Freenet AG (FNTGn) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Freenet AG (Germany)
Based on various researches at Oak Spring University , Freenet AG is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing energy prices, there is backlash against globalization, geopolitical disruptions, there is increasing trade war between United States & China, central banks are concerned over increasing inflation,
technology disruption, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Freenet AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Freenet AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Freenet 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 Freenet AG can be done for the following purposes –
1. Strategic planning of Freenet AG
2. Improving business portfolio management of Freenet AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Communications Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Freenet AG
Strengths of Freenet AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Freenet AG are -
Training and development
– Freenet AG has one of the best training and development program in Services 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.
Diverse revenue streams
– Freenet AG is present in almost all the verticals within the Communications Services industry. This has provided Freenet 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.
Digital Transformation in Communications Services industry
- digital transformation varies from industry to industry. For Freenet AG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Freenet 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.
Sustainable margins compare to other players in Communications Services industry
– Freenet AG has clearly differentiated products in the market place. This has enabled Freenet AG to fetch slight price premium compare to the competitors in the Communications Services industry. The sustainable margins have also helped Freenet AG to invest into research and development (R&D) and innovation.
Strong track record of project management in the Communications Services industry
– Freenet 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.
Superior customer experience
– The customer experience strategy of Freenet AG in Communications Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Freenet AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Freenet AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Freenet AG in the Services sector have low bargaining power. Freenet AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Freenet AG to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Freenet 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 Freenet AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Freenet AG emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Freenet AG is one of the most innovative firm in Communications Services sector.
Cross disciplinary teams
– Horizontal connected teams at the Freenet 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.
Effective Research and Development (R&D)
– Freenet AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Freenet AG staying ahead in the Communications Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Freenet AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Freenet AG are -
High bargaining power of channel partners in Communications Services industry
– because of the regulatory requirements in Germany, Freenet 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 Communications Services industry.
Slow to strategic competitive environment developments
– As Freenet AG is one of the leading players in the Communications Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Communications Services industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Freenet AG, in the dynamic environment of Communications Services industry it has struggled to respond to the nimble upstart competition. Freenet AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Germany, Freenet AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Communications Services industry
– The stress on hiring functional specialists at Freenet 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.
Interest costs
– Compare to the competition, Freenet 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
– Freenet 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.
Capital Spending Reduction
– Even during the low interest decade, Freenet 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 Communications Services industry using digital technology.
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 Freenet AG supply chain. Even after few cautionary changes, Freenet AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Freenet AG vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Freenet AG, it seems that company is thinking out the frontier risks that can impact Communications Services 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.
Workers concerns about automation
– As automation is fast increasing in the Communications Services industry, Freenet 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.
Freenet AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Freenet AG are -
Developing new processes and practices
– Freenet AG can develop new processes and procedures in Communications Services 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.
Building a culture of innovation
– managers at Freenet 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 Communications Services industry.
Buying journey improvements
– Freenet AG can improve the customer journey of consumers in the Communications 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Freenet AG 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
– Freenet 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Freenet 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 Communications Services industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Freenet 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Communications Services industry, but it has also influenced the consumer preferences. Freenet AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Freenet 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Freenet AG can use these opportunities to build new business models that can help the communities that Freenet AG operates in. Secondly it can use opportunities from government spending in Communications Services sector.
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 Freenet 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Freenet 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 Freenet AG to hire the very best people irrespective of their geographical location.
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. Freenet AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Freenet AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Freenet AG are -
Regulatory challenges
– Freenet 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 Communications Services industry regulations.
Technology acceleration in Forth Industrial Revolution
– Freenet AG has witnessed rapid integration of technology during Covid-19 in the Communications Services industry. As one of the leading players in the industry, Freenet AG needs to keep up with the evolution of technology in the Communications Services 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.
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. Freenet AG needs to understand the core reasons impacting the Communications Services 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 Freenet AG business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Freenet 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 Communications Services industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Freenet AG in Communications Services industry. The Communications 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.
Easy access to finance
– Easy access to finance in Communications Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Freenet AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Communications Services industry are lowering. It can presents Freenet AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Services sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Freenet 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 Freenet AG prominent markets.
Environmental challenges
– Freenet 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. Freenet AG can take advantage of this fund but it will also bring new competitors in the Communications Services 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. Freenet 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.
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 Freenet AG.
High dependence on third party suppliers
– Freenet 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.
Weighted SWOT Analysis of Freenet AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Freenet 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 Freenet 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 Freenet 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 Freenet 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 Freenet AG needs to make to build a sustainable competitive advantage.