Deutsche Telekom AG (0MPH) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Deutsche Telekom AG (United Kingdom)

Based on various researches at Oak Spring University , Deutsche Telekom AG is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, wage bills are increasing, increasing energy prices, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Deutsche Telekom AG

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

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Deutsche Telekom AG can be done for the following purposes –
1. Strategic planning of Deutsche Telekom AG
2. Improving business portfolio management of Deutsche Telekom AG
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Communications Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Deutsche Telekom AG

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Strengths of Deutsche Telekom AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Deutsche Telekom AG are -

High switching costs

– The high switching costs that Deutsche Telekom 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.

Superior customer experience

– The customer experience strategy of Deutsche Telekom AG in Communications Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High brand equity

– Deutsche Telekom AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Deutsche Telekom AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to recruit top talent

– Deutsche Telekom AG is one of the leading players in the Communications Services industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

Highly skilled collaborators

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

Digital Transformation in Communications Services industry

- digital transformation varies from industry to industry. For Deutsche Telekom AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Deutsche Telekom 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.

Learning organization

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

Organizational Resilience of Deutsche Telekom AG

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

Operational resilience

– The operational resilience strategy of Deutsche Telekom AG comprises – understanding the underlying the factors in the Communications Services 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 Communications Services

– Deutsche Telekom AG is one of the leading players in the Communications Services industry in United Kingdom. Over the years it has not only transformed the business landscape in the Communications Services industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Deutsche Telekom AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Strong track record of project management in the Communications Services industry

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

Low bargaining power of suppliers

– Suppliers of Deutsche Telekom AG in the Services sector have low bargaining power. Deutsche Telekom AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Deutsche Telekom AG to manage not only supply disruptions but also source products at highly competitive prices.

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Weaknesses of Deutsche Telekom AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Deutsche Telekom AG are -

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Deutsche Telekom AG is slow explore the new channels of communication. These new channels of communication can help Deutsche Telekom AG to provide better information regarding Communications Services products and services. It can also build an online community to further reach out to potential customers.

Interest costs

– Compare to the competition, Deutsche Telekom 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.

High dependence on Deutsche Telekom AG ‘s star products

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

Products dominated business model

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

High bargaining power of channel partners in Communications Services industry

– because of the regulatory requirements in United Kingdom, Deutsche Telekom 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 Communications Services industry.

Aligning sales with marketing

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

High cash cycle compare to competitors

Deutsche Telekom AG has a high cash cycle compare to other players in the Communications Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Compensation and incentives

– The revenue per employee of Deutsche Telekom AG is just above the Communications Services 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.

Employees’ less understanding of Deutsche Telekom AG strategy

– From the outside it seems that the employees of Deutsche Telekom 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.

Low market penetration in new markets

– Outside its home market of United Kingdom, Deutsche Telekom AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Skills based hiring in Communications Services industry

– The stress on hiring functional specialists at Deutsche Telekom AG 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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Deutsche Telekom AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Deutsche Telekom AG are -

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. Deutsche Telekom AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Better consumer reach

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

Low interest rates

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Communications Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Deutsche Telekom AG 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. Deutsche Telekom AG 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.

Leveraging digital technologies

– Deutsche Telekom AG 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.

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 Deutsche Telekom 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Deutsche Telekom 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 Communications Services industry, and it will provide faster access to the consumers.

Learning at scale

– Online learning technologies has now opened space for Deutsche Telekom 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.

Loyalty marketing

– Deutsche Telekom AG 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

– Deutsche Telekom AG can develop new processes and procedures in Communications Services 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.

Redefining models of collaboration and team work

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

Using analytics as competitive advantage

– Deutsche Telekom AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Services sector. This continuous investment in analytics has enabled Deutsche Telekom AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Deutsche Telekom AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Buying journey improvements

– Deutsche Telekom AG can improve the customer journey of consumers in the Communications Services 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.

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Threats Deutsche Telekom AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Deutsche Telekom AG are -

Regulatory challenges

– Deutsche Telekom 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 Communications Services 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.

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. Deutsche Telekom AG 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.

Consumer confidence and its impact on Deutsche Telekom 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 Communications Services industry and other sectors.

Easy access to finance

– Easy access to finance in Communications Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Deutsche Telekom 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

– Deutsche Telekom 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.

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 Deutsche Telekom AG in the Communications Services sector and impact the bottomline of the organization.

Environmental challenges

– Deutsche Telekom 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. Deutsche Telekom AG can take advantage of this fund but it will also bring new competitors in the Communications Services 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 Deutsche Telekom AG business can come under increasing regulations regarding data privacy, data security, etc.

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. Deutsche Telekom AG needs to understand the core reasons impacting the Communications Services industry. This will help it in building a better workplace.

Shortening product life cycle

– it is one of the major threat that Deutsche Telekom AG is facing in Communications Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Technology acceleration in Forth Industrial Revolution

– Deutsche Telekom AG has witnessed rapid integration of technology during Covid-19 in the Communications Services industry. As one of the leading players in the industry, Deutsche Telekom AG needs to keep up with the evolution of technology in the Communications Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Stagnating economy with rate increase

– Deutsche Telekom 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 Communications Services industry.

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Weighted SWOT Analysis of Deutsche Telekom AG Template, Example

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

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