SWOT Analysis / TOWS Matrix for Spotify Tech (Germany)
Based on various researches at Oak Spring University , Spotify Tech is operating in a macro-environment that has been destablized by – increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs,
central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Spotify Tech can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spotify Tech, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spotify Tech 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 Spotify Tech can be done for the following purposes –
1. Strategic planning of Spotify Tech
2. Improving business portfolio management of Spotify Tech
3. Assessing feasibility of the new initiative in Germany
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Spotify Tech
Strengths of Spotify Tech | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spotify Tech are -
High switching costs
– The high switching costs that Spotify Tech 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.
Digital Transformation in Computer Services industry
- digital transformation varies from industry to industry. For Spotify Tech digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Spotify Tech 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.
Superior customer experience
– The customer experience strategy of Spotify Tech in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Spotify Tech has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Spotify Tech to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Spotify Tech 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 Spotify Tech is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Spotify Tech emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Computer Services industry
– Spotify Tech has clearly differentiated products in the market place. This has enabled Spotify Tech to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Spotify Tech to invest into research and development (R&D) and innovation.
Analytics focus
– Spotify Tech 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 Computer Services industry. The technology infrastructure of Germany 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.
Highly skilled collaborators
– Spotify Tech has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Services industry. Secondly the value chain collaborators of Spotify Tech have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Computer Services industry
– Spotify Tech is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Spotify Tech is one of the most innovative firm in Computer Services sector.
Successful track record of launching new products
– Spotify Tech has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Spotify Tech 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 Computer Services
– Spotify Tech is one of the leading players in the Computer Services industry in Germany. Over the years it has not only transformed the business landscape in the Computer Services industry in Germany but also across the existing markets. The ability to lead change has enabled Spotify Tech in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Spotify Tech | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spotify Tech are -
Compensation and incentives
– The revenue per employee of Spotify Tech is just above the Computer Services 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 Computer Services industry
– The stress on hiring functional specialists at Spotify Tech 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, Spotify Tech has high operating costs in the Computer Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Spotify Tech lucrative customers.
Low market penetration in new markets
– Outside its home market of Germany, Spotify Tech needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Spotify Tech 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 Spotify Tech supply chain. Even after few cautionary changes, Spotify Tech is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Spotify Tech vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Computer Services industry
– because of the regulatory requirements in Germany, Spotify Tech 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 Computer Services industry.
Workers concerns about automation
– As automation is fast increasing in the Computer Services industry, Spotify Tech 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.
Products dominated business model
– Even though Spotify Tech has some of the most successful models in the Computer Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Spotify Tech should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Spotify Tech needs to have more collaboration between its sales team and marketing team. Sales professionals in the Computer Services industry have deep experience in developing customer relationships. Marketing department at Spotify Tech can leverage the sales team experience to cultivate customer relationships as Spotify Tech is planning to shift buying processes online.
Need for greater diversity
– Spotify Tech has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Spotify Tech Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Spotify Tech are -
Developing new processes and practices
– Spotify Tech can develop new processes and procedures in Computer Services 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.
Use of Bitcoin and other crypto currencies for transactions in Computer Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Spotify Tech in the Computer Services industry. Now Spotify Tech can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Spotify Tech can use these opportunities to build new business models that can help the communities that Spotify Tech operates in. Secondly it can use opportunities from government spending in Computer Services sector.
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 Spotify Tech 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Spotify Tech can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Spotify Tech can improve the customer journey of consumers in the Computer Services 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.
Loyalty marketing
– Spotify Tech 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Spotify Tech in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Computer Services industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Spotify Tech to increase its market reach. Spotify Tech 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. Spotify Tech can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Spotify Tech 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.
Learning at scale
– Online learning technologies has now opened space for Spotify Tech 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.
Using analytics as competitive advantage
– Spotify Tech has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Computer Services sector. This continuous investment in analytics has enabled Spotify Tech to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spotify Tech to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Spotify Tech External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Spotify Tech are -
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 Spotify Tech in the Computer Services sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Spotify Tech 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 Spotify Tech prominent markets.
Consumer confidence and its impact on Spotify Tech 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 Computer Services 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 Spotify Tech in Computer Services industry. The Computer Services 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.
Easy access to finance
– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Spotify Tech can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Spotify Tech
– 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 Spotify Tech.
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 Spotify Tech.
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 Spotify Tech business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Spotify Tech may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Computer Services sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Spotify Tech with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
Technology acceleration in Forth Industrial Revolution
– Spotify Tech has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Spotify Tech needs to keep up with the evolution of technology in the Computer Services 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.
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. Spotify Tech 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.
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.
Weighted SWOT Analysis of Spotify Tech Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Spotify Tech 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 Spotify Tech 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 Spotify Tech 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 Spotify Tech 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 Spotify Tech needs to make to build a sustainable competitive advantage.
