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 - – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing,
increasing household debt because of falling income levels, increasing commodity prices, 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 -
Strong track record of project management
– Sap Aligning is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Sap Aligning in the sector have low bargaining power. SAP: The Challenge of Aligning Sourcing and Innovation Strategies has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sap Aligning to manage not only supply disruptions but also source products at highly competitive prices.
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.
Highly skilled collaborators
– Sap Aligning 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: The Challenge of Aligning Sourcing and Innovation Strategies HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Sap Aligning is present in almost all the verticals within the industry. This has provided firm in SAP: The Challenge of Aligning Sourcing and Innovation Strategies 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.
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.
Sustainable margins compare to other players in Strategy & Execution industry
– SAP: The Challenge of Aligning Sourcing and Innovation Strategies firm has clearly differentiated products in the market place. This has enabled Sap Aligning to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Sap Aligning to invest into research and development (R&D) and innovation.
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 -
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies, is just above the industry average. Sap Aligning 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.
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 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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Sap Aligning, firm in the HBR case study SAP: The Challenge of Aligning Sourcing and Innovation Strategies needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Sap Aligning 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.
Products dominated business model
– Even though Sap Aligning has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - SAP: The Challenge of Aligning Sourcing and Innovation Strategies should strive to include more intangible value offerings along with its core products and services.
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 -
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sap Aligning can use these opportunities to build new business models that can help the communities that Sap Aligning operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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.
Building a culture of innovation
– managers at Sap Aligning 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.
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.
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.
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.
Loyalty marketing
– Sap Aligning 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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sap Aligning 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: The Challenge of Aligning Sourcing and Innovation Strategies, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sap Aligning in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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 -
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 .
Technology acceleration in Forth Industrial Revolution
– Sap Aligning has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Sap Aligning 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sap Aligning with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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.
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: The Challenge of Aligning Sourcing and Innovation Strategies, Sap Aligning 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 .
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.
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.
Environmental challenges
– Sap Aligning 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. Sap Aligning can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.