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 – increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, there is backlash against globalization, there is increasing trade war between United States & China, 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 -

Digital Transformation in Iron & Steel industry

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

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.

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.

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.

Low bargaining power of suppliers

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

Ability to lead change in Iron & Steel

– Salzgitter AG is one of the leading players in the Iron & Steel industry in Germany. Over the years it has not only transformed the business landscape in the Iron & Steel industry in Germany but also across the existing markets. The ability to lead change has enabled Salzgitter AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Diverse revenue streams

– Salzgitter AG is present in almost all the verticals within the Iron & Steel industry. This has provided Salzgitter 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.

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.

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.

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.

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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 -

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.

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 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.

Aligning sales with marketing

– From the outside it seems that Salzgitter AG needs to have more collaboration between its sales team and marketing team. Sales professionals in the Iron & Steel industry have deep experience in developing customer relationships. Marketing department at Salzgitter AG can leverage the sales team experience to cultivate customer relationships as Salzgitter AG is planning to shift buying processes online.

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.

Slow decision making process

– As mentioned earlier in the report, Salzgitter AG has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Salzgitter AG even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Need for greater diversity

– Salzgitter 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.

Skills based hiring in Iron & Steel industry

– The stress on hiring functional specialists at Salzgitter 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.

Compensation and incentives

– The revenue per employee of Salzgitter AG is just above the Iron & Steel 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.

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.

Capital Spending Reduction

– Even during the low interest decade, Salzgitter 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 Iron & Steel industry using digital technology.

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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 -

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.

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.

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.

Buying journey improvements

– Salzgitter AG can improve the customer journey of consumers in the Iron & Steel 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.

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.

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.

Harnessing reconfiguration of the global supply chains

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

Finding new ways to collaborate

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

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.

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.

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.

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.

Better consumer reach

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

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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 -

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.

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.

Shortening product life cycle

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

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.

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.

Increasing wage structure of Salzgitter 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 Salzgitter AG.

Environmental challenges

– Salzgitter 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. Salzgitter AG can take advantage of this fund but it will also bring new competitors in the Iron & Steel 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 Salzgitter AG business can come under increasing regulations regarding data privacy, data security, etc.

Increasing international competition and downward pressure on margins

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

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.

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.

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.

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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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