Homag AG (HG1G) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. & Agric. Machinery
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Homag AG (Germany)
Based on various researches at Oak Spring University , Homag AG is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, technology disruption, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, wage bills are increasing, central banks are concerned over increasing inflation, increasing commodity prices,
challanges to central banks by blockchain based private currencies, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Homag AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Homag AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Homag 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 Homag AG can be done for the following purposes –
1. Strategic planning of Homag AG
2. Improving business portfolio management of Homag AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Constr. & Agric. Machinery sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Homag AG
Strengths of Homag AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Homag AG are -
Analytics focus
– Homag 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 Constr. & Agric. Machinery 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.
High switching costs
– The high switching costs that Homag 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.
Cross disciplinary teams
– Horizontal connected teams at the Homag 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.
Training and development
– Homag AG has one of the best training and development program in Capital Goods 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 Homag AG in Constr. & Agric. Machinery industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Homag AG is one of the most innovative firm in Constr. & Agric. Machinery sector.
Successful track record of launching new products
– Homag AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Homag 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.
Effective Research and Development (R&D)
– Homag AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Homag AG staying ahead in the Constr. & Agric. Machinery industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Homag 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 Homag AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Homag AG emphasize – knowledge, initiative, and innovation.
High brand equity
– Homag AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Homag AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Homag AG in the Capital Goods sector have low bargaining power. Homag AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Homag AG to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Constr. & Agric. Machinery
– Homag AG is one of the leading players in the Constr. & Agric. Machinery industry in Germany. Over the years it has not only transformed the business landscape in the Constr. & Agric. Machinery industry in Germany but also across the existing markets. The ability to lead change has enabled Homag AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Homag AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Homag AG are -
Capital Spending Reduction
– Even during the low interest decade, Homag 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 Constr. & Agric. Machinery industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Homag AG is dominated by functional specialists. It is not different from other players in the Constr. & Agric. Machinery industry, but Homag AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Homag AG to focus more on services in the Constr. & Agric. Machinery industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Germany, Homag 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 Constr. & Agric. Machinery industry, Homag 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 operating costs
– Compare to the competitors, Homag AG has high operating costs in the Constr. & Agric. Machinery industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Homag AG lucrative customers.
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 Homag AG supply chain. Even after few cautionary changes, Homag AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Homag AG vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Homag AG has a high cash cycle compare to other players in the Constr. & Agric. Machinery industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Constr. & Agric. Machinery industry
– The stress on hiring functional specialists at Homag 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.
No frontier risks strategy
– From the 10K / annual statement of Homag AG, it seems that company is thinking out the frontier risks that can impact Constr. & Agric. Machinery 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.
Ability to respond to the competition
– As the decision making is very deliberative at Homag AG, in the dynamic environment of Constr. & Agric. Machinery industry it has struggled to respond to the nimble upstart competition. Homag AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Homag 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 Constr. & Agric. Machinery industry over the last five years. Homag 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.
Homag AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Homag AG are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Constr. & Agric. Machinery industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Homag AG can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Homag AG can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Homag 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 Homag 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Homag 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 Homag 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.
Building a culture of innovation
– managers at Homag AG 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 Constr. & Agric. Machinery industry.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Homag AG can use these opportunities to build new business models that can help the communities that Homag AG operates in. Secondly it can use opportunities from government spending in Constr. & Agric. Machinery sector.
Buying journey improvements
– Homag AG can improve the customer journey of consumers in the Constr. & Agric. Machinery 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.
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. Homag AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Homag 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 Homag AG to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Homag AG 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.
Using analytics as competitive advantage
– Homag AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. & Agric. Machinery sector. This continuous investment in analytics has enabled Homag AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Homag AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Homag AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. & Agric. Machinery industry, but it has also influenced the consumer preferences. Homag AG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Homag AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Homag AG are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Homag AG in Constr. & Agric. Machinery industry. The Constr. & Agric. Machinery 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.
Technology acceleration in Forth Industrial Revolution
– Homag AG has witnessed rapid integration of technology during Covid-19 in the Constr. & Agric. Machinery industry. As one of the leading players in the industry, Homag AG needs to keep up with the evolution of technology in the Constr. & Agric. Machinery 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.
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 Homag AG in the Constr. & Agric. Machinery sector and impact the bottomline of the organization.
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. Homag 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.
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 Homag AG business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Homag 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.
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. Homag AG needs to understand the core reasons impacting the Constr. & Agric. Machinery industry. This will help it in building a better workplace.
Regulatory challenges
– Homag 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 Constr. & Agric. Machinery industry regulations.
Stagnating economy with rate increase
– Homag 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 Constr. & Agric. Machinery industry.
Environmental challenges
– Homag 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. Homag AG can take advantage of this fund but it will also bring new competitors in the Constr. & Agric. Machinery industry.
Shortening product life cycle
– it is one of the major threat that Homag AG is facing in Constr. & Agric. Machinery 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, Homag 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 Homag AG prominent markets.
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 Homag AG.
Weighted SWOT Analysis of Homag AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Homag 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 Homag 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 Homag 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 Homag 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 Homag AG needs to make to build a sustainable competitive advantage.
