BASF (BFFAF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for BASF (United States)

Based on various researches at Oak Spring University , BASF is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, there is backlash against globalization, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of BASF

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

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

The strengths of BASF are -

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For BASF digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. BASF 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.

Innovation driven organization

– BASF is one of the most innovative firm in Chemical Manufacturing sector.

Sustainable margins compare to other players in Chemical Manufacturing industry

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

Cross disciplinary teams

– Horizontal connected teams at the BASF 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.

Learning organization

- BASF 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 BASF is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at BASF emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of BASF comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

High brand equity

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

Ability to recruit top talent

– BASF is one of the leading players in the Chemical Manufacturing industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Training and development

– BASF has one of the best training and development program in Basic Materials 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.

Successful track record of launching new products

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

Highly skilled collaborators

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

Ability to lead change in Chemical Manufacturing

– BASF is one of the leading players in the Chemical Manufacturing industry in United States. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in United States but also across the existing markets. The ability to lead change has enabled BASF in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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

The weaknesses of BASF are -

Slow to strategic competitive environment developments

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

High cash cycle compare to competitors

BASF has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

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

High operating costs

– Compare to the competitors, BASF has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract BASF lucrative customers.

Employees’ less understanding of BASF strategy

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

Lack of clear differentiation of BASF products

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, BASF is slow explore the new channels of communication. These new channels of communication can help BASF to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at BASF 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.

Aligning sales with marketing

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

High dependence on BASF ‘s star products

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

Workers concerns about automation

– As automation is fast increasing in the Chemical Manufacturing industry, BASF 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.

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

The opportunities of BASF are -

Buying journey improvements

– BASF can improve the customer journey of consumers in the Chemical Manufacturing 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for BASF to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for BASF to hire the very best people irrespective of their geographical location.

Lowering marketing communication costs

– 5G expansion will open new opportunities for BASF in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Better consumer reach

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

Increase in government spending

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

Manufacturing automation

– BASF can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.

Learning at scale

– Online learning technologies has now opened space for BASF 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.

Loyalty marketing

– BASF 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.

Developing new processes and practices

– BASF can develop new processes and procedures in Chemical Manufacturing 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.

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. BASF 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, BASF 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.

Creating value in data economy

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

Building a culture of innovation

– managers at BASF 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 Chemical Manufacturing industry.

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

The threats of BASF are -

Consumer confidence and its impact on BASF 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 Chemical Manufacturing industry and other sectors.

Technology acceleration in Forth Industrial Revolution

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

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

Stagnating economy with rate increase

– BASF 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 Chemical Manufacturing industry.

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 BASF.

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. BASF needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

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

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. BASF can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 BASF in Chemical Manufacturing industry. The Chemical Manufacturing 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, BASF may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

Shortening product life cycle

– it is one of the major threat that BASF is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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Weighted SWOT Analysis of BASF Template, Example

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

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