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Equinix SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Equinix managers to do a situational analysis of the company . It is a useful technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Equinix is facing in its current business environment.
The Equinix is one of the leading organizatations in its industry. Equinix maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Equinix to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The primary purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Equinix strengths, and eradicate its weaknesses.
Step by Step Guide to Equinix SWOT Analysis
Strengths of Equinix – Internal Strategic Factors
As one of the leading companies in its industry, Equinix has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Equinix are –
- Strong Free Cash Flow – Equinix has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly successful at Go To Market strategies for its products.
- Superb Performance in New Markets – Equinix has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Strong distribution network – Over the years Equinix has built a reliable distribution network that can reach majority of its potential market.
- Good Returns on Capital Expenditure – Equinix is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Strong Brand Portfolio – Over the years Equinix has invested in building a strong brand portfolio. The SWOT analysis of Equinix just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Weakness of Equinix – Internal Strategic Factors
Weakness are the areas where Equinix can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Equinix is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Equinix is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Equinix has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- The profitability ratio and Net Contribution % of Equinix are below the industry average.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Equinix is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Equinix – External Strategic Factors
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Equinix’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Equinix an opportunity to enter a new emerging market.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Equinix. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The market development will lead to dilution of competitor’s advantage and enable Equinix to increase its competitiveness compare to the other competitors.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Equinix to increase its profitability.
- The new technology provides an opportunity to Equinix to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Equinix to drive home its advantage in new technology and gain market share in the new product category.
Threats Equinix Facing - External Strategic Factors
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Liability laws in different countries are different and Equinix may be exposed to various liability claims given change in policies in those markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Equinix
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Limitations of SWOT Analysis for Equinix
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Equinix
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Equinix
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Equinix managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Equinix
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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