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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, increasing household debt because of falling income levels,
there is increasing trade war between United States & China, increasing energy 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 -
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.
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.
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.
Training and development
– Sap Research has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SAP: Establishing a Research Centre in China 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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Sap Research in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Sap Research 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: Establishing a Research Centre in China HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Global Business industry
– SAP: Establishing a Research Centre in China firm has clearly differentiated products in the market place. This has enabled Sap Research to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Sap Research to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Sap Research is present in almost all the verticals within the industry. This has provided firm in SAP: Establishing a Research Centre in China 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.
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 -
Increasing silos among functional specialists
– The organizational structure of Sap Research is dominated by functional specialists. It is not different from other players in the Global Business segment. Sap Research needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sap Research to focus more on services rather than just following the product oriented approach.
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.
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.
Lack of clear differentiation of Sap Research products
– To increase the profitability and margins on the products, Sap Research needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Sap Research needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
Capital Spending Reduction
– Even during the low interest decade, Sap Research has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Sap Research 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 Research 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.
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 Research supply chain. Even after few cautionary changes mentioned in the HBR case study - SAP: Establishing a Research Centre in China, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sap Research vulnerable to further global disruptions in South East Asia.
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.
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 -
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.
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.
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.
Buying journey improvements
– Sap Research can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. SAP: Establishing a Research Centre in China 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.
Developing new processes and practices
– Sap Research can develop new processes and procedures in Global Business 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.
Learning at scale
– Online learning technologies has now opened space for Sap Research 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sap Research 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 Research to hire the very best people irrespective of their geographical location.
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.
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.
Building a culture of innovation
– managers at Sap Research 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 Global Business segment.
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.
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.
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.
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 -
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.
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 Research 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.
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.
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 .
Environmental challenges
– Sap Research 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 Research can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sap Research 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: Establishing a Research Centre in China .
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.
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 Research business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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 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.
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.