Telefonica Deutschland AG (O2Dn) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Telefonica Deutschland AG (Germany)
Based on various researches at Oak Spring University , Telefonica Deutschland AG is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , wage bills are increasing, central banks are concerned over increasing inflation, increasing transportation and logistics costs, there is backlash against globalization,
competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Telefonica Deutschland AG
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Telefonica Deutschland AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Telefonica Deutschland AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Telefonica Deutschland 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 Telefonica Deutschland AG can be done for the following purposes –
1. Strategic planning of Telefonica Deutschland AG
2. Improving business portfolio management of Telefonica Deutschland AG
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 Deutschland AG
Strengths of Telefonica Deutschland AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Telefonica Deutschland AG are -
Ability to lead change in Communications Services
– Telefonica Deutschland AG is one of the leading players in the Communications Services industry in Germany. Over the years it has not only transformed the business landscape in the Communications Services industry in Germany but also across the existing markets. The ability to lead change has enabled Telefonica Deutschland AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Communications Services industry
- digital transformation varies from industry to industry. For Telefonica Deutschland AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Telefonica Deutschland 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.
Analytics focus
– Telefonica Deutschland 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 Communications Services 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.
Highly skilled collaborators
– Telefonica Deutschland AG 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 Deutschland AG have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Telefonica Deutschland AG is present in almost all the verticals within the Communications Services industry. This has provided Telefonica Deutschland 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 Communications Services industry
– Telefonica Deutschland 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.
High switching costs
– The high switching costs that Telefonica Deutschland 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 recruit top talent
– Telefonica Deutschland AG is one of the leading players in the Communications Services industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of Telefonica Deutschland AG comprises – understanding the underlying the factors in the Communications Services 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.
Organizational Resilience of Telefonica Deutschland AG
– The covid-19 pandemic has put organizational resilience at the centre of everthing Telefonica Deutschland AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Telefonica Deutschland 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 Telefonica Deutschland AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Telefonica Deutschland AG emphasize – knowledge, initiative, and innovation.
High brand equity
– Telefonica Deutschland AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Telefonica Deutschland AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Telefonica Deutschland AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Telefonica Deutschland AG are -
Ability to respond to the competition
– As the decision making is very deliberative at Telefonica Deutschland AG, in the dynamic environment of Communications Services industry it has struggled to respond to the nimble upstart competition. Telefonica Deutschland AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Communications Services industry
– because of the regulatory requirements in Germany, Telefonica Deutschland 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 Communications Services industry.
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 Telefonica Deutschland AG supply chain. Even after few cautionary changes, Telefonica Deutschland AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Telefonica Deutschland AG vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Telefonica Deutschland AG has high operating costs in the Communications Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Telefonica Deutschland AG lucrative customers.
Products dominated business model
– Even though Telefonica Deutschland AG 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 Deutschland AG should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Telefonica Deutschland 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 Communications Services industry using digital technology.
High cash cycle compare to competitors
Telefonica Deutschland AG has a high cash cycle compare to other players in the Communications Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Telefonica Deutschland AG 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 Deutschland AG can leverage the sales team experience to cultivate customer relationships as Telefonica Deutschland AG is planning to shift buying processes online.
No frontier risks strategy
– From the 10K / annual statement of Telefonica Deutschland AG, it seems that company is thinking out the frontier risks that can impact Communications Services 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.
Need for greater diversity
– Telefonica Deutschland 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.
Interest costs
– Compare to the competition, Telefonica Deutschland 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.
Telefonica Deutschland AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Telefonica Deutschland AG are -
Better consumer reach
– The expansion of the 5G network will help Telefonica Deutschland AG to increase its market reach. Telefonica Deutschland 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.
Using analytics as competitive advantage
– Telefonica Deutschland AG 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 Deutschland AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Telefonica Deutschland AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Telefonica Deutschland 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Telefonica Deutschland AG is facing challenges because of the dominance of functional experts in the organization. Telefonica Deutschland AG can utilize new technology in the field of Communications Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 Deutschland AG in the Communications Services industry. Now Telefonica Deutschland AG can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Telefonica Deutschland AG can develop new processes and procedures in Communications Services 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.
Creating value in data economy
– The success of analytics program of Telefonica Deutschland AG has opened avenues for new revenue streams for the organization in Communications Services industry. This can help Telefonica Deutschland AG to build a more holistic ecosystem for Telefonica Deutschland AG products in the Communications Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Telefonica Deutschland 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.
Buying journey improvements
– Telefonica Deutschland AG 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Telefonica Deutschland 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Telefonica Deutschland AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Deutschland AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Telefonica Deutschland AG can use the latest technology developments to improve its manufacturing and designing process in Communications Services 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.
Threats Telefonica Deutschland AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Telefonica Deutschland AG are -
Environmental challenges
– Telefonica Deutschland 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. Telefonica Deutschland AG can take advantage of this fund but it will also bring new competitors in the Communications Services industry.
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 Telefonica Deutschland AG in the Communications Services sector and impact the bottomline of the organization.
Consumer confidence and its impact on Telefonica Deutschland 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 Communications Services industry and other sectors.
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 Deutschland 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, Telefonica Deutschland 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 Communications Services sector.
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.
High dependence on third party suppliers
– Telefonica Deutschland 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.
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 Deutschland AG needs to understand the core reasons impacting the Communications Services industry. This will help it in building a better workplace.
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 Deutschland AG.
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.
Increasing wage structure of Telefonica Deutschland 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 Telefonica Deutschland AG.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Telefonica Deutschland 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 Telefonica Deutschland AG prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Telefonica Deutschland AG 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.
Weighted SWOT Analysis of Telefonica Deutschland AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Telefonica Deutschland 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 Telefonica Deutschland 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 Telefonica Deutschland 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 Telefonica Deutschland 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 Telefonica Deutschland AG needs to make to build a sustainable competitive advantage.