Freenet AG (FNTGn) SWOT Analysis / TOWS Matrix / 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 – wage bills are increasing, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of Freenet AG

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.

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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

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

The strengths of Freenet AG are -

Innovation driven organization

– Freenet AG is one of the most innovative firm in Communications Services sector.

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.

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.

Organizational Resilience of Freenet AG

– The covid-19 pandemic has put organizational resilience at the centre of everthing Freenet AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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.

Analytics focus

– Freenet 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 Communications Services 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.

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.

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.

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.

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.

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.

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

The weaknesses of Freenet AG are -

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.

Products dominated business model

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

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.

High dependence on Freenet AG ‘s star products

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

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.

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.

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.

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.

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.

Increasing silos among functional specialists

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

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.

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

The opportunities of Freenet AG are -

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.

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.

Creating value in data economy

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

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Freenet AG is facing challenges because of the dominance of functional experts in the organization. Freenet AG can utilize new technology in the field of Communications Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Freenet 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 Freenet 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.

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.

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.

Better consumer reach

– The expansion of the 5G network will help Freenet AG to increase its market reach. Freenet 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.

Leveraging digital technologies

– Freenet 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 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.

Using analytics as competitive advantage

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

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

The threats of Freenet AG are -

Consumer confidence and its impact on Freenet AG 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 Communications Services industry and other sectors.

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.

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.

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.

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.

Increasing wage structure of Freenet 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 Freenet AG.

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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Freenet 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 Communications Services sector.

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.

Shortening product life cycle

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

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 Freenet AG in the Communications Services sector and impact the bottomline of the organization.

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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.

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