Varta (VAR1) SWOT Analysis / TOWS Matrix / MBA Resources
Electronic Instr. & Controls
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Varta (Germany)
Based on various researches at Oak Spring University , Varta is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, geopolitical disruptions, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation,
banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Varta can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Varta, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Varta 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 Varta can be done for the following purposes –
1. Strategic planning of Varta
2. Improving business portfolio management of Varta
3. Assessing feasibility of the new initiative in Germany
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Varta
Strengths of Varta | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Varta are -
Superior customer experience
– The customer experience strategy of Varta in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Varta has one of the best training and development program in Technology 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.
Ability to recruit top talent
– Varta is one of the leading players in the Electronic Instr. & Controls 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.
Cross disciplinary teams
– Horizontal connected teams at the Varta 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.
Learning organization
- Varta 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 Varta is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Varta emphasize – knowledge, initiative, and innovation.
Analytics focus
– Varta 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 Electronic Instr. & Controls 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.
Ability to lead change in Electronic Instr. & Controls
– Varta is one of the leading players in the Electronic Instr. & Controls industry in Germany. Over the years it has not only transformed the business landscape in the Electronic Instr. & Controls industry in Germany but also across the existing markets. The ability to lead change has enabled Varta in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Varta in the Technology sector have low bargaining power. Varta has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Varta to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Varta comprises – understanding the underlying the factors in the Electronic Instr. & Controls industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Varta
– The covid-19 pandemic has put organizational resilience at the centre of everthing Varta does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Varta has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Varta staying ahead in the Electronic Instr. & Controls industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Electronic Instr. & Controls industry
– Varta is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Varta | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Varta are -
High cash cycle compare to competitors
Varta has a high cash cycle compare to other players in the Electronic Instr. & Controls industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Varta products
– To increase the profitability and margins on the products, Varta needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Varta has high operating costs in the Electronic Instr. & Controls industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Varta lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Varta 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 Electronic Instr. & Controls 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 Varta supply chain. Even after few cautionary changes, Varta is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Varta vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Varta is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but Varta needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Varta to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Varta, in the dynamic environment of Electronic Instr. & Controls industry it has struggled to respond to the nimble upstart competition. Varta has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in Germany, Varta 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 Electronic Instr. & Controls industry.
Products dominated business model
– Even though Varta has some of the most successful models in the Electronic Instr. & Controls industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Varta should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Varta is one of the leading players in the Electronic Instr. & Controls industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Electronic Instr. & Controls industry in last five years.
Employees’ less understanding of Varta strategy
– From the outside it seems that the employees of Varta 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.
Varta Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Varta are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Varta 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 Varta to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Varta 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Varta in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electronic Instr. & Controls industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Varta to increase its market reach. Varta 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.
Developing new processes and practices
– Varta can develop new processes and procedures in Electronic Instr. & Controls 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Varta can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Varta can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls 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.
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. Varta can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Varta is facing challenges because of the dominance of functional experts in the organization. Varta can utilize new technology in the field of Electronic Instr. & Controls industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Varta in the Electronic Instr. & Controls industry. Now Varta can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Varta 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 Electronic Instr. & Controls industry.
Buying journey improvements
– Varta can improve the customer journey of consumers in the Electronic Instr. & Controls 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.
Loyalty marketing
– Varta 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.
Threats Varta External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Varta are -
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. Varta 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.
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. Varta needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
Increasing wage structure of Varta
– 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 Varta.
Technology acceleration in Forth Industrial Revolution
– Varta has witnessed rapid integration of technology during Covid-19 in the Electronic Instr. & Controls industry. As one of the leading players in the industry, Varta needs to keep up with the evolution of technology in the Electronic Instr. & Controls 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 Varta is facing in Electronic Instr. & Controls sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Varta 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 Varta 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.
Environmental challenges
– Varta 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. Varta can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
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
– Varta 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 Electronic Instr. & Controls industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents Varta with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electronic Instr. & Controls sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Varta may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
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 Varta in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Varta Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Varta 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 Varta 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 Varta 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 Varta 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 Varta needs to make to build a sustainable competitive advantage.