Leoni AG (LEOGn) SWOT Analysis / TOWS Matrix / 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%, geopolitical disruptions, increasing transportation and logistics costs, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, increasing energy prices, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Leoni AG

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.

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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

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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.

Ability to recruit top talent

– Leoni AG is one of the leading players in the Communications Equipment 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 Communications Equipment industry

– Leoni 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.

Effective Research and Development (R&D)

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

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.

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.

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.

Digital Transformation in Communications Equipment industry

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

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.

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.

Highly skilled collaborators

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

Superior customer experience

– The customer experience strategy of Leoni AG in Communications Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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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.

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.

Aligning sales with marketing

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

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.

High bargaining power of channel partners in Communications Equipment industry

– because of the regulatory requirements in Germany, Leoni 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 Communications Equipment industry.

Ability to respond to the competition

– As the decision making is very deliberative at Leoni AG, in the dynamic environment of Communications Equipment industry it has struggled to respond to the nimble upstart competition. Leoni AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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.

Interest costs

– Compare to the competition, Leoni 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.

Low market penetration in new markets

– Outside its home market of Germany, Leoni 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 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.

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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.

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.

Developing new processes and practices

– Leoni AG can develop new processes and procedures in Communications Equipment 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.

Loyalty marketing

– Leoni 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.

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.

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.

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.

Reforming the budgeting process

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

– Leoni AG can use the latest technology developments to improve its manufacturing and designing process in Communications Equipment 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.

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.

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.

Redefining models of collaboration and team work

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

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

The threats of Leoni AG are -

Regulatory challenges

– Leoni 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 Equipment industry regulations.

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.

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.

Environmental challenges

– Leoni 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. Leoni AG can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Leoni 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 Equipment 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. Leoni AG needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.

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.

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.

Consumer confidence and its impact on Leoni 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 Equipment industry and other sectors.

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.

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 Leoni AG in the Communications Equipment sector and impact the bottomline 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.

Stagnating economy with rate increase

– Leoni 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 Equipment industry.

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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.

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