AlzChem (SFP1) SWOT Analysis / TOWS Matrix / MBA Resources
Chemical Manufacturing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AlzChem (Germany)
Based on various researches at Oak Spring University , AlzChem is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, there is backlash against globalization, technology disruption, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, geopolitical disruptions, increasing household debt because of falling income levels,
increasing energy prices, 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 AlzChem can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AlzChem, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AlzChem 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 AlzChem can be done for the following purposes –
1. Strategic planning of AlzChem
2. Improving business portfolio management of AlzChem
3. Assessing feasibility of the new initiative in Germany
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AlzChem
Strengths of AlzChem | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AlzChem are -
High brand equity
– AlzChem has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AlzChem to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– AlzChem has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AlzChem staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that AlzChem 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.
Diverse revenue streams
– AlzChem is present in almost all the verticals within the Chemical Manufacturing industry. This has provided AlzChem 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.
Low bargaining power of suppliers
– Suppliers of AlzChem in the Basic Materials sector have low bargaining power. AlzChem has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AlzChem to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– AlzChem has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AlzChem 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.
Ability to lead change in Chemical Manufacturing
– AlzChem is one of the leading players in the Chemical Manufacturing industry in Germany. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Germany but also across the existing markets. The ability to lead change has enabled AlzChem in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Chemical Manufacturing industry
- digital transformation varies from industry to industry. For AlzChem digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AlzChem 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.
Training and development
– AlzChem has one of the best training and development program in Basic Materials 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.
Sustainable margins compare to other players in Chemical Manufacturing industry
– AlzChem has clearly differentiated products in the market place. This has enabled AlzChem to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped AlzChem to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– AlzChem is one of the leading players in the Chemical Manufacturing 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.
Innovation driven organization
– AlzChem is one of the most innovative firm in Chemical Manufacturing sector.
Weaknesses of AlzChem | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AlzChem are -
Workers concerns about automation
– As automation is fast increasing in the Chemical Manufacturing industry, AlzChem 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.
Increasing silos among functional specialists
– The organizational structure of AlzChem is dominated by functional specialists. It is not different from other players in the Chemical Manufacturing industry, but AlzChem needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help AlzChem to focus more on services in the Chemical Manufacturing industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of AlzChem, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.
Products dominated business model
– Even though AlzChem has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AlzChem should strive to include more intangible value offerings along with its core products and services.
High dependence on AlzChem ‘s star products
– The top 2 products and services of AlzChem still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though AlzChem has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, AlzChem 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.
Compensation and incentives
– The revenue per employee of AlzChem is just above the Chemical Manufacturing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow decision making process
– As mentioned earlier in the report, AlzChem has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. AlzChem 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.
Low market penetration in new markets
– Outside its home market of Germany, AlzChem needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that AlzChem needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at AlzChem can leverage the sales team experience to cultivate customer relationships as AlzChem is planning to shift buying processes online.
High bargaining power of channel partners in Chemical Manufacturing industry
– because of the regulatory requirements in Germany, AlzChem 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 Chemical Manufacturing industry.
AlzChem Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AlzChem are -
Creating value in data economy
– The success of analytics program of AlzChem has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help AlzChem to build a more holistic ecosystem for AlzChem products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– AlzChem can improve the customer journey of consumers in the Chemical Manufacturing 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.
Better consumer reach
– The expansion of the 5G network will help AlzChem to increase its market reach. AlzChem 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.
Loyalty marketing
– AlzChem 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AlzChem 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. AlzChem 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, AlzChem 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects AlzChem can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– AlzChem can develop new processes and procedures in Chemical Manufacturing 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.
Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AlzChem in the Chemical Manufacturing industry. Now AlzChem can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for AlzChem 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. AlzChem can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at AlzChem 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 Chemical Manufacturing industry.
Using analytics as competitive advantage
– AlzChem has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled AlzChem to build a competitive advantage using analytics. The analytics driven competitive advantage can help AlzChem to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats AlzChem External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AlzChem are -
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 AlzChem business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that AlzChem is facing in Chemical Manufacturing 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, AlzChem 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 AlzChem prominent markets.
Consumer confidence and its impact on AlzChem 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 Chemical Manufacturing industry and other sectors.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents AlzChem with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
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 AlzChem.
Environmental challenges
– AlzChem 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. AlzChem can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
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. AlzChem 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.
Increasing wage structure of AlzChem
– 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 AlzChem.
Stagnating economy with rate increase
– AlzChem 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 Chemical Manufacturing industry.
Regulatory challenges
– AlzChem 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 Chemical Manufacturing industry regulations.
Easy access to finance
– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AlzChem can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of AlzChem Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AlzChem 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 AlzChem 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 AlzChem 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 AlzChem 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 AlzChem needs to make to build a sustainable competitive advantage.