Based on various researches at Oak Spring University , JSW Steel is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, geopolitical disruptions, increasing household debt because of falling income levels, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that JSW Steel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the JSW Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which JSW 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 JSW Steel can be done for the following purposes –
1. Strategic planning of JSW Steel
2. Improving business portfolio management of JSW Steel
3. Assessing feasibility of the new initiative in India
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of JSW Steel
Strengths of JSW Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of JSW Steel are -
Ability to lead change in Iron & Steel
– JSW Steel is one of the leading players in the Iron & Steel industry in India. Over the years it has not only transformed the business landscape in the Iron & Steel industry in India but also across the existing markets. The ability to lead change has enabled JSW Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Iron & Steel industry
– JSW Steel has clearly differentiated products in the market place. This has enabled JSW Steel to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped JSW Steel to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that JSW 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.
Effective Research and Development (R&D)
– JSW Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – JSW Steel staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of JSW Steel comprises – understanding the underlying the factors in the Iron & Steel 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.
Low bargaining power of suppliers
– Suppliers of JSW Steel in the Basic Materials sector have low bargaining power. JSW Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps JSW Steel to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- JSW 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 JSW Steel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at JSW Steel emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Iron & Steel industry
– JSW Steel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of JSW Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– JSW 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 Iron & Steel industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For JSW Steel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. JSW 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.
Diverse revenue streams
– JSW Steel is present in almost all the verticals within the Iron & Steel industry. This has provided JSW Steel 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.
Weaknesses of JSW Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of JSW Steel are -
Compensation and incentives
– The revenue per employee of JSW Steel is just above the Iron & Steel industry average. It 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.
Employees’ less understanding of JSW Steel strategy
– From the outside it seems that the employees of JSW 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.
Interest costs
– Compare to the competition, JSW 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.
Ability to respond to the competition
– As the decision making is very deliberative at JSW Steel, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. JSW 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
– From the 10K / annual statement of JSW Steel, it seems that company is thinking out the frontier risks that can impact Iron & Steel industry. 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.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in India, JSW 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 Iron & Steel industry.
Aligning sales with marketing
– From the outside it seems that JSW Steel needs to have more collaboration between its sales team and marketing team. Sales professionals in the Iron & Steel industry have deep experience in developing customer relationships. Marketing department at JSW Steel can leverage the sales team experience to cultivate customer relationships as JSW Steel is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, JSW Steel has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. JSW Steel 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 dependence on JSW Steel ‘s star products
– The top 2 products and services of JSW Steel still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though JSW Steel has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, JSW Steel has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract JSW Steel lucrative customers.
Increasing silos among functional specialists
– The organizational structure of JSW Steel is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but JSW Steel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help JSW Steel to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
JSW Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of JSW Steel are -
Leveraging digital technologies
– JSW 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.
Building a culture of innovation
– managers at JSW Steel 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 Iron & Steel industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects JSW Steel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, JSW Steel can use these opportunities to build new business models that can help the communities that JSW Steel operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, JSW 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 JSW Steel to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. JSW Steel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– JSW Steel can improve the customer journey of consumers in the Iron & Steel industry by using analytics and artificial intelligence. It 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.
Loyalty marketing
– JSW 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.
Manufacturing automation
– JSW Steel can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel sector. 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.
Learning at scale
– Online learning technologies has now opened space for JSW Steel 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.
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 JSW 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.
Creating value in data economy
– The success of analytics program of JSW Steel has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help JSW Steel to build a more holistic ecosystem for JSW Steel products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. JSW 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 JSW Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of JSW Steel are -
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 JSW 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 Iron & Steel industry and other sectors.
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 JSW Steel in the Iron & Steel sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, JSW 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 JSW Steel prominent markets.
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. JSW 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, JSW Steel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
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.
Regulatory challenges
– JSW 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 Iron & Steel industry regulations.
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. JSW Steel needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Increasing wage structure of JSW 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 JSW Steel.
Easy access to finance
– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. JSW Steel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– JSW Steel has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, JSW Steel needs to keep up with the evolution of technology in the Iron & Steel 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 JSW Steel.
Weighted SWOT Analysis of JSW Steel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at JSW Steel 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 JSW Steel 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 JSW Steel 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 JSW Steel 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 JSW Steel needs to make to build a sustainable competitive advantage.