SAP (SAPG) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for SAP (Germany)
Based on various researches at Oak Spring University , SAP is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, talent flight as more people leaving formal jobs,
challanges to central banks by blockchain based private currencies, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SAP can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SAP, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SAP 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 SAP can be done for the following purposes –
1. Strategic planning of SAP
2. Improving business portfolio management of SAP
3. Assessing feasibility of the new initiative in Germany
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of SAP
Strengths of SAP | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SAP are -
Highly skilled collaborators
– SAP has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of SAP have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– SAP has one of the best training and development program in Technology 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
– SAP has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. SAP 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.
Analytics focus
– SAP 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 Software & Programming industry. The technology infrastructure of Germany 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.
Organizational Resilience of SAP
– The covid-19 pandemic has put organizational resilience at the centre of everthing SAP does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of SAP comprises – understanding the underlying the factors in the Software & Programming 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.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For SAP digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. SAP 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.
Low bargaining power of suppliers
– Suppliers of SAP in the Technology sector have low bargaining power. SAP has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps SAP to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Software & Programming
– SAP is one of the leading players in the Software & Programming industry in Germany. Over the years it has not only transformed the business landscape in the Software & Programming industry in Germany but also across the existing markets. The ability to lead change has enabled SAP 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 SAP in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– SAP is present in almost all the verticals within the Software & Programming industry. This has provided SAP 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.
Learning organization
- SAP 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 SAP is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SAP emphasize – knowledge, initiative, and innovation.
Weaknesses of SAP | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SAP are -
Products dominated business model
– Even though SAP has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. SAP should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, SAP 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 Software & Programming industry using digital technology.
Interest costs
– Compare to the competition, SAP 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 Software & Programming industry
– because of the regulatory requirements in Germany, SAP 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 Software & Programming industry.
High dependence on SAP ‘s star products
– The top 2 products and services of SAP still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though SAP has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of SAP, it seems that company is thinking out the frontier risks that can impact Software & Programming industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Workers concerns about automation
– As automation is fast increasing in the Software & Programming industry, SAP 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.
Compensation and incentives
– The revenue per employee of SAP is just above the Software & Programming 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, SAP is slow explore the new channels of communication. These new channels of communication can help SAP to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of SAP is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but SAP needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help SAP to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that SAP needs to have more collaboration between its sales team and marketing team. Sales professionals in the Software & Programming industry have deep experience in developing customer relationships. Marketing department at SAP can leverage the sales team experience to cultivate customer relationships as SAP is planning to shift buying processes online.
SAP Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SAP are -
Creating value in data economy
– The success of analytics program of SAP has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help SAP to build a more holistic ecosystem for SAP products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 SAP 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.
Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for SAP in the Software & Programming industry. Now SAP can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. SAP 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. SAP 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, SAP 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 SAP 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, SAP can use these opportunities to build new business models that can help the communities that SAP operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Building a culture of innovation
– managers at SAP 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 Software & Programming industry.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for SAP 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 SAP to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– SAP 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, SAP is facing challenges because of the dominance of functional experts in the organization. SAP can utilize new technology in the field of Software & Programming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– SAP can use the latest technology developments to improve its manufacturing and designing process in Software & Programming 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 SAP to increase its market reach. SAP 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 Software & Programming industry, but it has also influenced the consumer preferences. SAP can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats SAP External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SAP are -
Environmental challenges
– SAP 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. SAP can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
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.
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. SAP 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.
High dependence on third party suppliers
– SAP 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.
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 SAP business can come under increasing regulations regarding data privacy, data security, etc.
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 SAP.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, SAP may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.
Shortening product life cycle
– it is one of the major threat that SAP is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. SAP needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
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 SAP in the Software & Programming sector and impact the bottomline of the organization.
Consumer confidence and its impact on SAP 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 Software & Programming industry and other sectors.
Increasing wage structure of SAP
– 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 SAP.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, SAP 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 SAP prominent markets.
Weighted SWOT Analysis of SAP Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SAP 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 SAP 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 SAP 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 SAP 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 SAP needs to make to build a sustainable competitive advantage.