Leoni AG (LEOGn) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Leoni AG (Germany)
Based on various researches at Oak Spring University , Leoni 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%, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Leoni AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Leoni AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Leoni 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 Leoni AG can be done for the following purposes –
1. Strategic planning of Leoni AG
2. Improving business portfolio management of Leoni AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Leoni AG
Strengths of Leoni AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Leoni AG are -
Organizational Resilience of Leoni AG
– The covid-19 pandemic has put organizational resilience at the centre of everthing Leoni AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Leoni AG is present in almost all the verticals within the Communications Equipment industry. This has provided Leoni 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.
Innovation driven organization
– Leoni AG is one of the most innovative firm in Communications Equipment sector.
Ability to lead change in Communications Equipment
– Leoni AG is one of the leading players in the Communications Equipment industry in Germany. Over the years it has not only transformed the business landscape in the Communications Equipment industry in Germany but also across the existing markets. The ability to lead change has enabled Leoni AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Leoni 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.
Sustainable margins compare to other players in Communications Equipment industry
– Leoni AG has clearly differentiated products in the market place. This has enabled Leoni AG to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped Leoni AG to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Leoni AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Leoni 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.
Training and development
– Leoni AG 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.
Learning organization
- Leoni 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 Leoni AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Leoni AG emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Leoni 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.
Operational resilience
– The operational resilience strategy of Leoni AG comprises – understanding the underlying the factors in the Communications Equipment 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.
High brand equity
– Leoni AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Leoni AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Leoni AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Leoni AG are -
High cash cycle compare to competitors
Leoni AG has a high cash cycle compare to other players in the Communications Equipment 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 operating costs
– Compare to the competitors, Leoni AG has high operating costs in the Communications Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Leoni AG lucrative customers.
High dependence on Leoni AG ‘s star products
– The top 2 products and services of Leoni AG still accounts for major business revenue. This dependence on star products in Communications Equipment industry has resulted into insufficient focus on developing new products, even though Leoni AG has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Leoni AG is dominated by functional specialists. It is not different from other players in the Communications Equipment industry, but Leoni AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Leoni AG to focus more on services in the Communications Equipment industry rather than just following the product oriented approach.
Skills based hiring in Communications Equipment industry
– The stress on hiring functional specialists at Leoni 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.
Slow decision making process
– As mentioned earlier in the report, Leoni 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 Communications Equipment industry over the last five years. Leoni 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.
Workers concerns about automation
– As automation is fast increasing in the Communications Equipment industry, Leoni 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.
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 Leoni AG supply chain. Even after few cautionary changes, Leoni AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Leoni AG vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Leoni AG strategy
– From the outside it seems that the employees of Leoni 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.
Capital Spending Reduction
– Even during the low interest decade, Leoni 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 Equipment industry using digital technology.
Lack of clear differentiation of Leoni AG products
– To increase the profitability and margins on the products, Leoni AG needs to provide more differentiated products than what it is currently offering in the marketplace.
Leoni AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Leoni AG are -
Leveraging digital technologies
– Leoni 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.
Use of Bitcoin and other crypto currencies for transactions in Communications Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Leoni AG in the Communications Equipment industry. Now Leoni AG can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Leoni 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 Equipment industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Leoni AG can use these opportunities to build new business models that can help the communities that Leoni AG operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.
Learning at scale
– Online learning technologies has now opened space for Leoni 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.
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 Leoni 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 Leoni 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 Leoni AG to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Leoni AG can improve the customer journey of consumers in the Communications Equipment 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 Equipment industry, but it has also influenced the consumer preferences. Leoni AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Leoni AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Leoni 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 Leoni 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.
Using analytics as competitive advantage
– Leoni AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled Leoni AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Leoni AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Leoni AG has opened avenues for new revenue streams for the organization in Communications Equipment industry. This can help Leoni AG to build a more holistic ecosystem for Leoni AG products in the Communications Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Leoni AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Leoni AG are -
Technology acceleration in Forth Industrial Revolution
– Leoni AG has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, Leoni AG needs to keep up with the evolution of technology in the Communications Equipment 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Leoni 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 Leoni 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.
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. Leoni 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.
High dependence on third party suppliers
– Leoni 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.
Shortening product life cycle
– it is one of the major threat that Leoni AG is facing in Communications Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents Leoni AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.
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.
Easy access to finance
– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Leoni AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Leoni AG.
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. Leoni AG needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.
Increasing wage structure of Leoni 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 Leoni AG.
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 Leoni AG business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Leoni AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Leoni 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 Leoni 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 Leoni 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 Leoni 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 Leoni AG needs to make to build a sustainable competitive advantage.