DEAG AG (ERMGk) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for DEAG AG (Germany)

Based on various researches at Oak Spring University , DEAG AG is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, cloud computing is disrupting traditional business models, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, etc

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Introduction to SWOT Analysis of DEAG AG

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

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

The strengths of DEAG AG are -

Effective Research and Development (R&D)

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

Learning organization

- DEAG 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 DEAG AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at DEAG AG emphasize – knowledge, initiative, and innovation.

Innovation driven organization

– DEAG AG is one of the most innovative firm in Recreational Activities sector.

Ability to recruit top talent

– DEAG AG is one of the leading players in the Recreational Activities 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 Recreational Activities industry

– DEAG 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.

Cross disciplinary teams

– Horizontal connected teams at the DEAG 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.

Operational resilience

– The operational resilience strategy of DEAG AG comprises – understanding the underlying the factors in the Recreational Activities 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.

Analytics focus

– DEAG 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 Recreational Activities 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.

Sustainable margins compare to other players in Recreational Activities industry

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

Training and development

– DEAG AG has one of the best training and development program in Services 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.

High brand equity

– DEAG AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled DEAG AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Successful track record of launching new products

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

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

The weaknesses of DEAG AG are -

Lack of clear differentiation of DEAG AG products

– To increase the profitability and margins on the products, DEAG AG needs to provide more differentiated products than what it is currently offering in the marketplace.

Workers concerns about automation

– As automation is fast increasing in the Recreational Activities industry, DEAG 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 DEAG AG ‘s star products

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

Need for greater diversity

– DEAG 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.

Slow decision making process

– As mentioned earlier in the report, DEAG 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 Recreational Activities industry over the last five years. DEAG 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.

Capital Spending Reduction

– Even during the low interest decade, DEAG 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 Recreational Activities industry using digital technology.

Compensation and incentives

– The revenue per employee of DEAG AG is just above the Recreational Activities 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.

No frontier risks strategy

– From the 10K / annual statement of DEAG AG, it seems that company is thinking out the frontier risks that can impact Recreational Activities 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.

Employees’ less understanding of DEAG AG strategy

– From the outside it seems that the employees of DEAG AG don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Low market penetration in new markets

– Outside its home market of Germany, DEAG AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Skills based hiring in Recreational Activities industry

– The stress on hiring functional specialists at DEAG 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.

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

The opportunities of DEAG AG are -

Low interest rates

– Even though inflation is raising its head in most developed economies, DEAG 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.

Better consumer reach

– The expansion of the 5G network will help DEAG AG to increase its market reach. DEAG 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.

Building a culture of innovation

– managers at DEAG 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 Recreational Activities industry.

Creating value in data economy

– The success of analytics program of DEAG AG has opened avenues for new revenue streams for the organization in Recreational Activities industry. This can help DEAG AG to build a more holistic ecosystem for DEAG AG products in the Recreational Activities 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 DEAG 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.

Redefining models of collaboration and team work

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

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects DEAG AG can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Leveraging digital technologies

– DEAG 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.

Use of Bitcoin and other crypto currencies for transactions in Recreational Activities industry

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

Loyalty marketing

– DEAG 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 DEAG 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 Recreational Activities industry, and it will provide faster access to the consumers.

Developing new processes and practices

– DEAG AG can develop new processes and procedures in Recreational Activities 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.

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

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

The threats of DEAG AG are -

High dependence on third party suppliers

– DEAG 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.

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 DEAG AG in the Recreational Activities sector and impact the bottomline of the organization.

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 DEAG AG.

Technology acceleration in Forth Industrial Revolution

– DEAG AG has witnessed rapid integration of technology during Covid-19 in the Recreational Activities industry. As one of the leading players in the industry, DEAG AG needs to keep up with the evolution of technology in the Recreational Activities 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, DEAG 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 Recreational Activities sector.

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.

Stagnating economy with rate increase

– DEAG 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 Recreational Activities industry.

Easy access to finance

– Easy access to finance in Recreational Activities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. DEAG AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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 DEAG AG business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on DEAG 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 Recreational Activities industry and other sectors.

Increasing wage structure of DEAG 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 DEAG AG.

Shortening product life cycle

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

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Weighted SWOT Analysis of DEAG AG Template, Example

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

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