Salzgitter AG (SZGG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Salzgitter AG (Germany)

Based on various researches at Oak Spring University , Salzgitter AG is operating in a macro-environment that has been destablized by – technology disruption, central banks are concerned over increasing inflation, geopolitical disruptions, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing commodity prices, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Salzgitter AG

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

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

The strengths of Salzgitter AG are -

High brand equity

– Salzgitter AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Salzgitter AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Successful track record of launching new products

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

Highly skilled collaborators

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

High switching costs

– The high switching costs that Salzgitter 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.

Superior customer experience

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

Ability to recruit top talent

– Salzgitter AG is one of the leading players in the Iron & Steel 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.

Strong track record of project management in the Iron & Steel industry

– Salzgitter 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.

Training and development

– Salzgitter AG has one of the best training and development program in Basic Materials 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.

Learning organization

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

Sustainable margins compare to other players in Iron & Steel industry

– Salzgitter AG has clearly differentiated products in the market place. This has enabled Salzgitter AG to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Salzgitter AG to invest into research and development (R&D) and innovation.

Analytics focus

– Salzgitter 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 Iron & Steel 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.

Effective Research and Development (R&D)

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

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

The weaknesses of Salzgitter AG are -

Workers concerns about automation

– As automation is fast increasing in the Iron & Steel industry, Salzgitter 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.

No frontier risks strategy

– From the 10K / annual statement of Salzgitter AG, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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.

Slow to strategic competitive environment developments

– As Salzgitter AG is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.

Lack of clear differentiation of Salzgitter AG products

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

High dependence on Salzgitter AG ‘s star products

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

High operating costs

– Compare to the competitors, Salzgitter AG has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Salzgitter AG lucrative customers.

Increasing silos among functional specialists

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

High cash cycle compare to competitors

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

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 Salzgitter AG supply chain. Even after few cautionary changes, Salzgitter AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Salzgitter AG vulnerable to further global disruptions in South East Asia.

Employees’ less understanding of Salzgitter AG strategy

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

High bargaining power of channel partners in Iron & Steel industry

– because of the regulatory requirements in Germany, Salzgitter 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 Iron & Steel industry.

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

The opportunities of Salzgitter AG are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for Salzgitter 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 Iron & Steel industry, and it will provide faster access to the consumers.

Using analytics as competitive advantage

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

Learning at scale

– Online learning technologies has now opened space for Salzgitter 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.

Leveraging digital technologies

– Salzgitter 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.

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. Salzgitter AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Creating value in data economy

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

Manufacturing automation

– Salzgitter AG can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.

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 Salzgitter 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.

Developing new processes and practices

– Salzgitter AG can develop new processes and procedures in Iron & Steel 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 Salzgitter 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 Iron & Steel 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, Salzgitter AG can use these opportunities to build new business models that can help the communities that Salzgitter AG operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Salzgitter 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

– Salzgitter 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.

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

The threats of Salzgitter AG are -

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.

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.

Regulatory challenges

– Salzgitter 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 Iron & Steel industry regulations.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Salzgitter AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.

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. Salzgitter AG needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.

Consumer confidence and its impact on Salzgitter 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 Iron & Steel industry and other sectors.

Technology acceleration in Forth Industrial Revolution

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

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 Salzgitter AG in the Iron & Steel sector and impact the bottomline of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Salzgitter 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 Iron & Steel sector.

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. Salzgitter 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Salzgitter AG in Iron & Steel industry. The Iron & Steel 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.

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

Easy access to finance

– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Salzgitter AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of Salzgitter AG Template, Example

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

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