Software AG (STWRY) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Software AG (United States)
Based on various researches at Oak Spring University , Software AG is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, wage bills are increasing, increasing commodity prices, geopolitical disruptions,
increasing government debt because of Covid-19 spendings, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Software AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Software AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Software 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 Software AG can be done for the following purposes –
1. Strategic planning of Software AG
2. Improving business portfolio management of Software 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 Software AG
Strengths of Software AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Software AG are -
Highly skilled collaborators
– Software 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 Software AG have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Software 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 Software AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Software AG emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Software AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Software 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.
Diverse revenue streams
– Software AG is present in almost all the verticals within the industry. This has provided Software 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.
Strong track record of project management in the industry
– Software 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.
Analytics focus
– Software 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 States 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.
Low bargaining power of suppliers
– Suppliers of Software AG in the sector have low bargaining power. Software AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Software AG to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Software AG is one of the leading players in the 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
– Software AG has one of the best training and development program in 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.
Sustainable margins compare to other players in industry
– Software AG has clearly differentiated products in the market place. This has enabled Software AG to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Software AG to invest into research and development (R&D) and innovation.
High brand equity
– Software AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Software AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Software AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Software 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.
Weaknesses of Software AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Software AG are -
Slow to strategic competitive environment developments
– As Software 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.
Slow decision making process
– As mentioned earlier in the report, Software 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. Software 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.
Ability to respond to the competition
– As the decision making is very deliberative at Software AG, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Software AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, Software 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 Software AG lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Software AG is dominated by functional specialists. It is not different from other players in the industry, but Software AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Software AG to focus more on services in the industry rather than just following the product oriented approach.
Employees’ less understanding of Software AG strategy
– From the outside it seems that the employees of Software 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.
Interest costs
– Compare to the competition, Software 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 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 Software AG supply chain. Even after few cautionary changes, Software AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Software AG vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Software 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 Software AG can leverage the sales team experience to cultivate customer relationships as Software AG is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of United States, Software AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Software 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.
Software AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Software AG are -
Manufacturing automation
– Software 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.
Better consumer reach
– The expansion of the 5G network will help Software AG to increase its market reach. Software 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 industry, but it has also influenced the consumer preferences. Software AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Software 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. Software 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. Software 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.
Leveraging digital technologies
– Software 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.
Loyalty marketing
– Software 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Software AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Software 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 Software AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Software AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Software AG can develop new processes and procedures in 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.
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 Software AG in the industry. Now Software AG can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Software AG 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 Software AG to hire the very best people irrespective of their geographical location.
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 Software 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.
Threats Software AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Software 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 Software AG.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Software AG in the sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Software 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Software 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 Software AG prominent markets.
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.
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 Software AG business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Software 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. Software AG can take advantage of this fund but it will also bring new competitors in the industry.
Consumer confidence and its impact on Software 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.
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.
Shortening product life cycle
– it is one of the major threat that Software AG is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Software 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.
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. Software 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Software 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.
Weighted SWOT Analysis of Software AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Software 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 Software 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 Software 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 Software 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 Software AG needs to make to build a sustainable competitive advantage.
