Telefonica (TDET) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Telefonica (United Kingdom)
Based on various researches at Oak Spring University , Telefonica is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, increasing energy prices, technology disruption, there is increasing trade war between United States & China,
central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Telefonica can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Telefonica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Telefonica 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 Telefonica can be done for the following purposes –
1. Strategic planning of Telefonica
2. Improving business portfolio management of Telefonica
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 Telefonica
Strengths of Telefonica | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Telefonica are -
Effective Research and Development (R&D)
– Telefonica has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Telefonica staying ahead in the Communications Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Telefonica is one of the most innovative firm in Communications Services sector.
Organizational Resilience of Telefonica
– The covid-19 pandemic has put organizational resilience at the centre of everthing Telefonica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Telefonica 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.
Ability to lead change in Communications Services
– Telefonica 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 Telefonica 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 Communications Services industry
– Telefonica has clearly differentiated products in the market place. This has enabled Telefonica to fetch slight price premium compare to the competitors in the Communications Services industry. The sustainable margins have also helped Telefonica to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Telefonica is present in almost all the verticals within the Communications Services industry. This has provided Telefonica 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.
Training and development
– Telefonica has one of the best training and development program in Services 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.
Digital Transformation in Communications Services industry
- digital transformation varies from industry to industry. For Telefonica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Telefonica 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.
Superior customer experience
– The customer experience strategy of Telefonica in Communications Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Telefonica 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 Telefonica is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Telefonica emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Telefonica has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Telefonica 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 of Telefonica | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Telefonica are -
High dependence on Telefonica ‘s star products
– The top 2 products and services of Telefonica 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 Telefonica has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Telefonica has high operating costs in the Communications Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Telefonica lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Communications Services industry, Telefonica 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 cash cycle compare to competitors
Telefonica 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.
Lack of clear differentiation of Telefonica products
– To increase the profitability and margins on the products, Telefonica needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Telefonica is dominated by functional specialists. It is not different from other players in the Communications Services industry, but Telefonica needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Telefonica to focus more on services in the Communications Services industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Telefonica, in the dynamic environment of Communications Services industry it has struggled to respond to the nimble upstart competition. Telefonica has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Telefonica 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.
Slow to strategic competitive environment developments
– As Telefonica is one of the leading players in the Communications Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Communications Services industry in last five years.
Skills based hiring in Communications Services industry
– The stress on hiring functional specialists at Telefonica 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.
Employees’ less understanding of Telefonica strategy
– From the outside it seems that the employees of Telefonica 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.
Telefonica Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Telefonica are -
Manufacturing automation
– Telefonica can use the latest technology developments to improve its manufacturing and designing process in Communications Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Telefonica 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Telefonica 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.
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 Telefonica 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.
Loyalty marketing
– Telefonica 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.
Using analytics as competitive advantage
– Telefonica 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 Telefonica to build a competitive advantage using analytics. The analytics driven competitive advantage can help Telefonica to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Telefonica 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 Telefonica to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Telefonica 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Telefonica can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Telefonica is facing challenges because of the dominance of functional experts in the organization. Telefonica 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.
Leveraging digital technologies
– Telefonica 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.
Buying journey improvements
– Telefonica 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Telefonica 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.
Threats Telefonica External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Telefonica are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Communications Services industry are lowering. It can presents Telefonica with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Services 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 Telefonica business can come under increasing regulations regarding data privacy, data security, etc.
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. Telefonica can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Telefonica 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.
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.
Consumer confidence and its impact on Telefonica 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.
Shortening product life cycle
– it is one of the major threat that Telefonica is facing in Communications Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Telefonica may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Services sector.
High dependence on third party suppliers
– Telefonica 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Telefonica 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 Telefonica prominent markets.
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 Telefonica in the Communications Services sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Telefonica in Communications Services industry. The Communications Services 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.
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 Telefonica.
Weighted SWOT Analysis of Telefonica Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Telefonica 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 Telefonica 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 Telefonica 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 Telefonica 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 Telefonica needs to make to build a sustainable competitive advantage.
