POSCO is a large, Korean, integrated steel-making company attempting to address a domestic demand for concrete that is five times the per capita U.S. demand. Highlights how POSCO controls its extended "quality" in multiple dimensions of product quality, cost, environment, safety, and workers' welfare.
Swot Analysis of "Steel-Making at POSCO" written by Jin Whang, Hau Lee includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Posco Steel facing as an external strategic factors. Some of the topics covered in Steel-Making at POSCO case study are - Strategic Management Strategies, Product development, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Steel-Making at POSCO casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion,
geopolitical disruptions, technology disruption, etc
Introduction to SWOT Analysis of Steel-Making at POSCO
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Steel-Making at POSCO case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Posco Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Posco Steel 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 Steel-Making at POSCO can be done for the following purposes –
1. Strategic planning using facts provided in Steel-Making at POSCO case study
2. Improving business portfolio management of Posco Steel
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Posco Steel
Strengths Steel-Making at POSCO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Posco Steel in Steel-Making at POSCO Harvard Business Review case study are -
Analytics focus
– Posco Steel is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jin Whang, Hau Lee can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Posco Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Steel-Making at POSCO - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Posco Steel 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 Posco Steel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Steel-Making at POSCO Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Posco Steel is one of the leading recruiters in the industry. Managers in the Steel-Making at POSCO 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 Steel-Making at POSCO 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.
Organizational Resilience of Posco Steel
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Posco Steel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Technology & Operations field
– Posco Steel 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 Posco Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Posco Steel is one of the most innovative firm in sector. Manager in Steel-Making at POSCO Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Posco Steel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Posco Steel 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.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Posco Steel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Posco Steel 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.
High brand equity
– Posco Steel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Posco Steel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Posco Steel are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Steel-Making at POSCO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Steel-Making at POSCO are -
Products dominated business model
– Even though Posco Steel 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 - Steel-Making at POSCO should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Posco Steel 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.
Aligning sales with marketing
– It come across in the case study Steel-Making at POSCO 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 Steel-Making at POSCO can leverage the sales team experience to cultivate customer relationships as Posco Steel is planning to shift buying processes online.
Need for greater diversity
– Posco Steel 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.
Skills based hiring
– The stress on hiring functional specialists at Posco Steel 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Steel-Making at POSCO, it seems that the employees of Posco Steel don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Posco Steel 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Steel-Making at POSCO, in the dynamic environment Posco Steel has struggled to respond to the nimble upstart competition. Posco Steel has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Steel-Making at POSCO, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
Interest costs
– Compare to the competition, Posco Steel 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Posco Steel needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Steel-Making at POSCO | 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 Steel-Making at POSCO are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Posco Steel 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. Posco Steel 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.
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 Posco Steel in the consumer business. Now Posco Steel can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Posco Steel 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Posco Steel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Posco Steel 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 Posco Steel to hire the very best people irrespective of their geographical location.
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 Posco Steel 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Posco Steel can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Steel-Making at POSCO, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Posco Steel 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 Steel-Making at POSCO - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Posco Steel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Posco Steel can develop new processes and procedures in Technology & Operations 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.
Creating value in data economy
– The success of analytics program of Posco Steel has opened avenues for new revenue streams for the organization in the industry. This can help Posco Steel to build a more holistic ecosystem as suggested in the Steel-Making at POSCO case study. Posco Steel can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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. Posco Steel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Posco Steel can use these opportunities to build new business models that can help the communities that Posco Steel operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Posco Steel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Steel-Making at POSCO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Steel-Making at POSCO are -
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. Posco Steel needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Regulatory challenges
– Posco Steel 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 Technology & Operations 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 Posco Steel in the Technology & Operations sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Posco Steel is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Posco Steel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Posco Steel business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Posco Steel in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Posco Steel has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Posco Steel needs to keep up with the evolution of technology in the Technology & Operations 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.
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 Posco Steel.
Consumer confidence and its impact on Posco Steel 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.
Environmental challenges
– Posco Steel needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Posco Steel can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Increasing wage structure of Posco Steel
– 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 Posco Steel.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Posco Steel 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 Steel-Making at POSCO .
Weighted SWOT Analysis of Steel-Making at POSCO 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 Steel-Making at POSCO 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 Steel-Making at POSCO 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 Steel-Making at POSCO 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 Steel-Making at POSCO 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 Posco Steel needs to make to build a sustainable competitive advantage.