SAP AG in 2006: Driving Corporate Transformation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of SAP AG in 2006: Driving Corporate Transformation
In April 2006, SAP AG CEO Henning Kagermann faces several critical decisions. Over the past two years, Kagermann has put in place a bold growth strategy for the company--one that aims to transform the business software applications giant into a pioneer in the emerging Service Oriented Architecture (SOA) technology field, a leader in the small- to mid-size enterprise market segment, and a relevant solution provider for a broader population of business software users. Concurrent with the formulation of this strategy, Kagermann has instituted many internal changes and initiatives designed to make SAP into a more agile, efficient, and globally aligned organization. In several cases, these changes to organizational design, leadership, management processes, culture, and values directly challenge what many consider to be the foundational principles of this highly traditional, 30+year-old German company. Kagermann's plan and changes are not met with universal enthusiasm by employees or customers. Approximately one year after his public announcement of SAP's new growth strategy, Kagermann must now assess the situation and decide how to proceed. He has made repeated statements to the market that by 2010 SAP would be a company transformed, and even publicized specific quantitative goals that would substantiate such a transformation. However, in the meantime, a new development has occurred. Resurgent demand for SAP's legacy software applications is driving record revenues and profits and pushing SAP's stock price to new heights. As a result, Kagermann must answer several key questions. How can he determine whether the current pace of execution regarding the new growth strategy is right? How should he sequence the rollout of internal changes still required to support the corporate transformation? And given the industry environment and the resurgent growth of SAP's legacy business, how should he balance resource allocation between short- and long-term opportunities?
Swot Analysis of "SAP AG in 2006: Driving Corporate Transformation" written by Robert A. Burgelman, Tom Federico includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kagermann Sap's facing as an external strategic factors. Some of the topics covered in SAP AG in 2006: Driving Corporate Transformation case study are - Strategic Management Strategies, Leadership, Reorganization, Strategy execution and Strategy & Execution.
Some of the macro environment factors that can be used to understand the SAP AG in 2006: Driving Corporate Transformation casestudy better are - – technology disruption, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, there is backlash against globalization,
customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of SAP AG in 2006: Driving Corporate Transformation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SAP AG in 2006: Driving Corporate Transformation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kagermann Sap's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kagermann Sap's 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 AG in 2006: Driving Corporate Transformation can be done for the following purposes –
1. Strategic planning using facts provided in SAP AG in 2006: Driving Corporate Transformation case study
2. Improving business portfolio management of Kagermann Sap's
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 Kagermann Sap's
Strengths SAP AG in 2006: Driving Corporate Transformation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kagermann Sap's in SAP AG in 2006: Driving Corporate Transformation Harvard Business Review case study are -
Innovation driven organization
– Kagermann Sap's is one of the most innovative firm in sector. Manager in SAP AG in 2006: Driving Corporate Transformation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Kagermann Sap's 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 Kagermann Sap's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SAP AG in 2006: Driving Corporate Transformation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Kagermann Sap's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kagermann Sap's 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.
Organizational Resilience of Kagermann Sap's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kagermann Sap's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Kagermann Sap's is one of the leading recruiters in the industry. Managers in the SAP AG in 2006: Driving Corporate Transformation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Strategy & Execution industry
– SAP AG in 2006: Driving Corporate Transformation firm has clearly differentiated products in the market place. This has enabled Kagermann Sap's to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Kagermann Sap's to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Kagermann Sap's 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.
Highly skilled collaborators
– Kagermann Sap's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in SAP AG in 2006: Driving Corporate Transformation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Kagermann Sap's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SAP AG in 2006: Driving Corporate Transformation 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.
Diverse revenue streams
– Kagermann Sap's is present in almost all the verticals within the industry. This has provided firm in SAP AG in 2006: Driving Corporate Transformation case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Strong track record of project management
– Kagermann Sap's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the SAP AG in 2006: Driving Corporate Transformation 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.
Weaknesses SAP AG in 2006: Driving Corporate Transformation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SAP AG in 2006: Driving Corporate Transformation are -
Interest costs
– Compare to the competition, Kagermann Sap's 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 cash cycle compare to competitors
Kagermann Sap's 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.
Increasing silos among functional specialists
– The organizational structure of Kagermann Sap's is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Kagermann Sap's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kagermann Sap's to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Kagermann Sap's products
– To increase the profitability and margins on the products, Kagermann Sap's needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kagermann Sap's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study SAP AG in 2006: Driving Corporate Transformation can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study SAP AG in 2006: Driving Corporate Transformation, is just above the industry average. Kagermann Sap's 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.
Slow to strategic competitive environment developments
– As SAP AG in 2006: Driving Corporate Transformation HBR case study mentions - Kagermann Sap's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study SAP AG in 2006: Driving Corporate Transformation, it seems that the employees of Kagermann Sap's 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 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 Kagermann Sap's supply chain. Even after few cautionary changes mentioned in the HBR case study - SAP AG in 2006: Driving Corporate Transformation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kagermann Sap's vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study SAP AG in 2006: Driving Corporate Transformation 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 Kagermann Sap's 's lucrative customers.
Aligning sales with marketing
– It come across in the case study SAP AG in 2006: Driving Corporate Transformation 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 AG in 2006: Driving Corporate Transformation can leverage the sales team experience to cultivate customer relationships as Kagermann Sap's is planning to shift buying processes online.
Opportunities SAP AG in 2006: Driving Corporate Transformation | 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 AG in 2006: Driving Corporate Transformation are -
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. Kagermann Sap's 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. Kagermann Sap's 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.
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 Kagermann Sap's in the consumer business. Now Kagermann Sap's can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Kagermann Sap's 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.
Building a culture of innovation
– managers at Kagermann Sap's 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 Strategy & Execution segment.
Learning at scale
– Online learning technologies has now opened space for Kagermann Sap's 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.
Better consumer reach
– The expansion of the 5G network will help Kagermann Sap's to increase its market reach. Kagermann Sap's 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.
Buying journey improvements
– Kagermann Sap's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. SAP AG in 2006: Driving Corporate Transformation 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kagermann Sap's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, SAP AG in 2006: Driving Corporate Transformation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Kagermann Sap's 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.
Using analytics as competitive advantage
– Kagermann Sap's 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 AG in 2006: Driving Corporate Transformation - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kagermann Sap's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Kagermann Sap's 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kagermann Sap's 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 Kagermann Sap's to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Kagermann Sap's 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.
Threats SAP AG in 2006: Driving Corporate Transformation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SAP AG in 2006: Driving Corporate Transformation are -
High dependence on third party suppliers
– Kagermann Sap's 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.
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. Kagermann Sap's 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 acceleration in Forth Industrial Revolution
– Kagermann Sap's has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Kagermann Sap's needs to keep up with the evolution of technology in the Strategy & Execution 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.
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. Kagermann Sap's needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Environmental challenges
– Kagermann Sap's 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. Kagermann Sap's can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of Kagermann Sap's
– 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 Kagermann Sap's.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kagermann Sap's 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.
Regulatory challenges
– Kagermann Sap's 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.
Shortening product life cycle
– it is one of the major threat that Kagermann Sap's is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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. Kagermann Sap's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study SAP AG in 2006: Driving Corporate Transformation, Kagermann Sap's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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 Kagermann Sap's.
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.
Weighted SWOT Analysis of SAP AG in 2006: Driving Corporate Transformation 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 AG in 2006: Driving Corporate Transformation 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 AG in 2006: Driving Corporate Transformation 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 AG in 2006: Driving Corporate Transformation 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 AG in 2006: Driving Corporate Transformation 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 Kagermann Sap's needs to make to build a sustainable competitive advantage.
