Telefonica (TEF) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Telefonica (Germany)
Based on various researches at Oak Spring University , Telefonica is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
wage bills are increasing, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Telefonica can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Telefonica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Telefonica 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 Telefonica can be done for the following purposes –
1. Strategic planning of Telefonica
2. Improving business portfolio management of Telefonica
3. Assessing feasibility of the new initiative in Germany
4. Making a Communications Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Telefonica
Strengths of Telefonica | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Telefonica are -
Digital Transformation in Communications Services industry
- digital transformation varies from industry to industry. For Telefonica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Telefonica 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.
Sustainable margins compare to other players in Communications Services industry
– Telefonica has clearly differentiated products in the market place. This has enabled Telefonica to fetch slight price premium compare to the competitors in the Communications Services industry. The sustainable margins have also helped Telefonica to invest into research and development (R&D) and innovation.
Training and development
– Telefonica has one of the best training and development program in Services 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.
Diverse revenue streams
– Telefonica is present in almost all the verticals within the Communications Services industry. This has provided Telefonica 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.
Organizational Resilience of Telefonica
– The covid-19 pandemic has put organizational resilience at the centre of everthing Telefonica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Telefonica 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.
Low bargaining power of suppliers
– Suppliers of Telefonica in the Services sector have low bargaining power. Telefonica has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Telefonica to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Telefonica has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Telefonica to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Communications Services industry
– Telefonica is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Telefonica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Services industry. Secondly the value chain collaborators of Telefonica have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Telefonica is one of the most innovative firm in Communications Services sector.
Superior customer experience
– The customer experience strategy of Telefonica in Communications Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Telefonica | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Telefonica are -
Products dominated business model
– Even though Telefonica has some of the most successful models in the Communications Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Telefonica should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Telefonica needs to have more collaboration between its sales team and marketing team. Sales professionals in the Communications Services industry have deep experience in developing customer relationships. Marketing department at Telefonica can leverage the sales team experience to cultivate customer relationships as Telefonica is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Germany, Telefonica needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Communications Services industry, Telefonica 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.
Need for greater diversity
– Telefonica 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.
Lack of clear differentiation of Telefonica products
– To increase the profitability and margins on the products, Telefonica needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Telefonica is one of the leading players in the Communications Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Communications Services industry in last five years.
High bargaining power of channel partners in Communications Services industry
– because of the regulatory requirements in Germany, Telefonica 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 Communications Services industry.
Ability to respond to the competition
– As the decision making is very deliberative at Telefonica, in the dynamic environment of Communications Services industry it has struggled to respond to the nimble upstart competition. Telefonica has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Telefonica has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Communications Services industry over the last five years. Telefonica 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 dependence on Telefonica ‘s star products
– The top 2 products and services of Telefonica still accounts for major business revenue. This dependence on star products in Communications Services industry has resulted into insufficient focus on developing new products, even though Telefonica has relatively successful track record of launching new products.
Telefonica Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Telefonica are -
Buying journey improvements
– Telefonica can improve the customer journey of consumers in the Communications Services 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.
Loyalty marketing
– Telefonica 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Telefonica 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.
Use of Bitcoin and other crypto currencies for transactions in Communications Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Telefonica in the Communications Services industry. Now Telefonica can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Telefonica 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 Telefonica to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Telefonica in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Communications Services industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Telefonica has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Services sector. This continuous investment in analytics has enabled Telefonica to build a competitive advantage using analytics. The analytics driven competitive advantage can help Telefonica to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Telefonica 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 Communications Services industry.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Telefonica 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 Telefonica to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Telefonica 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Telefonica can use these opportunities to build new business models that can help the communities that Telefonica operates in. Secondly it can use opportunities from government spending in Communications Services sector.
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. Telefonica can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Communications Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Telefonica 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. Telefonica 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.
Threats Telefonica External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Telefonica are -
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 Telefonica business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Telefonica in Communications Services industry. The Communications Services 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.
High dependence on third party suppliers
– Telefonica 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.
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.
Technology acceleration in Forth Industrial Revolution
– Telefonica has witnessed rapid integration of technology during Covid-19 in the Communications Services industry. As one of the leading players in the industry, Telefonica needs to keep up with the evolution of technology in the Communications Services 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.
Increasing wage structure of Telefonica
– 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 Telefonica.
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. Telefonica 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, Telefonica may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Services sector.
Consumer confidence and its impact on Telefonica 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 Communications Services industry and other sectors.
Environmental challenges
– Telefonica 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. Telefonica can take advantage of this fund but it will also bring new competitors in the Communications Services 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 Telefonica.
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. Telefonica needs to understand the core reasons impacting the Communications Services 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, Telefonica 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 Telefonica prominent markets.
Weighted SWOT Analysis of Telefonica Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Telefonica 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 Telefonica 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 Telefonica 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 Telefonica 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 Telefonica needs to make to build a sustainable competitive advantage.