Salzgitter AG (0G77) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Salzgitter AG (United Kingdom)

Based on various researches at Oak Spring University , Salzgitter AG is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, geopolitical disruptions, there is backlash against globalization, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Salzgitter AG

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Salzgitter AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Salzgitter AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Salzgitter 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Salzgitter AG can be done for the following purposes –
1. Strategic planning of Salzgitter AG
2. Improving business portfolio management of Salzgitter AG
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Salzgitter AG

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Strengths of Salzgitter AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Salzgitter AG are -

Cross disciplinary teams

– Horizontal connected teams at the Salzgitter 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

– Salzgitter AG is one of the leading players in the Iron & Steel 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.

High brand equity

– Salzgitter AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Salzgitter AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Operational resilience

– The operational resilience strategy of Salzgitter AG comprises – understanding the underlying the factors in the Iron & Steel 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.

Sustainable margins compare to other players in Iron & Steel industry

– Salzgitter AG has clearly differentiated products in the market place. This has enabled Salzgitter AG to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Salzgitter AG to invest into research and development (R&D) and innovation.

Ability to lead change in Iron & Steel

– Salzgitter AG is one of the leading players in the Iron & Steel industry in United Kingdom. Over the years it has not only transformed the business landscape in the Iron & Steel industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Salzgitter 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 Salzgitter AG in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

– Salzgitter AG is present in almost all the verticals within the Iron & Steel industry. This has provided Salzgitter AG 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.

Highly skilled collaborators

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

Organizational Resilience of Salzgitter AG

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

Strong track record of project management in the Iron & Steel industry

– Salzgitter 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.

High switching costs

– The high switching costs that Salzgitter 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.

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

The weaknesses of Salzgitter AG are -

Slow decision making process

– As mentioned earlier in the report, Salzgitter 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 Iron & Steel industry over the last five years. Salzgitter 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.

High cash cycle compare to competitors

Salzgitter AG has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Interest costs

– Compare to the competition, Salzgitter 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 dependence on Salzgitter AG ‘s star products

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

Lack of clear differentiation of Salzgitter AG products

– To increase the profitability and margins on the products, Salzgitter AG needs to provide more differentiated products than what it is currently offering in the marketplace.

Compensation and incentives

– The revenue per employee of Salzgitter AG is just above the Iron & Steel 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.

Need for greater diversity

– Salzgitter 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.

Skills based hiring in Iron & Steel industry

– The stress on hiring functional specialists at Salzgitter 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.

Increasing silos among functional specialists

– The organizational structure of Salzgitter AG is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Salzgitter AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Salzgitter AG to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.

Slow to strategic competitive environment developments

– As Salzgitter AG is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.

Employees’ less understanding of Salzgitter AG strategy

– From the outside it seems that the employees of Salzgitter 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.

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

The opportunities of Salzgitter AG are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for Salzgitter 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 Iron & Steel industry, and it will provide faster access to the consumers.

Manufacturing automation

– Salzgitter AG can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Salzgitter 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. Salzgitter 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.

Building a culture of innovation

– managers at Salzgitter 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 Iron & Steel industry.

Learning at scale

– Online learning technologies has now opened space for Salzgitter 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.

Creating value in data economy

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

Better consumer reach

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

Finding new ways to collaborate

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

Developing new processes and practices

– Salzgitter AG can develop new processes and procedures in Iron & Steel 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.

Increase in government spending

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

Redefining models of collaboration and team work

– As explained in the weaknesses section, Salzgitter AG is facing challenges because of the dominance of functional experts in the organization. Salzgitter AG can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Salzgitter 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 Salzgitter 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.

Loyalty marketing

– Salzgitter 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.

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

The threats of Salzgitter AG 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. Salzgitter 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.

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 Salzgitter AG business can come under increasing regulations regarding data privacy, data security, etc.

Increasing wage structure of Salzgitter 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 Salzgitter AG.

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 Salzgitter AG in Iron & Steel industry. The Iron & Steel 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.

Technology acceleration in Forth Industrial Revolution

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

Regulatory challenges

– Salzgitter 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 Iron & Steel industry regulations.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Salzgitter 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 Salzgitter AG prominent markets.

Consumer confidence and its impact on Salzgitter 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 Iron & Steel industry and other sectors.

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 Salzgitter AG.

Stagnating economy with rate increase

– Salzgitter 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 Iron & Steel industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Salzgitter 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 Iron & Steel sector.

Environmental challenges

– Salzgitter 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. Salzgitter AG can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.

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Weighted SWOT Analysis of Salzgitter AG Template, Example

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

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