MTU Aero Engines AG (MTUAY) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for MTU Aero Engines AG (United States)
Based on various researches at Oak Spring University , MTU Aero Engines AG is operating in a macro-environment that has been destablized by – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , technology disruption, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion,
digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, etc
Introduction to SWOT Analysis of MTU Aero Engines AG
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that MTU Aero Engines AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the MTU Aero Engines AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which MTU Aero Engines 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 MTU Aero Engines AG can be done for the following purposes –
1. Strategic planning of MTU Aero Engines AG
2. Improving business portfolio management of MTU Aero Engines AG
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of MTU Aero Engines AG
Strengths of MTU Aero Engines AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of MTU Aero Engines AG are -
Successful track record of launching new products
– MTU Aero Engines AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. MTU Aero Engines 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.
Operational resilience
– The operational resilience strategy of MTU Aero Engines 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.
Highly skilled collaborators
– MTU Aero Engines 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 MTU Aero Engines AG have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– MTU Aero Engines AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled MTU Aero Engines AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that MTU Aero Engines 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.
Ability to lead change in
– MTU Aero Engines AG is one of the leading players in the industry in United States. Over the years it has not only transformed the business landscape in the industry in United States but also across the existing markets. The ability to lead change has enabled MTU Aero Engines AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– MTU Aero Engines AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – MTU Aero Engines 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.
Superior customer experience
– The customer experience strategy of MTU Aero Engines AG in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in industry
- digital transformation varies from industry to industry. For MTU Aero Engines AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. MTU Aero Engines 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.
Innovation driven organization
– MTU Aero Engines AG is one of the most innovative firm in sector.
Learning organization
- MTU Aero Engines 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 MTU Aero Engines AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at MTU Aero Engines AG emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the MTU Aero Engines 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.
Weaknesses of MTU Aero Engines AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of MTU Aero Engines AG are -
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 MTU Aero Engines AG supply chain. Even after few cautionary changes, MTU Aero Engines AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left MTU Aero Engines AG vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– MTU Aero Engines 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.
Compensation and incentives
– The revenue per employee of MTU Aero Engines 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 operating costs
– Compare to the competitors, MTU Aero Engines 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 MTU Aero Engines AG lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, MTU Aero Engines AG is slow explore the new channels of communication. These new channels of communication can help MTU Aero Engines AG to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, MTU Aero Engines 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 MTU Aero Engines 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.
Increasing silos among functional specialists
– The organizational structure of MTU Aero Engines AG is dominated by functional specialists. It is not different from other players in the industry, but MTU Aero Engines AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help MTU Aero Engines AG to focus more on services in the industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at MTU Aero Engines AG, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. MTU Aero Engines AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the industry, MTU Aero Engines 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.
High bargaining power of channel partners in industry
– because of the regulatory requirements in United States, MTU Aero Engines 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.
MTU Aero Engines AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of MTU Aero Engines AG are -
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. MTU Aero Engines AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– MTU Aero Engines 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, MTU Aero Engines 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 MTU Aero Engines 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, MTU Aero Engines AG can use these opportunities to build new business models that can help the communities that MTU Aero Engines AG operates in. Secondly it can use opportunities from government spending in sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects MTU Aero Engines AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. MTU Aero Engines AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 MTU Aero Engines AG in the industry. Now MTU Aero Engines AG can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, MTU Aero Engines 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.
Using analytics as competitive advantage
– MTU Aero Engines 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 MTU Aero Engines AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help MTU Aero Engines AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of MTU Aero Engines AG has opened avenues for new revenue streams for the organization in industry. This can help MTU Aero Engines AG to build a more holistic ecosystem for MTU Aero Engines AG products in the 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 MTU Aero Engines AG to increase its market reach. MTU Aero Engines 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.
Buying journey improvements
– MTU Aero Engines 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.
Leveraging digital technologies
– MTU Aero Engines 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.
Threats MTU Aero Engines AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of MTU Aero Engines AG are -
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. MTU Aero Engines AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of MTU Aero Engines 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 MTU Aero Engines AG.
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. MTU Aero Engines 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.
Consumer confidence and its impact on MTU Aero Engines 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.
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. MTU Aero Engines AG needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, MTU Aero Engines 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.
Stagnating economy with rate increase
– MTU Aero Engines 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, MTU Aero Engines 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 MTU Aero Engines AG prominent markets.
Environmental challenges
– MTU Aero Engines 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. MTU Aero Engines AG can take advantage of this fund but it will also bring new competitors in the industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents MTU Aero Engines AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for MTU Aero Engines 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.
Shortening product life cycle
– it is one of the major threat that MTU Aero Engines AG is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of MTU Aero Engines AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at MTU Aero Engines 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 MTU Aero Engines 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 MTU Aero Engines 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 MTU Aero Engines 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 MTU Aero Engines AG needs to make to build a sustainable competitive advantage.