Hochtief AG (HOTG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Hochtief AG (Germany)

Based on various researches at Oak Spring University , Hochtief AG is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, there is backlash against globalization, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing energy prices, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of Hochtief AG

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hochtief AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hochtief AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hochtief 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Hochtief AG can be done for the following purposes –
1. Strategic planning of Hochtief AG
2. Improving business portfolio management of Hochtief AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hochtief AG

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Strengths of Hochtief AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Hochtief AG are -

Ability to recruit top talent

– Hochtief AG is one of the leading players in the Construction 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.

Training and development

– Hochtief AG has one of the best training and development program in Capital Goods 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.

Low bargaining power of suppliers

– Suppliers of Hochtief AG in the Capital Goods sector have low bargaining power. Hochtief AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hochtief AG to manage not only supply disruptions but also source products at highly competitive prices.

Digital Transformation in Construction Services industry

- digital transformation varies from industry to industry. For Hochtief AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hochtief 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.

Learning organization

- Hochtief 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 Hochtief AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hochtief AG emphasize – knowledge, initiative, and innovation.

Effective Research and Development (R&D)

– Hochtief AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hochtief AG staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Successful track record of launching new products

– Hochtief AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hochtief 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.

Ability to lead change in Construction Services

– Hochtief AG is one of the leading players in the Construction Services industry in Germany. Over the years it has not only transformed the business landscape in the Construction Services industry in Germany but also across the existing markets. The ability to lead change has enabled Hochtief AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Strong track record of project management in the Construction Services industry

– Hochtief 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.

Cross disciplinary teams

– Horizontal connected teams at the Hochtief 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.

Organizational Resilience of Hochtief AG

– The covid-19 pandemic has put organizational resilience at the centre of everthing Hochtief AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Innovation driven organization

– Hochtief AG is one of the most innovative firm in Construction Services sector.

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Weaknesses of Hochtief AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Hochtief AG are -

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Hochtief AG has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Low market penetration in new markets

– Outside its home market of Germany, Hochtief AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Ability to respond to the competition

– As the decision making is very deliberative at Hochtief AG, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Hochtief 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 Construction Services industry, Hochtief 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.

Compensation and incentives

– The revenue per employee of Hochtief AG is just above the Construction Services 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, Hochtief AG is slow explore the new channels of communication. These new channels of communication can help Hochtief AG to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.

High operating costs

– Compare to the competitors, Hochtief AG has high operating costs in the Construction Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hochtief AG lucrative customers.

Slow decision making process

– As mentioned earlier in the report, Hochtief 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 Construction Services industry over the last five years. Hochtief 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.

Capital Spending Reduction

– Even during the low interest decade, Hochtief 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 Construction Services industry using digital technology.

High dependence on Hochtief AG ‘s star products

– The top 2 products and services of Hochtief AG still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Hochtief AG has relatively successful track record of launching new products.

Products dominated business model

– Even though Hochtief AG has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hochtief AG should strive to include more intangible value offerings along with its core products and services.

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Hochtief AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Hochtief AG are -

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Hochtief AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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 Hochtief 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.

Loyalty marketing

– Hochtief 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.

Using analytics as competitive advantage

– Hochtief AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Hochtief AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hochtief AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Buying journey improvements

– Hochtief AG can improve the customer journey of consumers in the Construction 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, Hochtief 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.

Better consumer reach

– The expansion of the 5G network will help Hochtief AG to increase its market reach. Hochtief 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Hochtief AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Hochtief 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 Hochtief 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, Hochtief AG can use these opportunities to build new business models that can help the communities that Hochtief AG operates in. Secondly it can use opportunities from government spending in Construction Services sector.

Learning at scale

– Online learning technologies has now opened space for Hochtief 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.

Creating value in data economy

– The success of analytics program of Hochtief AG has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Hochtief AG to build a more holistic ecosystem for Hochtief AG products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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. Hochtief AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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Threats Hochtief AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Hochtief AG are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Hochtief 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 Hochtief AG prominent markets.

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 Hochtief AG.

Consumer confidence and its impact on Hochtief 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 Construction Services industry and other sectors.

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 Hochtief AG in the Construction Services sector and impact the bottomline of the organization.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Hochtief AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Hochtief 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 Construction Services sector.

High dependence on third party suppliers

– Hochtief 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.

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. Hochtief 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.

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.

Environmental challenges

– Hochtief 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. Hochtief AG can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

Stagnating economy with rate increase

– Hochtief 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 Construction Services industry.

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 Hochtief AG 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 Hochtief AG in Construction Services industry. The Construction 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.

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Weighted SWOT Analysis of Hochtief AG Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hochtief 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 Hochtief 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 Hochtief 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 Hochtief 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 Hochtief AG needs to make to build a sustainable competitive advantage.

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