SWOT Analysis of the German Battery Electric Vehicle Market

INTRODUCTION TO SWOT ANALYSIS

SWOT Analysis: Stands for “strength, weaknesses, opportunities and threats.” It can be done to find out the organizations “strengths and weaknesses and opportunities and threats” that may affect the organization in the external environment. (Thompson and Martin 2010b). It takes the gathering of data and analyzing all the data of all the ‘internal and external factors” that help or hurt a business. (Pickton and Wright 1998).  It is a basis by which a manager can, “synthesize” an insight based on the conditions (Rothaermel 2012b).

Strengths will help a company take advantage of the markets. A weakness is judged as a factor that the competitor has and the firm does not or something that is detrimental. Opportunity is a factor that is of advantage to the firm; something important that the competitor cannot get or have. Threats are unfavourable events or factors that can affect the firm negatively. The strengths and weaknesses can be directly managed by some change in an organization it is the forecasting of these external and internal factors that will help first; and a suitable reaction to counter an unfavourable factors can be taken. The tool is universally accepted and easy to use, because of its simplicity and use of key issues that affect the firm. The Necessary strengths and weaknesses that are needed to counter threats or utilize opportunities need to be identified properly in a particular application (Coman and Ronen 2009; Johnson, Scholes and Whittington 2008). SWOT analysis is done is a simple way. Key strengths and weaknesses are listed and grouped after brainstorming. Similarly all the threats and opportunities are listed separately. Strength can be identified as something which is advantageous in a venture. A weakness is something the firm has to catch up with, that another firm may possess at the moment of study. Some strengths and weaknesses can be listed from external or internal factors of: land resource, equipment and technology advancements, patents, knowledge and company learning, skilled cheap labour, brand equity, Core competencies, capable workers, training, Management tools, Human resources, capital, easy access to loans, expertise in research, the work culture (and number of years) and others.

A clear definition of what the way an external internal factor affects the firm is need. For marketing image, if the firm has a bad image it is a weakness if the image is good it is strength. Another criterion for accurate results is comparing an external factor with the competitor’s strength or weakness. For example if a company has 100 million in reserves for research it may be a strength only if the competitor has 50 million; if the competitor has 250 million then the benchmark analysis leads one to say that we have a weakness. Valuable rare external or internal factors are an advantage and are strengths. An opportunity or threat may arise from some change in the external environment (macro conditions) it is uncontrollable at times. Hence, companies need to keep looking for them in advance so they can counter or take advantage of them as soon as possible. PESTEL analysis can be done in conjunction with SWOT it give a better result. Political, Economic, Social, Technological, Environmental and legal factors are always changing. The PESTEL analysis that is done should be current to give the best results. A competitor may react to your move, or change strategies; these need to be monitored all the time. A change in the market conditions, a new law passage, a new technology for sale, can open a new market. Companies have to be aware of these as well. A certain market niche may become profitable due to a external change also. If a company wants to gain revenue it must invest in a suitable real time assessment all the time. The threat or opportunity should be judged accordingly to what impact it has on the firm (Pickton and Wright 1998).

Like any strategic tool SWOT has its limitations. Academics sometimes are not in favour of this tool. Some do not even recognize it as a serious way to gauge the profitability of a venture or launch of a new good or service (Pickton and Wright 1998). Researchers claim it is a low grade analytic tool (Kotler 1991; Pickton and Wright 1998). The reasons given by the experts are: The tool uses a list that is not short but “excessive”, the tool does not prioritize the external and internal factors which are too broadly described at times, and the tool does not distinguish clearly between strengths and weaknesses/threats and opportunities (Kotler 1991).  

An advance SWOT is one which can overcome the limitations of a conventional analysis. Here the various threats and weakness or opportunities and strengths are prioritized first. The aim is to get the most important factors that will affect your firm and not a crowd of different factors. Prioritization is done by first listing all the strengths and weaknesses then assigning a value to strength or weakness from 1 to 3 to the list. 1 for strength means it is not important 3 means major importance; likewise 3 for weakness means major weakness and 1 is a minor one. After assigning the rating a degree of importance is assigned the value is 1 to 0 and all the values must add up to 1. The degree to which it will impact the firm is multiplied by the rating to give a score. The strength or weaknesses with the highest score are counted in the SWOT analysis as the finalists (David 2009b).

Prioritizing threats and opportunities is done slightly differently. The total importance of threats and opportunities is equal to 1; so it can be from 0 to 1. 0 means no impact 1 is high impact. Next the probability of an event impacting the firm from 1 to 3 low probabilities to high probability is listed. The importance and probability numbers are multiplied to give a score, which can determines which treats and opportunities are relevant to the situation and most affecting the firm (David 2009b).

SWOT Analysis of the German Battery Electric Vehicle (BEV) Market

The SWOT analysis parameters were extrapolated from studies of LCV and applied to BEVs (Jurevicius  2013 ).

Some of the strength, weaknesses opportunities and threats are listed below:

Strengths

An understanding with government, ability to design products, German brand image of quality (which is high), eco-friendliness, experience in engineering and technology, and reduction in emissions.

Weaknesses 

High import tariffs on components, low consumer awareness, lack of experience as compared to Asia and battery technology quality.

Opportunities 

Increase in the purchasing power, new market niche, tax and social benefits, environmental laws passed, and the chance to collaborate with foreign players.

Threats 

Competition from other international car makers, increasing cost inputs of the new technology, the threat from fuel efficient petrol and diesel cars, hybrid model cars, customer’s preferences, the stigma and trouble of not being able to charge the vehicle, and availability of charging stations in the country.

Further the methodology and analysis of the various Models used to examine the profitability of BEVs shall be done in the next section.

 

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