SM Entertainment SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of SM Entertainment
On the evening of June 10, 2011, the first European tour of Korean idol groups was held in Paris. With European fans demanding tickets and organizing a flashmob rally in front of the Louvre Museum, SM Entertainment, the producers, immediately set up an additional European concert. The success of the Paris concert elevated the status of K-pop and showed that it held potential in the global market. Behind the development of K-pop was the unique production system created by Soo-man Lee of SM Entertainment. When he established SM Entertainment in 1995, Lee introduced a systematic production system that integrated the functions of record distribution, agency, and management and enabled the company to make long-term investments in talented artists. The adoption of a sustainable growth model led SM to emerge as the leader in the Korean entertainment industry. This case explores in depth SM Entertainment's talent development process. It also traces the successes and failures that SM experienced, primarily in China, Japan, and Korea and discusses Lee's vision of building a "virtual nation." Lee believed that "the world's biggest star would come from the largest market," thus explaining his focus on succeeding in the Chinese market and grooming Chinese talent. The case concludes by examining a number of strategies that SM Entertainment used to develop a presence in the global music market.
Authors :: Mooweon Rhee, Sang-Hoon Kim, William Barnett
Swot Analysis of "SM Entertainment" written by Mooweon Rhee, Sang-Hoon Kim, William Barnett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sm Entertainment facing as an external strategic factors. Some of the topics covered in SM Entertainment case study are - Strategic Management Strategies, International business, Strategy, Talent management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the SM Entertainment casestudy better are - – there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, increasing transportation and logistics costs, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SM Entertainment case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sm Entertainment, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sm Entertainment 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 SM Entertainment can be done for the following purposes –
1. Strategic planning using facts provided in SM Entertainment case study
2. Improving business portfolio management of Sm Entertainment
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sm Entertainment
Strengths SM Entertainment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sm Entertainment in SM Entertainment Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– SM Entertainment firm has clearly differentiated products in the market place. This has enabled Sm Entertainment to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Sm Entertainment to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Sm Entertainment is one of the leading recruiters in the industry. Managers in the SM Entertainment are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the SM Entertainment Harvard Business Review case study comprises – understanding the underlying the factors in the 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.
Superior customer experience
– The customer experience strategy of Sm Entertainment in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Sm Entertainment is one of the most innovative firm in sector. Manager in SM Entertainment Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Sm Entertainment has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SM Entertainment Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Sm Entertainment 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.
Learning organization
- Sm Entertainment 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 Sm Entertainment is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SM Entertainment Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Sm Entertainment has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sm Entertainment to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Strategy & Execution field
– Sm Entertainment is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Sm Entertainment in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Sm Entertainment
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sm Entertainment does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Sm Entertainment in the sector have low bargaining power. SM Entertainment has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sm Entertainment to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses SM Entertainment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SM Entertainment are -
No frontier risks strategy
– After analyzing the HBR case study SM Entertainment, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. 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.
Slow to strategic competitive environment developments
– As SM Entertainment HBR case study mentions - Sm Entertainment takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Lack of clear differentiation of Sm Entertainment products
– To increase the profitability and margins on the products, Sm Entertainment needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Sm Entertainment 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.
Capital Spending Reduction
– Even during the low interest decade, Sm Entertainment 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 industry using digital technology.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sm Entertainment supply chain. Even after few cautionary changes mentioned in the HBR case study - SM Entertainment, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sm Entertainment vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Sm Entertainment has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Sm Entertainment 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.
High cash cycle compare to competitors
Sm Entertainment has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Sm Entertainment 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.
Products dominated business model
– Even though Sm Entertainment has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - SM Entertainment should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study SM Entertainment that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case SM Entertainment can leverage the sales team experience to cultivate customer relationships as Sm Entertainment is planning to shift buying processes online.
Opportunities SM Entertainment | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study SM Entertainment are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sm Entertainment in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sm Entertainment can use these opportunities to build new business models that can help the communities that Sm Entertainment operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sm Entertainment is facing challenges because of the dominance of functional experts in the organization. SM Entertainment case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Sm Entertainment 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 Strategy & Execution segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sm Entertainment 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 Sm Entertainment to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Sm Entertainment can develop new processes and procedures in Strategy & Execution 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.
Using analytics as competitive advantage
– Sm Entertainment has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study SM Entertainment - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sm Entertainment to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Sm Entertainment can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Sm Entertainment 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.
Manufacturing automation
– Sm Entertainment can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sm Entertainment 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.
Leveraging digital technologies
– Sm Entertainment 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Sm Entertainment can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats SM Entertainment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SM Entertainment are -
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 Sm Entertainment.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sm Entertainment 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 prominent markets illustrated in HBR case study SM Entertainment .
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. Sm Entertainment 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sm Entertainment with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Sm Entertainment business can come under increasing regulations regarding data privacy, data security, 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.
Consumer confidence and its impact on Sm Entertainment 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 the industry and other sectors.
Regulatory challenges
– Sm Entertainment 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 Strategy & Execution industry regulations.
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 Sm Entertainment in the Strategy & Execution sector and impact the bottomline of the organization.
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
– Sm Entertainment 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 field.
Increasing wage structure of Sm Entertainment
– 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 Sm Entertainment.
Technology acceleration in Forth Industrial Revolution
– Sm Entertainment has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Sm Entertainment needs to keep up with the evolution of technology in the Strategy & Execution 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.
Weighted SWOT Analysis of SM Entertainment Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study SM Entertainment 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 the case study SM Entertainment 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 the Harvard case study SM Entertainment 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 SM Entertainment is 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 Sm Entertainment needs to make to build a sustainable competitive advantage.