MTU Aero (0FC9) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for MTU Aero (United Kingdom)

Based on various researches at Oak Spring University , MTU Aero is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, increasing energy prices, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of MTU Aero

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that MTU Aero can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the MTU Aero, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which MTU Aero 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 MTU Aero can be done for the following purposes –
1. Strategic planning of MTU Aero
2. Improving business portfolio management of MTU Aero
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of MTU Aero

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

The strengths of MTU Aero are -

Highly skilled collaborators

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

High switching costs

– The high switching costs that MTU Aero 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.

Operational resilience

– The operational resilience strategy of MTU Aero comprises – understanding the underlying the factors in the Aerospace & Defense 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.

Low bargaining power of suppliers

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

Training and development

– MTU Aero has one of the best training and development program in Capital Goods 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.

Effective Research and Development (R&D)

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

Analytics focus

– MTU Aero 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 Aerospace & Defense 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.

Organizational Resilience of MTU Aero

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

Innovation driven organization

– MTU Aero is one of the most innovative firm in Aerospace & Defense sector.

Successful track record of launching new products

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

Strong track record of project management in the Aerospace & Defense industry

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

Superior customer experience

– The customer experience strategy of MTU Aero in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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

The weaknesses of MTU Aero are -

Employees’ less understanding of MTU Aero strategy

– From the outside it seems that the employees of MTU Aero 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.

High bargaining power of channel partners in Aerospace & Defense industry

– because of the regulatory requirements in United Kingdom, MTU Aero 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 Aerospace & Defense industry.

Products dominated business model

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

High dependence on MTU Aero ‘s star products

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

High cash cycle compare to competitors

MTU Aero has a high cash cycle compare to other players in the Aerospace & Defense 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, MTU Aero is slow explore the new channels of communication. These new channels of communication can help MTU Aero to provide better information regarding Aerospace & Defense products and services. It can also build an online community to further reach out to potential customers.

Aligning sales with marketing

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

Slow decision making process

– As mentioned earlier in the report, MTU Aero has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. MTU Aero 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.

Skills based hiring in Aerospace & Defense industry

– The stress on hiring functional specialists at MTU Aero 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.

Compensation and incentives

– The revenue per employee of MTU Aero is just above the Aerospace & Defense 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.

Capital Spending Reduction

– Even during the low interest decade, MTU Aero 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 Aerospace & Defense industry using digital technology.

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

The opportunities of MTU Aero are -

Better consumer reach

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

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 MTU Aero 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.

Creating value in data economy

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

Low interest rates

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

Use of Bitcoin and other crypto currencies for transactions in Aerospace & Defense industry

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

Reforming the budgeting process

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

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

Increase in government spending

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

Finding new ways to collaborate

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

Buying journey improvements

– MTU Aero can improve the customer journey of consumers in the Aerospace & Defense 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.

Loyalty marketing

– MTU Aero 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.

Leveraging digital technologies

– MTU Aero 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.

Developing new processes and practices

– MTU Aero can develop new processes and procedures in Aerospace & Defense 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.

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

The threats of MTU Aero are -

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. MTU Aero 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.

Increasing wage structure of MTU Aero

– 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 MTU Aero.

Environmental challenges

– MTU Aero 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. MTU Aero can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

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 MTU Aero in the Aerospace & Defense sector and impact the bottomline of the organization.

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 MTU Aero.

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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for MTU Aero in Aerospace & Defense industry. The Aerospace & Defense 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.

Regulatory challenges

– MTU Aero 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 Aerospace & Defense industry regulations.

Technology acceleration in Forth Industrial Revolution

– MTU Aero has witnessed rapid integration of technology during Covid-19 in the Aerospace & Defense industry. As one of the leading players in the industry, MTU Aero needs to keep up with the evolution of technology in the Aerospace & Defense 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.

Barriers of entry lowering

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

High dependence on third party suppliers

– MTU Aero 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.

Consumer confidence and its impact on MTU Aero 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 Aerospace & Defense industry and other sectors.

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Weighted SWOT Analysis of MTU Aero Template, Example

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

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