Elaborated SWOT Analysis Of SAP – One Of The Worlds Largest Publicly Traded Companies

About SAP

SAP(System Analysis Program) is a German-originated company founded in 1972, which was established by 5 entrepreneurs namely Dietmar Hopp, Hasso Plattner, Klaus Tschira, Hans-Werner Hector, and Claus Wellenreuther. Its headquarter is situated in Walldorf, Germany, with a workforce of more than 100,000 employees it provides its services worldwide.  SAP is the leading software company in the Dow Jones Sustainability Index for the past 14 years. With over 200M+ subscribers in their cloud user base, it made a total revenue of €27.34b for the financial year 2020. SAP believes in “Helping the world to run better and improve people’s lives” and it has a mission to create a world with “ZERO emissions, ZERO waste, and ZERO inequality”. The first program developed by SAP was for payroll and accounting. The program stored the data locally in the Electronic System with the help of a common Logical database for all activities of the organization unlike the old system back then where they had to be stored in punch cards mechanically. Therefore its software was called a real-time system since there was no need to process the punch cards overnight. SAP now supports advanced technologies, for example, Artificial Intelligence (AI) and Machine Learning ( ML), Business Intelligence Tools and Solutions.

Quick Strats about SAP

Services of SAP

SAP has been providing its customers with a diverse range of services. Below are the different services offered by SAP.

• ERP and Finance
• CRM and Customer Experience
• Spend Management
• Supply Chain Management
• Human Capital Management
• Business Technology Platform

Close Competitors of SAP

With the growing market over the years, the number of competitors for SAP has increased. These are some of the competitors that SAP faces:

• Microsoft
• Oracle
• IBM
• Tableau
• SAS
• MicroStrategy
• Qlik
• Amazon Web Services (AWS)

Now that we got an overview of the company, let us now see one by one the SWOT Analysis of SAP.

SWOT Analysis of SAP

According to SWOT Analysis, “Strengths and Opportunities” are positive factors, and “Weaknesses and Threats” are negative factors. SWOT Analysis of SAP helps it to prepare a unique strategic plan by showing it an overview of the current business environment. Let us now see the SWOT Analysis of SAP one by one by starting with the Strengths of SAP.

1. Strengths of SAP

Following are the strengths of SAP company that make them different from the rest of the global companies.

• High research and development: SAP itself spends a lot of investments on research and developments to improve their business and to introduce new products and services to the global market.

• Good Market positioning: SAP secures a good position among the major leading technological companies in the world which makes it a trustworthy company.

• Capability to make high innovative products: SAP is providing innovative goods and services to the global market and staying ahead in the market.

• Reliability of supplying: SAP company has their own reliable supplier network who have sufficient raw material to offer them for their supply chain.

• Highly skilled employees: SAP is formed with a skilled workforce to work efficiently which helps them to provide their customers with the best quality services.

• The ability of a strong distribution: SAP has a strong distribution network that is able to reach its large target market worldwide with ease.

• Wide range of services– SAP currently contains 25 separate industrial solutions formulated across different ranges of industries. For example, from mining and manufacturing to financial services and higher education. 

2. Weaknesses of SAP

Below are the weaknesses of SAP company that they need to work on in order to grow in the industry.

• Still only offers SAP ERP:   SAP still only keeps producing the SAP cloud-based system, “business ByDesign ERP system”, for medium and small businesses.

• Lack of money spend on technology: Compared to other competitive companies, SAP spends less amount of money to bring the new technology inside of the company.

• Unsuccessful criteria with regards to new cultures: SAP has become unsuccessful after putting different cultures into the firm.

• Not meeting the standard industry averages: SAP does not meet the standard industry averages such as net profitability ratio and the net distribution percentage.

• Inefficiency in financial planning:  SAP has an inefficiency in financial planning for example its asset ratios are misleading which creates errors in their financial plan.

3. Opportunities for SAP

Opportunities help in the growth of the company. Below are some opportunities that will change the future of SAP:

• Acquisition during a market consolidation:  Acquisition of a few companies can be a great opportunity for the SAP, so then it can expand its portfolio to become an ERP supplying company.
• Low Inflation rates:  Lower inflation rates can make the SAP company stable in the market and more potential customers will be attracted towards them.
• Establishment of new environmental policies: New environmental policies can bring opportunities for SAP to introduce new products to the market.
• New technological practices: New technological items will bring the SAP company to launch a differentiated pricing strategy in order to get a high market share.
• Green drive concept by the government: This concept helps SAP to produce new eco-friendly products and an opportunity for the procurement processes.

4. Threats for SAP

Though SAP is a leading company, it has many threats that can have a negative impact on the company. Following are some of the threats for SAP:

• Competitors:  Oracle is the major competitor and the biggest threat for SAP in the market, and with the changing times there are many new competitors entering the market. 

• New technologies stand as a threat:  Newly introduced cloud-based ERPs are getting popular and the open sources threaten the SAP company in a serious manner as their market share of the service decreases.

• Changes in consumer behavior: Changes in consumer behavior and buying patterns results in fewer purchases in and keeping up with the customer buying behaviors all the time is a difficult task thus this is a threat for the SAP.

• Irregular supply of innovative products: Though the company supplied a number of innovative products after competing with the market player, the market swings with the number of innovative product sales.

• Fluctuations in foreign currency: SAP companies are situated across different countries in the world and even the slightest difference in sales and currency rates can affect the profit of the SAP.

• Rise of the employee pay level: Rising salary levels are a huge threat for the SAP company as it affects their profitability. It creates serious pressure on the SAP economy.
• Copied goods: SAP company has a serious impact from the low-quality goods that are competing with them after imitating their items and representing them in the low-income markets.

SWOT analysis is the best way for brands like SAP to find out where they stand in the market in simple contexts.

Conclusion

SAP is one of the largest publicly traded companies in the world. In the extensive study of the SWOT Analysis of SAP, we saw that it is one of the most reliable brands in the market and has a good market capture by investing in its R&D simultaneously it can grow in the market by acquiring new companies and implementing low inflation rates. Even with such potentials, it lacks in some places. It spends very less amount of money on its technology and does not meet the standard industry averages such as the net profitability ratio. It can also face problems like rising employee pay levels, these problems can be tackled by implementing proper marketing strategies, and since most people are on digital platforms the company can market their products using digital marketing and increase their sales. If you are interested in learning more and upskilling, check out IIDE’s 3 Month Advanced Online Digital Marketing Course to know more. If you like such in-depth analysis of companies, find more such insightful case studies on our IIDE Knowledge portal. Thank you for taking the time to read this, and do share your thoughts on this case study in the comments section below.