SWOT Analysis / TOWS Matrix for Wacker Chemie (Germany)
Based on various researches at Oak Spring University , Wacker Chemie is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, there is backlash against globalization, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion,
geopolitical disruptions, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Wacker Chemie can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wacker Chemie, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wacker Chemie 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 Wacker Chemie can be done for the following purposes –
1. Strategic planning of Wacker Chemie
2. Improving business portfolio management of Wacker Chemie
3. Assessing feasibility of the new initiative in Germany
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wacker Chemie
Strengths of Wacker Chemie | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wacker Chemie are -
Highly skilled collaborators
– Wacker Chemie has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Wacker Chemie have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Wacker Chemie has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wacker Chemie 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.
Learning organization
- Wacker Chemie 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 Wacker Chemie is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Wacker Chemie emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Wacker Chemie comprises – understanding the underlying the factors in the Chemical Manufacturing 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.
Effective Research and Development (R&D)
– Wacker Chemie has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Wacker Chemie staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Wacker Chemie 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.
High switching costs
– The high switching costs that Wacker Chemie 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.
Strong track record of project management in the Chemical Manufacturing industry
– Wacker Chemie is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Wacker Chemie
– The covid-19 pandemic has put organizational resilience at the centre of everthing Wacker Chemie does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Wacker Chemie is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Wacker Chemie 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.
Superior customer experience
– The customer experience strategy of Wacker Chemie in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Wacker Chemie has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wacker Chemie to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Wacker Chemie | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wacker Chemie are -
Interest costs
– Compare to the competition, Wacker Chemie 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.
Capital Spending Reduction
– Even during the low interest decade, Wacker Chemie 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 Chemical Manufacturing industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at Wacker Chemie, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Wacker Chemie has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wacker Chemie is slow explore the new channels of communication. These new channels of communication can help Wacker Chemie to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Wacker Chemie products
– To increase the profitability and margins on the products, Wacker Chemie needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Wacker Chemie has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Wacker Chemie 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.
Need for greater diversity
– Wacker Chemie 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.
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 Wacker Chemie supply chain. Even after few cautionary changes, Wacker Chemie is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wacker Chemie vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Wacker Chemie needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Wacker Chemie can leverage the sales team experience to cultivate customer relationships as Wacker Chemie is planning to shift buying processes online.
No frontier risks strategy
– From the 10K / annual statement of Wacker Chemie, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.
High operating costs
– Compare to the competitors, Wacker Chemie has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Wacker Chemie lucrative customers.
Wacker Chemie Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Wacker Chemie are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wacker Chemie in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.
Buying journey improvements
– Wacker Chemie can improve the customer journey of consumers in the Chemical Manufacturing 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.
Developing new processes and practices
– Wacker Chemie can develop new processes and procedures in Chemical Manufacturing 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.
Leveraging digital technologies
– Wacker Chemie 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.
Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wacker Chemie in the Chemical Manufacturing industry. Now Wacker Chemie 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, Wacker Chemie 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 Wacker Chemie to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Wacker Chemie 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wacker Chemie can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Wacker Chemie 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.
Manufacturing automation
– Wacker Chemie can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.
Using analytics as competitive advantage
– Wacker Chemie has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Wacker Chemie to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wacker Chemie to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wacker Chemie 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. Wacker Chemie 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.
Creating value in data economy
– The success of analytics program of Wacker Chemie has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Wacker Chemie to build a more holistic ecosystem for Wacker Chemie products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Wacker Chemie External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Wacker Chemie are -
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. Wacker Chemie needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.
Environmental challenges
– Wacker Chemie 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. Wacker Chemie can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Wacker Chemie 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 Wacker Chemie prominent markets.
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. Wacker Chemie 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.
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 Wacker Chemie in the Chemical Manufacturing sector and impact the bottomline of the organization.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Wacker Chemie with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Wacker Chemie may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.
Increasing wage structure of Wacker Chemie
– 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 Wacker Chemie.
Consumer confidence and its impact on Wacker Chemie 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 Chemical Manufacturing industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Wacker Chemie is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Wacker Chemie 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 Chemical Manufacturing industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wacker Chemie in Chemical Manufacturing industry. The Chemical Manufacturing 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 Wacker Chemie Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Wacker Chemie 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 Wacker Chemie 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 Wacker Chemie 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 Wacker Chemie 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 Wacker Chemie needs to make to build a sustainable competitive advantage.