Intershop (ISHG) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Intershop (Germany)
Based on various researches at Oak Spring University , Intershop is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Intershop can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Intershop, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Intershop 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 Intershop can be done for the following purposes –
1. Strategic planning of Intershop
2. Improving business portfolio management of Intershop
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 Intershop
Strengths of Intershop | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Intershop are -
Low bargaining power of suppliers
– Suppliers of Intershop in the Technology sector have low bargaining power. Intershop has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Intershop to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Intershop 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
– Intershop is present in almost all the verticals within the Software & Programming industry. This has provided Intershop 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.
Effective Research and Development (R&D)
– Intershop has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Intershop 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.
Analytics focus
– Intershop 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.
Operational resilience
– The operational resilience strategy of Intershop comprises – understanding the underlying the factors in the Software & Programming 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.
Ability to lead change in Software & Programming
– Intershop is one of the leading players in the Software & Programming industry in Germany. Over the years it has not only transformed the business landscape in the Software & Programming industry in Germany but also across the existing markets. The ability to lead change has enabled Intershop in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Intershop has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Intershop to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Intershop digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Intershop 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
– Intershop has one of the best training and development program in Technology 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.
Successful track record of launching new products
– Intershop has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Intershop 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 recruit top talent
– Intershop 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.
Weaknesses of Intershop | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Intershop are -
Need for greater diversity
– Intershop 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.
Interest costs
– Compare to the competition, Intershop 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.
High dependence on Intershop ‘s star products
– The top 2 products and services of Intershop 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 Intershop has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Intershop 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 Software & Programming industry using digital technology.
High operating costs
– Compare to the competitors, Intershop has high operating costs in the Software & Programming industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Intershop lucrative customers.
Low market penetration in new markets
– Outside its home market of Germany, Intershop needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Intershop strategy
– From the outside it seems that the employees of Intershop 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Intershop is slow explore the new channels of communication. These new channels of communication can help Intershop to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at Intershop 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.
Aligning sales with marketing
– From the outside it seems that Intershop 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 Intershop can leverage the sales team experience to cultivate customer relationships as Intershop is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Intershop, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Intershop has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Intershop Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Intershop are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Intershop is facing challenges because of the dominance of functional experts in the organization. Intershop 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Intershop 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.
Creating value in data economy
– The success of analytics program of Intershop has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Intershop to build a more holistic ecosystem for Intershop products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Intershop can develop new processes and procedures in Software & Programming 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.
Manufacturing automation
– Intershop 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Intershop can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Intershop 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.
Learning at scale
– Online learning technologies has now opened space for Intershop 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Intershop 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Intershop 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 Intershop to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Intershop 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 Intershop in the Software & Programming industry. Now Intershop can target international markets with far fewer capital restrictions requirements than the existing system.
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 Intershop 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.
Threats Intershop External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Intershop are -
Shortening product life cycle
– it is one of the major threat that Intershop is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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. Intershop needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Intershop 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Intershop 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 Intershop prominent markets.
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. Intershop 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.
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
– Intershop 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.
Technology acceleration in Forth Industrial Revolution
– Intershop has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Intershop needs to keep up with the evolution of technology in the Software & Programming 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.
Consumer confidence and its impact on Intershop 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.
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 Intershop.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Intershop 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Intershop with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
Weighted SWOT Analysis of Intershop Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Intershop 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 Intershop 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 Intershop 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 Intershop 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 Intershop needs to make to build a sustainable competitive advantage.