SAP: Establishing a Research Centre in China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of SAP: Establishing a Research Centre in China
Leading technology companies from around the world are entering China to establish research centres, leverage China's unique situation of rapid growth and large manufacturing base, and scooping up talent from China's leading universities. SAP, the world's largest application software company, recently entered China to establish one of its exclusive technology research centres, SAP Research. While this division has been successful at its headquarters in Germany, the Chinese labor market and business environment remain difficult for foreign multinationals to navigate. Foreign companies often experience challenges ranging from difficulty finding innovators in a competitive talent pool to dealing with turnover of employees that have an aggressive focus on compensation. There is concern that locating in Shanghai, far away from the innovative hotbed of universities and other technology research centres that have set up shop in Beijing, was the wrong choice for SAP in China. What would be necessary to win the war for high-profile PhDs in the competitive Chinese labor market? What would be required for SAP Research China to be an integral contributor in SAP's worldwide innovation network? This case illustrates the opportunities and challenges of research and development ("R&D") globalization and familiarizes students with the unique challenges of R&D strategy, new-market entry strategies, human resource management, innovation, clustering and intellectual property protection in rapidly developing countries. In particular, this case is relevant to studies in R&D globalization, business in China and talent management.
Authors :: Kuldeep Kumar, Maya Kumar, Markus Alsleben
Swot Analysis of "SAP: Establishing a Research Centre in China" written by Kuldeep Kumar, Maya Kumar, Markus Alsleben includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sap Research facing as an external strategic factors. Some of the topics covered in SAP: Establishing a Research Centre in China case study are - Strategic Management Strategies, Intellectual property, Marketing, Operations management, Research & development, Talent management, Technology and Global Business.
Some of the macro environment factors that can be used to understand the SAP: Establishing a Research Centre in China casestudy better are - – challanges to central banks by blockchain based private currencies, there is backlash against globalization, cloud computing is disrupting traditional business models, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, etc
Introduction to SWOT Analysis of SAP: Establishing a Research Centre in China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SAP: Establishing a Research Centre in China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sap Research, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sap Research 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: Establishing a Research Centre in China can be done for the following purposes –
1. Strategic planning using facts provided in SAP: Establishing a Research Centre in China case study
2. Improving business portfolio management of Sap Research
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sap Research
Strengths SAP: Establishing a Research Centre in China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sap Research in SAP: Establishing a Research Centre in China Harvard Business Review case study are -
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Sap Research digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sap Research 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.
Organizational Resilience of Sap Research
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sap Research does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Sap Research is one of the leading recruiters in the industry. Managers in the SAP: Establishing a Research Centre in China are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Sap Research has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sap Research to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Sap Research 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.
Operational resilience
– The operational resilience strategy in the SAP: Establishing a Research Centre in China 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 Global Business field
– Sap Research 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 Research in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Sap Research in the sector have low bargaining power. SAP: Establishing a Research Centre in China has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sap Research to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Sap Research 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.
Learning organization
- Sap Research 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 Research is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SAP: Establishing a Research Centre in China Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Sap Research has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sap Research 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.
Strong track record of project management
– Sap Research is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses SAP: Establishing a Research Centre in China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SAP: Establishing a Research Centre in China are -
No frontier risks strategy
– After analyzing the HBR case study SAP: Establishing a Research Centre in China, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, firm in the HBR case study SAP: Establishing a Research Centre in China 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 Research 's lucrative customers.
Interest costs
– Compare to the competition, Sap Research 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 bargaining power of channel partners
– Because of the regulatory requirements, Kuldeep Kumar, Maya Kumar, Markus Alsleben suggests that, Sap Research 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.
Skills based hiring
– The stress on hiring functional specialists at Sap Research 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.
Slow to strategic competitive environment developments
– As SAP: Establishing a Research Centre in China HBR case study mentions - Sap Research 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.
Need for greater diversity
– Sap Research has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Aligning sales with marketing
– It come across in the case study SAP: Establishing a Research Centre in China 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: Establishing a Research Centre in China can leverage the sales team experience to cultivate customer relationships as Sap Research is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the SAP: Establishing a Research Centre in China 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 Research has relatively successful track record of launching new products.
Products dominated business model
– Even though Sap Research 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: Establishing a Research Centre in China should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study SAP: Establishing a Research Centre in China, it seems that the employees of Sap Research 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.
Opportunities SAP: Establishing a Research Centre in China | 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: Establishing a Research Centre in China are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Sap Research can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Sap Research 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.
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 Research 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.
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 Research in the consumer business. Now Sap Research can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sap Research 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 Research 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Sap Research can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Sap Research 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.
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 Research can use these opportunities to build new business models that can help the communities that Sap Research operates in. Secondly it can use opportunities from government spending in Global Business sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sap Research is facing challenges because of the dominance of functional experts in the organization. SAP: Establishing a Research Centre in China 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.
Better consumer reach
– The expansion of the 5G network will help Sap Research to increase its market reach. Sap Research 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sap Research can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Sap Research has opened avenues for new revenue streams for the organization in the industry. This can help Sap Research to build a more holistic ecosystem as suggested in the SAP: Establishing a Research Centre in China case study. Sap Research can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sap Research in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Threats SAP: Establishing a Research Centre in China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SAP: Establishing a Research Centre in China are -
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sap Research can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Sap Research 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.
Shortening product life cycle
– it is one of the major threat that Sap Research is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Research in the Global Business sector and impact the bottomline of the organization.
Increasing wage structure of Sap Research
– 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 Research.
Regulatory challenges
– Sap Research 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 Global Business industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sap Research in the Global Business industry. The Global Business 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sap Research with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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: Establishing a Research Centre in China, Sap Research may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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 Research.
Consumer confidence and its impact on Sap Research 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.
Technology acceleration in Forth Industrial Revolution
– Sap Research has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Sap Research needs to keep up with the evolution of technology in the Global Business 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.
Stagnating economy with rate increase
– Sap Research can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of SAP: Establishing a Research Centre in China 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: Establishing a Research Centre in China 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: Establishing a Research Centre in China 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: Establishing a Research Centre in China 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: Establishing a Research Centre in China 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 Research needs to make to build a sustainable competitive advantage.