SAP: The Challenge of Aligning Sourcing and Innovation Strategies SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of SAP: The Challenge of Aligning Sourcing and Innovation Strategies
In late 2011, SAP, the German leader in the enterprise software industry, announced a major investment plan for expanding in China and also acquired a leading American firm in cloud-based human capital management software. At first glance, these investments seemed rather unconnected. A closer look at SAP's strategy, however, revealed a closely connected and coordinated network of strategic decisions and investments for which alignment and finding the right balance were key challenges. Hence, it was crucial to ask: What were the principal challenges for SAP in aligning its innovation and sourcing strategies? Compared to its key competitors - Microsoft, IBM and Oracle - how was it aligning its innovation strategy with its sourcing strategy?
Authors :: Bent Petersen, Dominique Nikerle-Uhthoff, Helen Schwaerzler
Swot Analysis of "SAP: The Challenge of Aligning Sourcing and Innovation Strategies" written by Bent Petersen, Dominique Nikerle-Uhthoff, Helen Schwaerzler includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sap Aligning facing as an external strategic factors. Some of the topics covered in SAP: The Challenge of Aligning Sourcing and Innovation Strategies case study are - Strategic Management Strategies, International business, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the SAP: The Challenge of Aligning Sourcing and Innovation Strategies casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation,
increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of SAP: The Challenge of Aligning Sourcing and Innovation Strategies
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SAP: The Challenge of Aligning Sourcing and Innovation Strategies case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sap Aligning, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sap Aligning 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 SAP: The Challenge of Aligning Sourcing and Innovation Strategies can be done for the following purposes –
1. Strategic planning using facts provided in SAP: The Challenge of Aligning Sourcing and Innovation Strategies case study
2. Improving business portfolio management of Sap Aligning
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sap Aligning
Strengths SAP: The Challenge of Aligning Sourcing and Innovation Strategies | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sap Aligning in SAP: The Challenge of Aligning Sourcing and Innovation Strategies Harvard Business Review case study are -
Training and development
– Sap Aligning has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SAP: The Challenge of Aligning Sourcing and Innovation Strategies Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Sap Aligning has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sap Aligning to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Sap Aligning 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 industry. The technology infrastructure suggested by Bent Petersen, Dominique Nikerle-Uhthoff, Helen Schwaerzler can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Sap Aligning digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sap Aligning 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.
Operational resilience
– The operational resilience strategy in the SAP: The Challenge of Aligning Sourcing and Innovation Strategies Harvard Business Review case study comprises – understanding the underlying the factors in the 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.
Ability to lead change in Strategy & Execution field
– Sap Aligning is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Sap Aligning in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Sap Aligning is one of the most innovative firm in sector. Manager in SAP: The Challenge of Aligning Sourcing and Innovation Strategies Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Sap Aligning 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.
Organizational Resilience of Sap Aligning
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sap Aligning does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Sap Aligning is one of the leading recruiters in the industry. Managers in the SAP: The Challenge of Aligning Sourcing and Innovation Strategies are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Sap Aligning 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 Sap Aligning is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SAP: The Challenge of Aligning Sourcing and Innovation Strategies Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Sap Aligning has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sap Aligning 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.
Weaknesses SAP: The Challenge of Aligning Sourcing and Innovation Strategies | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SAP: The Challenge of Aligning Sourcing and Innovation Strategies are -
Interest costs
– Compare to the competition, Sap Aligning 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies, in the dynamic environment Sap Aligning has struggled to respond to the nimble upstart competition. Sap Aligning has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies, it seems that the employees of Sap Aligning don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High operating costs
– Compare to the competitors, firm in the HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sap Aligning 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Sap Aligning 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 industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Sap Aligning is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Sap Aligning needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sap Aligning to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case SAP: The Challenge of Aligning Sourcing and Innovation Strategies can leverage the sales team experience to cultivate customer relationships as Sap Aligning is planning to shift buying processes online.
High cash cycle compare to competitors
Sap Aligning has a high cash cycle compare to other players in the 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 Sap Aligning supply chain. Even after few cautionary changes mentioned in the HBR case study - SAP: The Challenge of Aligning Sourcing and Innovation Strategies, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sap Aligning vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Bent Petersen, Dominique Nikerle-Uhthoff, Helen Schwaerzler suggests that, Sap Aligning 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 industry.
Slow decision making process
– As mentioned earlier in the report, Sap Aligning has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Sap Aligning even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Opportunities SAP: The Challenge of Aligning Sourcing and Innovation Strategies | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies are -
Manufacturing automation
– Sap Aligning can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. 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.
Buying journey improvements
– Sap Aligning can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. SAP: The Challenge of Aligning Sourcing and Innovation Strategies suggest that firm 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.
Learning at scale
– Online learning technologies has now opened space for Sap Aligning 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.
Leveraging digital technologies
– Sap Aligning 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.
Creating value in data economy
– The success of analytics program of Sap Aligning has opened avenues for new revenue streams for the organization in the industry. This can help Sap Aligning to build a more holistic ecosystem as suggested in the SAP: The Challenge of Aligning Sourcing and Innovation Strategies case study. Sap Aligning can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sap Aligning in the consumer business. Now Sap Aligning can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Sap Aligning to increase its market reach. Sap Aligning 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.
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 Sap Aligning 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sap Aligning 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. Sap Aligning 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.
Using analytics as competitive advantage
– Sap Aligning has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sap Aligning to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sap Aligning 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 Sap Aligning to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sap Aligning 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sap Aligning can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats SAP: The Challenge of Aligning Sourcing and Innovation Strategies External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies are -
Regulatory challenges
– Sap Aligning 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 Strategy & Execution industry regulations.
Increasing wage structure of Sap Aligning
– 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 Sap Aligning.
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 Sap Aligning business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sap Aligning can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Sap Aligning 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.
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. Sap Aligning needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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 Sap Aligning in the Strategy & Execution sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sap Aligning in the Strategy & Execution industry. The Strategy & Execution 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.
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.
High dependence on third party suppliers
– Sap Aligning 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sap Aligning 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 prominent markets illustrated in HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies .
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 Sap Aligning.
Shortening product life cycle
– it is one of the major threat that Sap Aligning is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of SAP: The Challenge of Aligning Sourcing and Innovation Strategies Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies 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 the case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies 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 the Harvard case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies 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 SAP: The Challenge of Aligning Sourcing and Innovation Strategies is 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 Sap Aligning needs to make to build a sustainable competitive advantage.