Siemens AG (SIE) SWOT Analysis / TOWS Matrix / MBA Resources
Medical Equipment & Supplies
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Siemens AG (Italy)
Based on various researches at Oak Spring University , Siemens AG is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies,
geopolitical disruptions, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Siemens AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Siemens AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Siemens AG 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 Siemens AG can be done for the following purposes –
1. Strategic planning of Siemens AG
2. Improving business portfolio management of Siemens AG
3. Assessing feasibility of the new initiative in Italy
4. Making a Medical Equipment & Supplies sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Siemens AG
Strengths of Siemens AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Siemens AG are -
Operational resilience
– The operational resilience strategy of Siemens AG comprises – understanding the underlying the factors in the Medical Equipment & Supplies 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 Medical Equipment & Supplies
– Siemens AG is one of the leading players in the Medical Equipment & Supplies industry in Italy. Over the years it has not only transformed the business landscape in the Medical Equipment & Supplies industry in Italy but also across the existing markets. The ability to lead change has enabled Siemens AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Siemens AG has one of the best training and development program in Healthcare industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Siemens AG is present in almost all the verticals within the Medical Equipment & Supplies industry. This has provided Siemens AG 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.
High brand equity
– Siemens AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Siemens AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Medical Equipment & Supplies industry
- digital transformation varies from industry to industry. For Siemens AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Siemens AG has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Sustainable margins compare to other players in Medical Equipment & Supplies industry
– Siemens AG has clearly differentiated products in the market place. This has enabled Siemens AG to fetch slight price premium compare to the competitors in the Medical Equipment & Supplies industry. The sustainable margins have also helped Siemens AG to invest into research and development (R&D) and innovation.
Innovation driven organization
– Siemens AG is one of the most innovative firm in Medical Equipment & Supplies sector.
Ability to recruit top talent
– Siemens AG is one of the leading players in the Medical Equipment & Supplies industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Siemens AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Siemens AG 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.
Cross disciplinary teams
– Horizontal connected teams at the Siemens AG 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.
High switching costs
– The high switching costs that Siemens AG 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.
Weaknesses of Siemens AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Siemens AG are -
High cash cycle compare to competitors
Siemens AG has a high cash cycle compare to other players in the Medical Equipment & Supplies industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Siemens AG is slow explore the new channels of communication. These new channels of communication can help Siemens AG to provide better information regarding Medical Equipment & Supplies products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Siemens AG has some of the most successful models in the Medical Equipment & Supplies industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Siemens AG should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Siemens AG is just above the Medical Equipment & Supplies industry average. It 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.
Aligning sales with marketing
– From the outside it seems that Siemens AG needs to have more collaboration between its sales team and marketing team. Sales professionals in the Medical Equipment & Supplies industry have deep experience in developing customer relationships. Marketing department at Siemens AG can leverage the sales team experience to cultivate customer relationships as Siemens AG is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Siemens AG is one of the leading players in the Medical Equipment & Supplies industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Medical Equipment & Supplies industry in last five years.
High bargaining power of channel partners in Medical Equipment & Supplies industry
– because of the regulatory requirements in Italy, Siemens AG 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 Medical Equipment & Supplies industry.
Employees’ less understanding of Siemens AG strategy
– From the outside it seems that the employees of Siemens AG 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.
Workers concerns about automation
– As automation is fast increasing in the Medical Equipment & Supplies industry, Siemens AG 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.
No frontier risks strategy
– From the 10K / annual statement of Siemens AG, it seems that company is thinking out the frontier risks that can impact Medical Equipment & Supplies industry. 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.
Interest costs
– Compare to the competition, Siemens AG 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.
Siemens AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Siemens AG are -
Building a culture of innovation
– managers at Siemens AG 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 Medical Equipment & Supplies industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Siemens AG is facing challenges because of the dominance of functional experts in the organization. Siemens AG can utilize new technology in the field of Medical Equipment & Supplies industry 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 Siemens AG to increase its market reach. Siemens AG 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.
Learning at scale
– Online learning technologies has now opened space for Siemens AG 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.
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. Siemens AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Siemens AG 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Siemens AG 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 Siemens AG to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Siemens AG 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 Siemens AG in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Medical Equipment & Supplies industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Medical Equipment & Supplies industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Siemens AG in the Medical Equipment & Supplies industry. Now Siemens AG can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Siemens AG 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 Siemens AG to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Medical Equipment & Supplies industry, but it has also influenced the consumer preferences. Siemens AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Siemens AG can use these opportunities to build new business models that can help the communities that Siemens AG operates in. Secondly it can use opportunities from government spending in Medical Equipment & Supplies sector.
Threats Siemens AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Siemens AG are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Siemens AG 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 Medical Equipment & Supplies industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Medical Equipment & Supplies industry are lowering. It can presents Siemens AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Medical Equipment & Supplies sector.
Environmental challenges
– Siemens AG 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. Siemens AG can take advantage of this fund but it will also bring new competitors in the Medical Equipment & Supplies industry.
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 Siemens AG business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Siemens AG 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 Medical Equipment & Supplies industry regulations.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Siemens AG may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Medical Equipment & Supplies sector.
Shortening product life cycle
– it is one of the major threat that Siemens AG is facing in Medical Equipment & Supplies sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Medical Equipment & Supplies industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Siemens AG 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
– Siemens AG high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Siemens AG
– 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 Siemens AG.
Consumer confidence and its impact on Siemens AG 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 Medical Equipment & Supplies industry and other sectors.
Weighted SWOT Analysis of Siemens AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Siemens AG 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 Siemens AG 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 Siemens AG 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 Siemens AG 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 Siemens AG needs to make to build a sustainable competitive advantage.