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Rational AG (0FRJ) SWOT Analysis / TOWS Matrix / 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 – increasing commodity prices, wage bills are increasing, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , technology disruption, cloud computing is disrupting traditional business models, etc



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Introduction to SWOT Analysis of Rational AG


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 -

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.

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.

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.

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.

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.

Analytics focus

– Rational AG 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 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.

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.

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.

Innovation driven organization

– Rational AG is one of the most innovative firm in sector.

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.

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.

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.






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

The weaknesses of Rational AG are -

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.

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.

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 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.

Low market penetration in new markets

– Outside its home market of United Kingdom, Rational AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High dependence on Rational AG ‘s star products

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

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.

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.

Need for greater diversity

– Rational AG 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.

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.

Slow decision making process

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




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


The opportunities of Rational AG are -

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.




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


The threats of Rational AG are -

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.

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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Rational AG may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.

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.

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.

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.

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.

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.

Technology acceleration in Forth Industrial Revolution

– Rational AG has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Rational AG needs to keep up with the evolution of technology in the 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.

Stagnating economy with rate increase

– Rational AG 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 industry.

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.




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.



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