Fabasoft AG (FAAS) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Fabasoft AG (Germany)

Based on various researches at Oak Spring University , Fabasoft AG is operating in a macro-environment that has been destablized by – there is backlash against globalization, technology disruption, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, wage bills are increasing, increasing household debt because of falling income levels, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Fabasoft AG

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fabasoft AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fabasoft AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fabasoft 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 Fabasoft AG can be done for the following purposes –
1. Strategic planning of Fabasoft AG
2. Improving business portfolio management of Fabasoft AG
3. Assessing feasibility of the new initiative in Germany
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fabasoft AG

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Strengths of Fabasoft AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Fabasoft AG are -

Organizational Resilience of Fabasoft AG

– The covid-19 pandemic has put organizational resilience at the centre of everthing Fabasoft AG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Superior customer experience

– The customer experience strategy of Fabasoft AG in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Low bargaining power of suppliers

– Suppliers of Fabasoft AG in the Technology sector have low bargaining power. Fabasoft AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fabasoft AG to manage not only supply disruptions but also source products at highly competitive prices.

Sustainable margins compare to other players in Software & Programming industry

– Fabasoft AG has clearly differentiated products in the market place. This has enabled Fabasoft AG to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Fabasoft AG to invest into research and development (R&D) and innovation.

Highly skilled collaborators

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

Strong track record of project management in the Software & Programming industry

– Fabasoft 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.

Ability to recruit top talent

– Fabasoft AG is one of the leading players in the Software & Programming 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.

Successful track record of launching new products

– Fabasoft AG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fabasoft 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.

Analytics focus

– Fabasoft 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 Software & Programming 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.

Effective Research and Development (R&D)

– Fabasoft AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Fabasoft AG staying ahead in the Software & Programming 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 Fabasoft 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.

Digital Transformation in Software & Programming industry

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

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Weaknesses of Fabasoft AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Fabasoft AG are -

Aligning sales with marketing

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

Slow to strategic competitive environment developments

– As Fabasoft AG is one of the leading players in the Software & Programming industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Software & Programming industry in last five years.

Need for greater diversity

– Fabasoft 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.

Ability to respond to the competition

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

High cash cycle compare to competitors

Fabasoft AG has a high cash cycle compare to other players in the Software & Programming 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 Fabasoft AG ‘s star products

– The top 2 products and services of Fabasoft AG still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though Fabasoft AG has relatively successful track record of launching new products.

No frontier risks strategy

– From the 10K / annual statement of Fabasoft AG, it seems that company is thinking out the frontier risks that can impact Software & Programming 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.

Increasing silos among functional specialists

– The organizational structure of Fabasoft AG is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Fabasoft AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fabasoft AG to focus more on services in the Software & Programming industry rather than just following the product oriented approach.

High bargaining power of channel partners in Software & Programming industry

– because of the regulatory requirements in Germany, Fabasoft 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 Software & Programming industry.

Compensation and incentives

– The revenue per employee of Fabasoft AG is just above the Software & Programming 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.

Interest costs

– Compare to the competition, Fabasoft 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.

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Fabasoft AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Fabasoft AG are -

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. Fabasoft AG can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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 Fabasoft 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.

Reforming the budgeting process

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

– Fabasoft AG can use the latest technology developments to improve its manufacturing and designing process in Software & Programming 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.

Building a culture of innovation

– managers at Fabasoft 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 Software & Programming industry.

Redefining models of collaboration and team work

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Fabasoft 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 Software & Programming industry, and it will provide faster access to the consumers.

Learning at scale

– Online learning technologies has now opened space for Fabasoft 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fabasoft AG can use these opportunities to build new business models that can help the communities that Fabasoft AG operates in. Secondly it can use opportunities from government spending in Software & Programming sector.

Buying journey improvements

– Fabasoft AG can improve the customer journey of consumers in the Software & Programming 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.

Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Fabasoft AG in the Software & Programming industry. Now Fabasoft AG can target international markets with far fewer capital restrictions requirements than the existing system.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Fabasoft 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 Fabasoft 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fabasoft 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 Fabasoft AG to hire the very best people irrespective of their geographical location.

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

The threats of Fabasoft AG are -

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 Fabasoft AG.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Fabasoft 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 Fabasoft AG prominent markets.

Environmental challenges

– Fabasoft 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. Fabasoft AG can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.

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 Fabasoft AG in the Software & Programming sector and impact the bottomline of the organization.

Shortening product life cycle

– it is one of the major threat that Fabasoft AG is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. Fabasoft AG needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Fabasoft 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 Software & Programming sector.

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 Software & Programming industry are lowering. It can presents Fabasoft AG with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.

Consumer confidence and its impact on Fabasoft 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 Software & Programming industry and other sectors.

Stagnating economy with rate increase

– Fabasoft 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 Software & Programming industry.

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.

Regulatory challenges

– Fabasoft 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 Software & Programming industry regulations.

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Weighted SWOT Analysis of Fabasoft AG Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fabasoft 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 Fabasoft 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 Fabasoft 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 Fabasoft 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 Fabasoft AG needs to make to build a sustainable competitive advantage.

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