BASF (BASF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for BASF (Italy)

Based on various researches at Oak Spring University , BASF is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, wage bills are increasing, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, technology disruption, geopolitical disruptions, etc

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Introduction to SWOT Analysis of BASF

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that BASF can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the BASF, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which BASF 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of BASF can be done for the following purposes –
1. Strategic planning of BASF
2. Improving business portfolio management of BASF
3. Assessing feasibility of the new initiative in Italy
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of BASF

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Strengths of BASF | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of BASF are -

Effective Research and Development (R&D)

– BASF has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – BASF staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Training and development

– BASF has one of the best training and development program in Basic Materials 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.

Analytics focus

– BASF is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Chemical Manufacturing industry. The technology infrastructure of Italy is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

High switching costs

– The high switching costs that BASF 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.

Strong track record of project management in the Chemical Manufacturing industry

– BASF is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Sustainable margins compare to other players in Chemical Manufacturing industry

– BASF has clearly differentiated products in the market place. This has enabled BASF to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped BASF to invest into research and development (R&D) and innovation.

Ability to lead change in Chemical Manufacturing

– BASF is one of the leading players in the Chemical Manufacturing industry in Italy. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Italy but also across the existing markets. The ability to lead change has enabled BASF in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Learning organization

- BASF 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 BASF is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at BASF emphasize – knowledge, initiative, and innovation.

Highly skilled collaborators

– BASF has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of BASF have helped the firm to develop new products and bring them quickly to the marketplace.

Organizational Resilience of BASF

– The covid-19 pandemic has put organizational resilience at the centre of everthing BASF does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Cross disciplinary teams

– Horizontal connected teams at the BASF 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.

Ability to recruit top talent

– BASF is one of the leading players in the Chemical Manufacturing 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.

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Weaknesses of BASF | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of BASF are -

Compensation and incentives

– The revenue per employee of BASF is just above the Chemical Manufacturing 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.

Workers concerns about automation

– As automation is fast increasing in the Chemical Manufacturing industry, BASF 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 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 BASF supply chain. Even after few cautionary changes, BASF is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left BASF vulnerable to further global disruptions in South East Asia.

High operating costs

– Compare to the competitors, BASF has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract BASF lucrative customers.

High dependence on BASF ‘s star products

– The top 2 products and services of BASF still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though BASF has relatively successful track record of launching new products.

Products dominated business model

– Even though BASF has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. BASF should strive to include more intangible value offerings along with its core products and services.

No frontier risks strategy

– From the 10K / annual statement of BASF, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.

Slow decision making process

– As mentioned earlier in the report, BASF has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. BASF 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.

Aligning sales with marketing

– From the outside it seems that BASF needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at BASF can leverage the sales team experience to cultivate customer relationships as BASF is planning to shift buying processes online.

Slow to strategic competitive environment developments

– As BASF is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at BASF 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.

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BASF Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of BASF are -

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Chemical Manufacturing industry, but it has also influenced the consumer preferences. BASF can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for BASF in the Chemical Manufacturing industry. Now BASF can target international markets with far fewer capital restrictions requirements than the existing system.

Buying journey improvements

– BASF can improve the customer journey of consumers in the Chemical Manufacturing industry by using analytics and artificial intelligence. It 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, BASF 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 BASF to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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. BASF can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. BASF 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. BASF 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.

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 BASF 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for BASF in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Better consumer reach

– The expansion of the 5G network will help BASF to increase its market reach. BASF 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, BASF is facing challenges because of the dominance of functional experts in the organization. BASF can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Low interest rates

– Even though inflation is raising its head in most developed economies, BASF 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.

Building a culture of innovation

– managers at BASF 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 Chemical Manufacturing industry.

Creating value in data economy

– The success of analytics program of BASF has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help BASF to build a more holistic ecosystem for BASF products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats BASF External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of BASF 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents BASF with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.

Technology acceleration in Forth Industrial Revolution

– BASF has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, BASF needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

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 BASF business can come under increasing regulations regarding data privacy, data security, etc.

High dependence on third party suppliers

– BASF 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.

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. BASF 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.

Regulatory challenges

– BASF 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 Chemical Manufacturing industry regulations.

Consumer confidence and its impact on BASF 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 Chemical Manufacturing industry and other sectors.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. BASF needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

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 BASF in the Chemical Manufacturing sector and impact the bottomline of the organization.

Stagnating economy with rate increase

– BASF 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 Chemical Manufacturing industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, BASF may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

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Weighted SWOT Analysis of BASF Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at BASF 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 BASF 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 BASF 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 BASF 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 BASF needs to make to build a sustainable competitive advantage.

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