Rational AG (RAAG) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Rational AG (Germany)
Based on various researches at Oak Spring University , Rational AG is operating in a macro-environment that has been destablized by – increasing energy prices, there is backlash against globalization, increasing commodity prices, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, challanges to central banks by blockchain based private currencies,
increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rational AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rational AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rational 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 Rational AG can be done for the following purposes –
1. Strategic planning of Rational AG
2. Improving business portfolio management of Rational AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rational AG
Strengths of Rational AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rational AG are -
High brand equity
– Rational AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rational AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Rational AG is one of the leading players in the Misc. Capital Goods 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 Rational AG comprises – understanding the underlying the factors in the Misc. Capital Goods 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 Rational AG
– The covid-19 pandemic has put organizational resilience at the centre of everthing Rational AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Rational 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 Rational AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rational AG emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Rational AG in the Capital Goods sector have low bargaining power. Rational AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rational AG to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Rational AG in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Rational 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.
Successful track record of launching new products
– Rational AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rational 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.
Training and development
– Rational 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.
Analytics focus
– Rational 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 Misc. Capital Goods 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.
Ability to lead change in Misc. Capital Goods
– Rational AG is one of the leading players in the Misc. Capital Goods industry in Germany. Over the years it has not only transformed the business landscape in the Misc. Capital Goods industry in Germany but also across the existing markets. The ability to lead change has enabled Rational AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Rational AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rational AG are -
Need for greater diversity
– Rational 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.
Lack of clear differentiation of Rational AG products
– To increase the profitability and margins on the products, Rational AG needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Germany, Rational AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Misc. Capital Goods industry, Rational 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.
Capital Spending Reduction
– Even during the low interest decade, Rational 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 Misc. Capital Goods industry using digital technology.
High bargaining power of channel partners in Misc. Capital Goods industry
– because of the regulatory requirements in Germany, Rational 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 Misc. Capital Goods industry.
Employees’ less understanding of Rational AG strategy
– From the outside it seems that the employees of Rational 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.
Increasing silos among functional specialists
– The organizational structure of Rational AG is dominated by functional specialists. It is not different from other players in the Misc. Capital Goods industry, but Rational AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rational AG to focus more on services in the Misc. Capital Goods industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Rational 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 Misc. Capital Goods industry over the last five years. Rational 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.
Interest costs
– Compare to the competition, Rational 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.
No frontier risks strategy
– From the 10K / annual statement of Rational AG, it seems that company is thinking out the frontier risks that can impact Misc. Capital Goods 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.
Rational AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rational AG are -
Manufacturing automation
– Rational AG can use the latest technology developments to improve its manufacturing and designing process in Misc. Capital Goods 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rational 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 Rational AG to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rational 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.
Leveraging digital technologies
– Rational 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.
Building a culture of innovation
– managers at Rational AG 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 Misc. Capital Goods industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rational AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Capital Goods industry, but it has also influenced the consumer preferences. Rational AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Misc. Capital Goods industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Rational AG in the Misc. Capital Goods industry. Now Rational AG can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Rational AG to increase its market reach. Rational 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.
Creating value in data economy
– The success of analytics program of Rational AG has opened avenues for new revenue streams for the organization in Misc. Capital Goods industry. This can help Rational AG to build a more holistic ecosystem for Rational AG products in the Misc. Capital Goods industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rational 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 Rational 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Capital Goods industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Rational 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. Rational 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.
Loyalty marketing
– Rational 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.
Threats Rational AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rational AG are -
Shortening product life cycle
– it is one of the major threat that Rational AG is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Rational 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 Misc. Capital Goods industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Capital Goods industry are lowering. It can presents Rational AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Capital Goods sector.
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 Rational AG in the Misc. Capital Goods sector and impact the bottomline of the organization.
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 Rational 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.
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. Rational AG needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Rational 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 Misc. Capital Goods sector.
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. Rational 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.
Increasing wage structure of Rational 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 Rational AG.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rational 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 Rational AG prominent markets.
Technology acceleration in Forth Industrial Revolution
– Rational AG has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Rational AG needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rational AG in Misc. Capital Goods industry. The Misc. Capital Goods 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 Rational AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rational 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 Rational 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 Rational 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 Rational 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 Rational AG needs to make to build a sustainable competitive advantage.