– SPS Commerce can develop new processes and procedures in Software & Programming industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for SPS Commerce 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help SPS Commerce to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– SPS Commerce 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.
Building a culture of innovation
– managers at SPS Commerce 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.
Creating value in data economy
– The success of analytics program of SPS Commerce has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help SPS Commerce to build a more holistic ecosystem for SPS Commerce products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– SPS Commerce 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, SPS Commerce can use these opportunities to build new business models that can help the communities that SPS Commerce operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for SPS Commerce 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 SPS Commerce to hire the very best people irrespective of their geographical location.
Threats SPS Commerce External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SPS Commerce are -
High dependence on third party suppliers
– SPS Commerce 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.
Environmental challenges
– SPS Commerce 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. SPS Commerce can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
Stagnating economy with rate increase
– SPS Commerce 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.
Shortening product life cycle
– it is one of the major threat that SPS Commerce is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents SPS Commerce with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, SPS Commerce 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 SPS Commerce prominent markets.
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.
Regulatory challenges
– SPS Commerce 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for SPS Commerce 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 SPS Commerce.
Increasing wage structure of SPS Commerce
– 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 SPS Commerce.
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. SPS Commerce needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. SPS Commerce 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.
Weighted SWOT Analysis of SPS Commerce Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SPS Commerce 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 SPS Commerce 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 SPS Commerce 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 SPS Commerce 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 SPS Commerce needs to make to build a sustainable competitive advantage.