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 energy prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, geopolitical disruptions, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies,
supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, 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 -
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.
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.
High switching costs
– The high switching costs that Posco Steel 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.
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.
Highly skilled collaborators
– Posco Steel 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 Steel-Making at POSCO HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Low bargaining power of suppliers
– Suppliers of Posco Steel in the sector have low bargaining power. Steel-Making at POSCO has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Posco Steel to manage not only supply disruptions but also source products at highly competitive prices.
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.
Sustainable margins compare to other players in Technology & Operations industry
– Steel-Making at POSCO firm has clearly differentiated products in the market place. This has enabled Posco Steel to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Posco Steel to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Posco Steel is present in almost all the verticals within the industry. This has provided firm in Steel-Making at POSCO 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.
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.
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.
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 -
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.
Slow to strategic competitive environment developments
– As Steel-Making at POSCO HBR case study mentions - Posco Steel 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Steel-Making at POSCO has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Posco Steel 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Jin Whang, Hau Lee suggests that, Posco Steel 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.
Increasing silos among functional specialists
– The organizational structure of Posco Steel is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Posco Steel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Posco Steel to focus more on services rather than just following the product oriented approach.
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.
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.
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.
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.
Lack of clear differentiation of Posco Steel products
– To increase the profitability and margins on the products, Posco Steel needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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 -
Better consumer reach
– The expansion of the 5G network will help Posco Steel to increase its market reach. Posco Steel 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 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.
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.
Buying journey improvements
– Posco Steel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Steel-Making at POSCO suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, Posco Steel 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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Posco Steel is facing challenges because of the dominance of functional experts in the organization. Steel-Making at POSCO 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.
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.
Manufacturing automation
– Posco Steel can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Leveraging digital technologies
– Posco Steel 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.
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 -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Posco Steel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
Stagnating economy with rate increase
– Posco Steel 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.
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.
High dependence on third party suppliers
– Posco Steel 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.
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.
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.
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.
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.
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. Posco Steel 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 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.