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

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for BASF (United Kingdom)

Based on various researches at Oak Spring University , BASF is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, there is backlash against globalization, wage bills are increasing, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, etc

---

---

---

---

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.

---

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 United Kingdom
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of BASF

---

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

The strengths of BASF are -

Successful track record of launching new products

– BASF has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. BASF 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 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 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.

Ability to lead change in Chemical Manufacturing

– BASF is one of the leading players in the Chemical Manufacturing industry in United Kingdom. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in United Kingdom 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.

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.

Superior customer experience

– The customer experience strategy of BASF in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High brand equity

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

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 United Kingdom 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.

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.

Operational resilience

– The operational resilience strategy of BASF comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

Diverse revenue streams

– BASF is present in almost all the verticals within the Chemical Manufacturing industry. This has provided BASF 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.

Digital Transformation in Chemical Manufacturing industry

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

---

---

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

The weaknesses of BASF are -

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.

High cash cycle compare to competitors

BASF has a high cash cycle compare to other players in the Chemical Manufacturing 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 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 bargaining power of channel partners in Chemical Manufacturing industry

– because of the regulatory requirements in United Kingdom, BASF 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 Chemical Manufacturing industry.

Interest costs

– Compare to the competition, BASF 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.

Ability to respond to the competition

– As the decision making is very deliberative at BASF, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. BASF has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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.

Capital Spending Reduction

– Even during the low interest decade, BASF 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 Chemical Manufacturing industry using digital technology.

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.

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.

---

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

The opportunities of BASF are -

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.

Leveraging digital technologies

– BASF 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.

Learning at scale

– Online learning technologies has now opened space for BASF 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects BASF can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

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.

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.

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.

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.

Developing new processes and practices

– BASF can develop new processes and procedures in Chemical Manufacturing 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, BASF can use these opportunities to build new business models that can help the communities that BASF operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.

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.

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.

---

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

The threats of BASF are -

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.

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. BASF can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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.

Increasing wage structure of BASF

– 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 BASF.

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.

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.

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.

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 BASF.

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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for BASF in Chemical Manufacturing industry. The Chemical Manufacturing 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.

---

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.

--- ---