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Rackspace Hosting SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Rackspace Hosting managers to do a situational analysis of the organization . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Rackspace Hosting is facing in its current business environment.
The Rackspace Hosting is one of the leading firms in its industry. Rackspace Hosting maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly 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 enables 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Rackspace Hosting 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 main purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Rackspace Hosting strengths, and eradicate its weaknesses.
Step by Step Guide to Rackspace Hosting SWOT Analysis
Strengths of Rackspace Hosting – Internal Strategic Factors
As one of the leading firms in its industry, Rackspace Hosting 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 Rackspace Hosting are –
- Superb Performance in New Markets – Rackspace Hosting 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 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.
- Highly successful at Go To Market strategies for its products.
- Strong Brand Portfolio – Over the years Rackspace Hosting has invested in building a strong brand portfolio. The SWOT analysis of Rackspace Hosting just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly skilled workforce through successful training and learning programs. Rackspace Hosting is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Automation of activities brought consistency of quality to Rackspace Hosting products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong distribution network – Over the years Rackspace Hosting has built a reliable distribution network that can reach majority of its potential market.
Weakness of Rackspace Hosting – Internal Strategic Factors
Weakness are the areas where Rackspace Hosting can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Rackspace Hosting is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The profitability ratio and Net Contribution % of Rackspace Hosting are below the industry average.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Rackspace Hosting
- High attrition rate in work force – compare to other organizations in the industry Rackspace Hosting has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Rackspace Hosting needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for Rackspace Hosting – External Strategic Factors
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Rackspace Hosting in other product categories.
- 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.
- The new technology provides an opportunity to Rackspace Hosting 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.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Rackspace Hosting to capture new customers and increase its market share.
- 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 Rackspace Hosting to drive home its advantage in new technology and gain market share in the new product category.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Rackspace Hosting.
- New trends in the consumer behavior can open up new market for the Rackspace Hosting . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- 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 Rackspace Hosting. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Threats Rackspace Hosting Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Rackspace Hosting’s product especially in the emerging markets and low income markets.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- 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.
- Rising raw material can pose a threat to the Rackspace Hosting profitability.
- Liability laws in different countries are different and Rackspace Hosting may be exposed to various liability claims given change in policies in those markets.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Limitations of SWOT Analysis for Rackspace Hosting
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 Rackspace Hosting
- 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 Rackspace Hosting
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 Rackspace Hosting 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 Rackspace Hosting
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
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
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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