SAP 2014: Reaching for the Cloud SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of SAP 2014: Reaching for the Cloud
In May 2014, Bill McDermott will become the sole CEO of SAP AG, the world leader in the Enterprise Resource Planning (ERP) field. The case occurs in January 2014 at SAP's investors meeting, at a time when the company's stock is near record high. A 2010 strategy committed the company to a transition to cloud computing. The main driver behind this transition was the development of SAP HANA, an in-memory computing technology that combined database, data processing, and application platform functionality. Ownership of cloud infrastructure was a key question. SAP could build, own, and operate its own data centers, or partner to locate SAP HANA and other products with other cloud infrastructure providers, such as Amazon, Microsoft, or IBM. McDermott also had to make decisions around the organization and leadership of the company's cloud efforts.
Authors :: Karim R. Lakhani, Marco Iansiti, Noah Fisher
Swot Analysis of "SAP 2014: Reaching for the Cloud" written by Karim R. Lakhani, Marco Iansiti, Noah Fisher includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sap Cloud facing as an external strategic factors. Some of the topics covered in SAP 2014: Reaching for the Cloud case study are - Strategic Management Strategies, Leadership, Operations management, Strategy execution and Technology & Operations.
Some of the macro environment factors that can be used to understand the SAP 2014: Reaching for the Cloud casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, cloud computing is disrupting traditional business models, increasing commodity prices, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, increasing energy prices, etc
Introduction to SWOT Analysis of SAP 2014: Reaching for the Cloud
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SAP 2014: Reaching for the Cloud case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sap Cloud, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sap Cloud 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 2014: Reaching for the Cloud can be done for the following purposes –
1. Strategic planning using facts provided in SAP 2014: Reaching for the Cloud case study
2. Improving business portfolio management of Sap Cloud
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sap Cloud
Strengths SAP 2014: Reaching for the Cloud | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sap Cloud in SAP 2014: Reaching for the Cloud Harvard Business Review case study are -
Strong track record of project management
– Sap Cloud is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Sap Cloud digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sap Cloud 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.
Effective Research and Development (R&D)
– Sap Cloud has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study SAP 2014: Reaching for the Cloud - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Technology & Operations industry
– SAP 2014: Reaching for the Cloud firm has clearly differentiated products in the market place. This has enabled Sap Cloud to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Sap Cloud to invest into research and development (R&D) and innovation.
Innovation driven organization
– Sap Cloud is one of the most innovative firm in sector. Manager in SAP 2014: Reaching for the Cloud Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Sap Cloud is one of the leading recruiters in the industry. Managers in the SAP 2014: Reaching for the Cloud are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Sap Cloud 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 Karim R. Lakhani, Marco Iansiti, Noah Fisher 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.
Ability to lead change in Technology & Operations field
– Sap Cloud 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 Cloud in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Sap Cloud 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.
Cross disciplinary teams
– Horizontal connected teams at the Sap Cloud 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.
Successful track record of launching new products
– Sap Cloud has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sap Cloud 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 Sap Cloud
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sap Cloud does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses SAP 2014: Reaching for the Cloud | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SAP 2014: Reaching for the Cloud are -
Low market penetration in new markets
– Outside its home market of Sap Cloud, firm in the HBR case study SAP 2014: Reaching for the Cloud needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Sap Cloud 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SAP 2014: Reaching for the Cloud, in the dynamic environment Sap Cloud has struggled to respond to the nimble upstart competition. Sap Cloud has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sap Cloud is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study SAP 2014: Reaching for the Cloud can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the SAP 2014: Reaching for the Cloud HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Sap Cloud has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study SAP 2014: Reaching for the Cloud, is just above the industry average. Sap Cloud 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.
High operating costs
– Compare to the competitors, firm in the HBR case study SAP 2014: Reaching for the Cloud 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 Cloud 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Sap Cloud 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 Cloud 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.
Lack of clear differentiation of Sap Cloud products
– To increase the profitability and margins on the products, Sap Cloud needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study SAP 2014: Reaching for the Cloud 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 2014: Reaching for the Cloud can leverage the sales team experience to cultivate customer relationships as Sap Cloud is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As SAP 2014: Reaching for the Cloud HBR case study mentions - Sap Cloud 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.
Opportunities SAP 2014: Reaching for the Cloud | 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 2014: Reaching for the Cloud are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Sap Cloud can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Sap Cloud can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sap Cloud can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Sap Cloud 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.
Manufacturing automation
– Sap Cloud can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Using analytics as competitive advantage
– Sap Cloud 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 2014: Reaching for the Cloud - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sap Cloud to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sap Cloud 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 Cloud 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.
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 Cloud can use these opportunities to build new business models that can help the communities that Sap Cloud operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sap Cloud 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sap Cloud in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sap Cloud is facing challenges because of the dominance of functional experts in the organization. SAP 2014: Reaching for the Cloud case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Sap Cloud has opened avenues for new revenue streams for the organization in the industry. This can help Sap Cloud to build a more holistic ecosystem as suggested in the SAP 2014: Reaching for the Cloud case study. Sap Cloud can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sap Cloud 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 2014: Reaching for the Cloud, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats SAP 2014: Reaching for the Cloud External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SAP 2014: Reaching for the Cloud are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sap Cloud 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 2014: Reaching for the Cloud .
Increasing wage structure of Sap Cloud
– 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 Cloud.
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 Cloud business can come under increasing regulations regarding data privacy, data security, etc.
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 Cloud 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sap Cloud with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sap Cloud can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Consumer confidence and its impact on Sap Cloud demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sap Cloud in the Technology & Operations industry. The Technology & Operations 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.
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 Cloud in the Technology & Operations sector and impact the bottomline of the organization.
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.
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 Cloud needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Sap Cloud is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of SAP 2014: Reaching for the Cloud 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 2014: Reaching for the Cloud 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 2014: Reaching for the Cloud 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 2014: Reaching for the Cloud 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 2014: Reaching for the Cloud 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 Cloud needs to make to build a sustainable competitive advantage.