Baywa AG (BYWG) SWOT Analysis / TOWS Matrix / MBA Resources
Crops
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Baywa AG (Germany)
Based on various researches at Oak Spring University , Baywa AG is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, there is backlash against globalization, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , technology disruption,
increasing energy prices, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Baywa AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Baywa AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Baywa 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 Baywa AG can be done for the following purposes –
1. Strategic planning of Baywa AG
2. Improving business portfolio management of Baywa AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Crops sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Baywa AG
Strengths of Baywa AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Baywa AG are -
Ability to lead change in Crops
– Baywa AG is one of the leading players in the Crops industry in Germany. Over the years it has not only transformed the business landscape in the Crops industry in Germany but also across the existing markets. The ability to lead change has enabled Baywa AG 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 Baywa AG in the Consumer/Non-Cyclical sector have low bargaining power. Baywa AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Baywa AG to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Baywa AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Baywa AG staying ahead in the Crops industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Baywa AG in Crops industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Baywa 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.
Successful track record of launching new products
– Baywa AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Baywa 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.
High switching costs
– The high switching costs that Baywa 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.
Highly skilled collaborators
– Baywa AG has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Crops industry. Secondly the value chain collaborators of Baywa AG have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Baywa 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 Baywa AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Baywa AG emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Baywa AG comprises – understanding the underlying the factors in the Crops 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.
Training and development
– Baywa AG has one of the best training and development program in Consumer/Non-Cyclical 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.
Diverse revenue streams
– Baywa AG is present in almost all the verticals within the Crops industry. This has provided Baywa 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.
Weaknesses of Baywa AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Baywa AG are -
Skills based hiring in Crops industry
– The stress on hiring functional specialists at Baywa 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.
Need for greater diversity
– Baywa 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.
No frontier risks strategy
– From the 10K / annual statement of Baywa AG, it seems that company is thinking out the frontier risks that can impact Crops 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.
Capital Spending Reduction
– Even during the low interest decade, Baywa 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 Crops industry using digital technology.
Lack of clear differentiation of Baywa AG products
– To increase the profitability and margins on the products, Baywa AG needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Baywa AG ‘s star products
– The top 2 products and services of Baywa AG still accounts for major business revenue. This dependence on star products in Crops industry has resulted into insufficient focus on developing new products, even though Baywa AG has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Baywa AG has high operating costs in the Crops industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Baywa AG lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Baywa 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 Crops industry over the last five years. Baywa 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.
Products dominated business model
– Even though Baywa AG has some of the most successful models in the Crops industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Baywa AG should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Baywa AG has a high cash cycle compare to other players in the Crops 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 Baywa AG supply chain. Even after few cautionary changes, Baywa AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Baywa AG vulnerable to further global disruptions in South East Asia.
Baywa AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Baywa AG are -
Developing new processes and practices
– Baywa AG can develop new processes and procedures in Crops 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 Baywa AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Baywa 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 Baywa AG to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Baywa AG can use the latest technology developments to improve its manufacturing and designing process in Crops 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. Baywa AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Crops industry, but it has also influenced the consumer preferences. Baywa AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Baywa 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.
Creating value in data economy
– The success of analytics program of Baywa AG has opened avenues for new revenue streams for the organization in Crops industry. This can help Baywa AG to build a more holistic ecosystem for Baywa AG products in the Crops industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Baywa 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.
Loyalty marketing
– Baywa 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Baywa 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 Baywa 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Baywa AG can use these opportunities to build new business models that can help the communities that Baywa AG operates in. Secondly it can use opportunities from government spending in Crops sector.
Better consumer reach
– The expansion of the 5G network will help Baywa AG to increase its market reach. Baywa 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.
Threats Baywa AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Baywa AG are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Baywa 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 Baywa AG prominent markets.
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. Baywa AG needs to understand the core reasons impacting the Crops industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Crops industry are lowering. It can presents Baywa AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Crops sector.
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 Baywa AG business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Baywa 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 Crops 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. Baywa 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.
Stagnating economy with rate increase
– Baywa 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 Crops industry.
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 Baywa AG.
Increasing wage structure of Baywa 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 Baywa AG.
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.
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.
Shortening product life cycle
– it is one of the major threat that Baywa AG is facing in Crops sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Baywa 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 Crops sector.
Weighted SWOT Analysis of Baywa AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Baywa 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 Baywa 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 Baywa 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 Baywa 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 Baywa AG needs to make to build a sustainable competitive advantage.