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 – central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing commodity prices, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
Successful track record of launching new products
– Rational AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rational AG 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.
Innovation driven organization
– Rational AG is one of the most innovative firm in sector.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Rational AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rational 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.
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.
Learning organization
- Rational 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 Rational AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rational AG emphasize – knowledge, initiative, 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.
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.
High brand equity
– Rational AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rational AG to keep acquiring new customers and building profitable relationship with both the new and loyal 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.
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.
Superior customer experience
– The customer experience strategy of Rational AG in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Rational AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rational AG are -
Aligning sales with marketing
– From the outside it seems that Rational AG needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Rational AG can leverage the sales team experience to cultivate customer relationships as Rational AG is planning to shift buying processes online.
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.
Workers concerns about automation
– As automation is fast increasing in the industry, Rational AG 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.
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.
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.
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.
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 bargaining power of channel partners in industry
– because of the regulatory requirements in United Kingdom, Rational 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 industry.
Compensation and incentives
– The revenue per employee of Rational AG is just above the 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.
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.
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.
Rational AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rational AG are -
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.
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.
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. Rational AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Rational 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. Rational 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.
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.
Loyalty marketing
– Rational 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rational AG can use these opportunities to build new business models that can help the communities that Rational AG operates in. Secondly it can use opportunities from government spending in sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rational 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rational AG 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 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.
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.
Better consumer reach
– The expansion of the 5G network will help Rational AG to increase its market reach. Rational 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.
Threats Rational AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rational AG are -
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.
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.
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.
Environmental challenges
– Rational 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. Rational AG can take advantage of this fund but it will also bring new competitors in the industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rational AG 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 Rational AG prominent markets.
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.
Shortening product life cycle
– it is one of the major threat that Rational AG is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
Consumer confidence and its impact on Rational 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 industry and other sectors.
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.
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.