SAP SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by SAP managers to do a situational analysis of the firm . It is a handy technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) SAP is facing in its current business environment.

The SAP is one of the leading firms in its industry. SAP maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the SAP to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
SAP swot analysis / matrix

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect SAP strengths, and eradicate its weaknesses.

Step by Step Guide to SAP SWOT Analysis

Strengths of SAP – Internal Strategic Factors


As one of the leading organizations in its industry, SAP has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of SAP are –

  • Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
  • Superb Performance in New Markets – SAP has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
  • Highly skilled workforce through successful training and learning programs. SAP is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
  • Strong Free Cash Flow – SAP has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Automation of activities brought consistency of quality to SAP products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Highly successful at Go To Market strategies for its products.
  • Strong distribution network – Over the years SAP has built a reliable distribution network that can reach majority of its potential market.


Weakness of SAP – Internal Strategic Factors


Weakness are the areas where SAP can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, SAP needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though SAP is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
  • Limited success outside core business – Even though SAP is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
  • The profitability ratio and Net Contribution % of SAP are below the industry average.
  • Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  • High attrition rate in work force – compare to other organizations in the industry SAP has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.

Opportunities for SAP – External Strategic Factors

  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for SAP to capture new customers and increase its market share.
  • The market development will lead to dilution of competitor’s advantage and enable SAP to increase its competitiveness compare to the other competitors.
  • New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for SAP. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of SAP.
  • New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for SAP to drive home its advantage in new technology and gain market share in the new product category.
  • The new technology provides an opportunity to SAP to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
  • Government green drive also opens an opportunity for procurement of SAP products by the state as well as federal government contractors.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of SAP’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.

Threats SAP Facing - External Strategic Factors

  • Imitation of the counterfeit and low quality product is also a threat to SAP’s product especially in the emerging markets and low income markets.
  • Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
  • No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of SAP
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
  • As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.

Limitations of SWOT Analysis for SAP

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

  • Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
  • SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
  • The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of SAP
  • SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
  • SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of SAP

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis SAP managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of SAP

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

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References / Citations & Bibliography

  • M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
  • A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
  • O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
  • L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
  • R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)