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 backlash against globalization, increasing household debt because of falling income levels, geopolitical disruptions, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing energy prices,
central banks are concerned over increasing inflation, wage bills are increasing, 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 -
Strong track record of project management
– Sm Entertainment is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Sm Entertainment digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sm Entertainment 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.
Diverse revenue streams
– Sm Entertainment is present in almost all the verticals within the industry. This has provided firm in SM Entertainment case study 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.
Highly skilled collaborators
– Sm Entertainment has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in SM Entertainment HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Successful track record of launching new products
– Sm Entertainment has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sm Entertainment 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.
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.
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.
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.
Weaknesses SM Entertainment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SM Entertainment are -
High bargaining power of channel partners
– Because of the regulatory requirements, Mooweon Rhee, Sang-Hoon Kim, William Barnett suggests that, Sm Entertainment is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study SM Entertainment, is just above the industry average. Sm Entertainment needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the SM Entertainment HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Sm Entertainment has relatively successful track record of launching new products.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SM Entertainment, in the dynamic environment Sm Entertainment has struggled to respond to the nimble upstart competition. Sm Entertainment has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 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.
Skills based hiring
– The stress on hiring functional specialists at Sm Entertainment 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.
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.
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 -
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.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sm Entertainment in the consumer business. Now Sm Entertainment can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Sm Entertainment to increase its market reach. Sm Entertainment will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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 Sm Entertainment 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sm Entertainment can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Sm Entertainment can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
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.
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.
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.
Loyalty marketing
– Sm Entertainment has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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 -
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sm Entertainment can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Sm Entertainment high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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 .
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.
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.
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 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study SM Entertainment, Sm Entertainment may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Shortening product life cycle
– it is one of the major threat that Sm Entertainment is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Sm Entertainment needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
