Case Study Description of Fraunhofer: Innovation in Germany
Fraunhofer is one of the largest applied research organizations in the world. With 17,000 employees and a 1.6 billion euros budget, Fraunhofer has 60 institutes in Germany that cover most fields of science. The case examines the consequences that Fraunhofer has for the competitiveness of the German economy. It also explores whether the organization of R&D is affected by the size distribution of firms as well as by institutions in labor and financial markets.
Authors :: Diego Comin, Gunnar Trumbull, Kerry Yang
Swot Analysis of "Fraunhofer: Innovation in Germany" written by Diego Comin, Gunnar Trumbull, Kerry Yang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fraunhofer Germany facing as an external strategic factors. Some of the topics covered in Fraunhofer: Innovation in Germany case study are - Strategic Management Strategies, Competitive strategy, Entrepreneurship, Financial markets, Government, Labor, Productivity, Research & development and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Fraunhofer: Innovation in Germany casestudy better are - – cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic ,
increasing energy prices, there is backlash against globalization, etc
Introduction to SWOT Analysis of Fraunhofer: Innovation in Germany
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Fraunhofer: Innovation in Germany case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fraunhofer Germany, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fraunhofer Germany 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 Fraunhofer: Innovation in Germany can be done for the following purposes –
1. Strategic planning using facts provided in Fraunhofer: Innovation in Germany case study
2. Improving business portfolio management of Fraunhofer Germany
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fraunhofer Germany
Strengths Fraunhofer: Innovation in Germany | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fraunhofer Germany in Fraunhofer: Innovation in Germany Harvard Business Review case study are -
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Fraunhofer: Innovation in Germany firm has clearly differentiated products in the market place. This has enabled Fraunhofer Germany to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Fraunhofer Germany to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Fraunhofer Germany 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.
Diverse revenue streams
– Fraunhofer Germany is present in almost all the verticals within the industry. This has provided firm in Fraunhofer: Innovation in Germany 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.
Operational resilience
– The operational resilience strategy in the Fraunhofer: Innovation in Germany 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.
Organizational Resilience of Fraunhofer Germany
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fraunhofer Germany does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Fraunhofer Germany 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 Fraunhofer: Innovation in Germany HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Fraunhofer Germany digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fraunhofer Germany 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.
Innovation driven organization
– Fraunhofer Germany is one of the most innovative firm in sector. Manager in Fraunhofer: Innovation in Germany 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 Fraunhofer Germany in the sector have low bargaining power. Fraunhofer: Innovation in Germany has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fraunhofer Germany to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Fraunhofer Germany is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Innovation & Entrepreneurship field
– Fraunhofer Germany 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 Fraunhofer Germany in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Fraunhofer Germany has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fraunhofer Germany 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.
Weaknesses Fraunhofer: Innovation in Germany | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fraunhofer: Innovation in Germany are -
Capital Spending Reduction
– Even during the low interest decade, Fraunhofer Germany 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.
Skills based hiring
– The stress on hiring functional specialists at Fraunhofer Germany 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 Fraunhofer: Innovation in Germany 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 Fraunhofer: Innovation in Germany can leverage the sales team experience to cultivate customer relationships as Fraunhofer Germany is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Fraunhofer Germany is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Fraunhofer Germany needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fraunhofer Germany to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fraunhofer Germany is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Fraunhofer: Innovation in Germany can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Fraunhofer: Innovation in Germany, is just above the industry average. Fraunhofer Germany 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Fraunhofer Germany 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 Fraunhofer: Innovation in Germany 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 Fraunhofer Germany 's lucrative customers.
Need for greater diversity
– Fraunhofer Germany 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.
No frontier risks strategy
– After analyzing the HBR case study Fraunhofer: Innovation in Germany, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
Low market penetration in new markets
– Outside its home market of Fraunhofer Germany, firm in the HBR case study Fraunhofer: Innovation in Germany needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Fraunhofer: Innovation in Germany | 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 Fraunhofer: Innovation in Germany are -
Building a culture of innovation
– managers at Fraunhofer Germany 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 Innovation & Entrepreneurship segment.
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 Fraunhofer Germany in the consumer business. Now Fraunhofer Germany can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fraunhofer Germany 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.
Creating value in data economy
– The success of analytics program of Fraunhofer Germany has opened avenues for new revenue streams for the organization in the industry. This can help Fraunhofer Germany to build a more holistic ecosystem as suggested in the Fraunhofer: Innovation in Germany case study. Fraunhofer Germany can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fraunhofer Germany is facing challenges because of the dominance of functional experts in the organization. Fraunhofer: Innovation in Germany 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fraunhofer Germany in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Buying journey improvements
– Fraunhofer Germany can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Fraunhofer: Innovation in Germany 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fraunhofer Germany 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. Fraunhofer Germany 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.
Loyalty marketing
– Fraunhofer Germany 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.
Developing new processes and practices
– Fraunhofer Germany can develop new processes and procedures in Innovation & Entrepreneurship 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 Fraunhofer Germany 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fraunhofer Germany can use these opportunities to build new business models that can help the communities that Fraunhofer Germany operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Using analytics as competitive advantage
– Fraunhofer Germany 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 Fraunhofer: Innovation in Germany - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fraunhofer Germany to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Fraunhofer: Innovation in Germany External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Fraunhofer: Innovation in Germany are -
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 Fraunhofer Germany business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Fraunhofer Germany 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 Innovation & Entrepreneurship industry regulations.
Stagnating economy with rate increase
– Fraunhofer Germany 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Fraunhofer Germany with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fraunhofer Germany in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fraunhofer Germany 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 Fraunhofer: Innovation in Germany .
Increasing wage structure of Fraunhofer Germany
– 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 Fraunhofer Germany.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Fraunhofer Germany can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Fraunhofer Germany 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.
Environmental challenges
– Fraunhofer Germany 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. Fraunhofer Germany can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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. Fraunhofer Germany 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Fraunhofer: Innovation in Germany, Fraunhofer Germany may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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 Fraunhofer Germany.
Weighted SWOT Analysis of Fraunhofer: Innovation in Germany 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 Fraunhofer: Innovation in Germany 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 Fraunhofer: Innovation in Germany 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 Fraunhofer: Innovation in Germany 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 Fraunhofer: Innovation in Germany 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 Fraunhofer Germany needs to make to build a sustainable competitive advantage.
