Nemetschek AG (NEKG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nemetschek AG (Germany)

Based on various researches at Oak Spring University , Nemetschek AG is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Nemetschek AG

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nemetschek AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nemetschek AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nemetschek 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 Nemetschek AG can be done for the following purposes –
1. Strategic planning of Nemetschek AG
2. Improving business portfolio management of Nemetschek AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nemetschek AG

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

The strengths of Nemetschek AG are -

Strong track record of project management in the Software & Programming industry

– Nemetschek 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.

Digital Transformation in Software & Programming industry

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

Superior customer experience

– The customer experience strategy of Nemetschek AG in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Highly skilled collaborators

– Nemetschek AG has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of Nemetschek AG have helped the firm to develop new products and bring them quickly to the marketplace.

Learning organization

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

Ability to recruit top talent

– Nemetschek AG is one of the leading players in the Software & Programming 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.

Diverse revenue streams

– Nemetschek AG is present in almost all the verticals within the Software & Programming industry. This has provided Nemetschek 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.

Successful track record of launching new products

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

Effective Research and Development (R&D)

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

High switching costs

– The high switching costs that Nemetschek 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.

Low bargaining power of suppliers

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

Cross disciplinary teams

– Horizontal connected teams at the Nemetschek 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.

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

The weaknesses of Nemetschek AG are -

Increasing silos among functional specialists

– The organizational structure of Nemetschek AG is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Nemetschek AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nemetschek AG to focus more on services in the Software & Programming industry rather than just following the product oriented approach.

Products dominated business model

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

Lack of clear differentiation of Nemetschek AG products

– To increase the profitability and margins on the products, Nemetschek AG needs to provide more differentiated products than what it is currently offering in the marketplace.

Interest costs

– Compare to the competition, Nemetschek 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.

Need for greater diversity

– Nemetschek 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.

Employees’ less understanding of Nemetschek AG strategy

– From the outside it seems that the employees of Nemetschek 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nemetschek AG is slow explore the new channels of communication. These new channels of communication can help Nemetschek AG to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.

High cash cycle compare to competitors

Nemetschek AG has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Workers concerns about automation

– As automation is fast increasing in the Software & Programming industry, Nemetschek 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.

Skills based hiring in Software & Programming industry

– The stress on hiring functional specialists at Nemetschek 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.

High dependence on Nemetschek AG ‘s star products

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

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

The opportunities of Nemetschek AG are -

Buying journey improvements

– Nemetschek AG can improve the customer journey of consumers in the Software & Programming 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.

Leveraging digital technologies

– Nemetschek 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.

Reforming the budgeting process

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nemetschek 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. Nemetschek 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.

Using analytics as competitive advantage

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

Creating value in data economy

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

Finding new ways to collaborate

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

Developing new processes and practices

– Nemetschek AG can develop new processes and procedures in Software & Programming 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.

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 Nemetschek 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.

Learning at scale

– Online learning technologies has now opened space for Nemetschek 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.

Loyalty marketing

– Nemetschek 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.

Manufacturing automation

– Nemetschek AG can use the latest technology developments to improve its manufacturing and designing process in Software & Programming 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 Nemetschek 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 Nemetschek AG to hire the very best people irrespective of their geographical location.

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

The threats of Nemetschek AG are -

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 Nemetschek AG.

Environmental challenges

– Nemetschek 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. Nemetschek AG can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.

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.

Shortening product life cycle

– it is one of the major threat that Nemetschek AG is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. Nemetschek AG needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.

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 Nemetschek AG business can come under increasing regulations regarding data privacy, data security, etc.

Technology acceleration in Forth Industrial Revolution

– Nemetschek AG has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Nemetschek AG needs to keep up with the evolution of technology in the Software & Programming 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.

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. Nemetschek 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.

Regulatory challenges

– Nemetschek 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 Software & Programming industry regulations.

Increasing wage structure of Nemetschek 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 Nemetschek AG.

Increasing international competition and downward pressure on margins

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

High dependence on third party suppliers

– Nemetschek 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.

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.

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Weighted SWOT Analysis of Nemetschek AG Template, Example

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

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