Rational AG (0FRJ) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Rational AG (United Kingdom)
Based on various researches at Oak Spring University , Rational AG is operating in a macro-environment that has been destablized by – there is backlash against globalization, challanges to central banks by blockchain based private currencies, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic ,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rational AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rational AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rational 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Rational AG can be done for the following purposes –
1. Strategic planning of Rational AG
2. Improving business portfolio management of Rational AG
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rational AG
Strengths of Rational AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rational AG are -
Training and development
– Rational AG has one of the best training and development program in 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.
Low bargaining power of suppliers
– Suppliers of Rational AG in the sector have low bargaining power. Rational AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rational AG to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the industry
– Rational 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.
Sustainable margins compare to other players in industry
– Rational AG has clearly differentiated products in the market place. This has enabled Rational AG to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Rational AG to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Rational AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Rational AG staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in
– Rational AG is one of the leading players in the industry in United Kingdom. Over the years it has not only transformed the business landscape in the industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Rational AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Rational AG comprises – understanding the underlying the factors in the 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.
Organizational Resilience of Rational AG
– The covid-19 pandemic has put organizational resilience at the centre of everthing Rational AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Rational 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.
Cross disciplinary teams
– Horizontal connected teams at the Rational AG 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
– Rational AG is one of the leading players in the 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
– Rational AG has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Rational AG have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Rational AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rational AG are -
Employees’ less understanding of Rational AG strategy
– From the outside it seems that the employees of Rational 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.
Products dominated business model
– Even though Rational AG has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Rational AG should strive to include more intangible value offerings along with its core products and services.
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 Rational AG supply chain. Even after few cautionary changes, Rational AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rational AG vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Rational AG, it seems that company is thinking out the frontier risks that can impact 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.
Capital Spending Reduction
– Even during the low interest decade, Rational AG 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 industry using digital technology.
Slow to strategic competitive environment developments
– As Rational AG is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, Rational AG has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Rational AG lucrative customers.
Lack of clear differentiation of Rational AG products
– To increase the profitability and margins on the products, Rational AG needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Rational 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 cash cycle compare to competitors
Rational AG has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in industry
– The stress on hiring functional specialists at Rational 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.
Rational AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rational AG are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rational AG 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 Rational AG to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Rational AG 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 industry.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Rational AG in the industry. Now Rational AG can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Rational AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Rational AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rational AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Rational 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.
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 Rational 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 Rational 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 industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Rational AG is facing challenges because of the dominance of functional experts in the organization. Rational AG can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Rational AG can use the latest technology developments to improve its manufacturing and designing process in 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Rational AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Rational 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.
Developing new processes and practices
– Rational AG can develop new processes and procedures in 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.
Buying journey improvements
– Rational AG can improve the customer journey of consumers in the 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 Rational AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rational AG are -
High dependence on third party suppliers
– Rational 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.
Regulatory challenges
– Rational 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 industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rational AG in industry. The 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.
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 Rational AG
– 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 Rational AG.
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. Rational AG needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
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.
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 Rational AG 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 Rational AG.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Rational AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Rational 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.
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 Rational AG in the sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Rational AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Rational AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rational 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 Rational 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 Rational 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 Rational 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 Rational AG needs to make to build a sustainable competitive advantage.