Rheinmetall AG (RHMG) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Parts
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Rheinmetall AG (Germany)
Based on various researches at Oak Spring University , Rheinmetall AG is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, geopolitical disruptions, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing energy prices, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rheinmetall AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rheinmetall AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rheinmetall 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 Rheinmetall AG can be done for the following purposes –
1. Strategic planning of Rheinmetall AG
2. Improving business portfolio management of Rheinmetall AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Auto & Truck Parts sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rheinmetall AG
Strengths of Rheinmetall AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rheinmetall AG are -
Ability to lead change in Auto & Truck Parts
– Rheinmetall AG is one of the leading players in the Auto & Truck Parts industry in Germany. Over the years it has not only transformed the business landscape in the Auto & Truck Parts industry in Germany but also across the existing markets. The ability to lead change has enabled Rheinmetall AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Rheinmetall 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.
Low bargaining power of suppliers
– Suppliers of Rheinmetall AG in the Consumer Cyclical sector have low bargaining power. Rheinmetall AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rheinmetall AG to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Rheinmetall AG is present in almost all the verticals within the Auto & Truck Parts industry. This has provided Rheinmetall 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.
High switching costs
– The high switching costs that Rheinmetall 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.
Training and development
– Rheinmetall AG has one of the best training and development program in Consumer Cyclical 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.
Effective Research and Development (R&D)
– Rheinmetall AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Rheinmetall AG staying ahead in the Auto & Truck Parts 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
– Rheinmetall AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rheinmetall 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.
High brand equity
– Rheinmetall AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rheinmetall AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Auto & Truck Parts industry
– Rheinmetall 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 Auto & Truck Parts industry
- digital transformation varies from industry to industry. For Rheinmetall AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rheinmetall 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
– Rheinmetall 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 Auto & Truck Parts 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.
Weaknesses of Rheinmetall AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rheinmetall AG are -
Low market penetration in new markets
– Outside its home market of Germany, Rheinmetall AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Rheinmetall AG, it seems that company is thinking out the frontier risks that can impact Auto & Truck Parts 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 dependence on Rheinmetall AG ‘s star products
– The top 2 products and services of Rheinmetall AG still accounts for major business revenue. This dependence on star products in Auto & Truck Parts industry has resulted into insufficient focus on developing new products, even though Rheinmetall AG has relatively successful track record of launching new products.
High cash cycle compare to competitors
Rheinmetall AG has a high cash cycle compare to other players in the Auto & Truck Parts industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Rheinmetall 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.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Parts industry, Rheinmetall 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.
Employees’ less understanding of Rheinmetall AG strategy
– From the outside it seems that the employees of Rheinmetall 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 strategic competitive environment developments
– As Rheinmetall AG is one of the leading players in the Auto & Truck Parts industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Parts industry in last five years.
Compensation and incentives
– The revenue per employee of Rheinmetall AG is just above the Auto & Truck Parts 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.
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 Rheinmetall AG supply chain. Even after few cautionary changes, Rheinmetall AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rheinmetall AG vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Rheinmetall AG is dominated by functional specialists. It is not different from other players in the Auto & Truck Parts industry, but Rheinmetall AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rheinmetall AG to focus more on services in the Auto & Truck Parts industry rather than just following the product oriented approach.
Rheinmetall AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rheinmetall AG are -
Using analytics as competitive advantage
– Rheinmetall AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Parts sector. This continuous investment in analytics has enabled Rheinmetall AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rheinmetall 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
– Rheinmetall 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Rheinmetall AG in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Parts industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Rheinmetall AG is facing challenges because of the dominance of functional experts in the organization. Rheinmetall AG can utilize new technology in the field of Auto & Truck Parts industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Rheinmetall 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.
Developing new processes and practices
– Rheinmetall AG can develop new processes and procedures in Auto & Truck Parts 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rheinmetall 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 Rheinmetall AG to increase its market reach. Rheinmetall 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Parts industry, but it has also influenced the consumer preferences. Rheinmetall AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Rheinmetall AG has opened avenues for new revenue streams for the organization in Auto & Truck Parts industry. This can help Rheinmetall AG to build a more holistic ecosystem for Rheinmetall AG products in the Auto & Truck Parts industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Parts industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Rheinmetall 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. Rheinmetall 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rheinmetall AG can use these opportunities to build new business models that can help the communities that Rheinmetall AG operates in. Secondly it can use opportunities from government spending in Auto & Truck Parts sector.
Manufacturing automation
– Rheinmetall AG can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Parts 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 Rheinmetall AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rheinmetall AG are -
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.
Easy access to finance
– Easy access to finance in Auto & Truck Parts industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Rheinmetall AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Rheinmetall AG is facing in Auto & Truck Parts sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Rheinmetall 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Parts industry are lowering. It can presents Rheinmetall AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Parts sector.
Regulatory challenges
– Rheinmetall 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 Auto & Truck Parts industry regulations.
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 Rheinmetall AG.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rheinmetall AG in Auto & Truck Parts industry. The Auto & Truck Parts 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.
Technology acceleration in Forth Industrial Revolution
– Rheinmetall AG has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Parts industry. As one of the leading players in the industry, Rheinmetall AG needs to keep up with the evolution of technology in the Auto & Truck Parts 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.
Stagnating economy with rate increase
– Rheinmetall 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 Auto & Truck Parts industry.
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. Rheinmetall 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.
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 Rheinmetall AG in the Auto & Truck Parts sector and impact the bottomline of the organization.
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.
Weighted SWOT Analysis of Rheinmetall AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rheinmetall 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 Rheinmetall 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 Rheinmetall 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 Rheinmetall 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 Rheinmetall AG needs to make to build a sustainable competitive advantage.