SWOT Analysis / TOWS Matrix for Steel Authority (India)
Based on various researches at Oak Spring University , Steel Authority is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Steel Authority can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Steel Authority, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Steel Authority 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 Authority can be done for the following purposes –
1. Strategic planning of Steel Authority
2. Improving business portfolio management of Steel Authority
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 Steel Authority
Strengths of Steel Authority | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Steel Authority are -
Highly skilled collaborators
– Steel Authority has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Steel Authority have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Steel Authority 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.
Low bargaining power of suppliers
– Suppliers of Steel Authority in the Basic Materials sector have low bargaining power. Steel Authority has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Steel Authority to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Iron & Steel industry
– Steel Authority has clearly differentiated products in the market place. This has enabled Steel Authority to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Steel Authority to invest into research and development (R&D) and innovation.
Innovation driven organization
– Steel Authority is one of the most innovative firm in Iron & Steel sector.
Strong track record of project management in the Iron & Steel industry
– Steel Authority is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Steel Authority 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 Steel Authority digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Steel Authority 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.
Organizational Resilience of Steel Authority
– The covid-19 pandemic has put organizational resilience at the centre of everthing Steel Authority does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Steel Authority has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Steel Authority to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Steel Authority 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 Steel Authority is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Steel Authority emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Steel Authority has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Steel Authority 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.
Weaknesses of Steel Authority | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Steel Authority are -
Compensation and incentives
– The revenue per employee of Steel Authority 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Steel Authority supply chain. Even after few cautionary changes, Steel Authority is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Steel Authority vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Steel Authority 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 Iron & Steel industry using digital technology.
High dependence on Steel Authority ‘s star products
– The top 2 products and services of Steel Authority 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 Steel Authority has relatively successful track record of launching new products.
Lack of clear differentiation of Steel Authority products
– To increase the profitability and margins on the products, Steel Authority needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Steel Authority 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 Steel Authority lucrative customers.
Need for greater diversity
– Steel Authority 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.
Low market penetration in new markets
– Outside its home market of India, Steel Authority needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Iron & Steel industry, Steel Authority 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Steel Authority is slow explore the new channels of communication. These new channels of communication can help Steel Authority to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Steel Authority is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Steel Authority needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Steel Authority to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
Steel Authority Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Steel Authority are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Steel Authority 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Steel Authority in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.
Loyalty marketing
– Steel Authority 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Steel Authority 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 Steel Authority to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Steel Authority 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.
Creating value in data economy
– The success of analytics program of Steel Authority has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Steel Authority to build a more holistic ecosystem for Steel Authority products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Steel Authority to increase its market reach. Steel Authority 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.
Buying journey improvements
– Steel Authority 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.
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 Steel Authority 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.
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. Steel Authority can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Steel Authority can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Steel Authority 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.
Using analytics as competitive advantage
– Steel Authority has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Iron & Steel sector. This continuous investment in analytics has enabled Steel Authority to build a competitive advantage using analytics. The analytics driven competitive advantage can help Steel Authority to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Steel Authority External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Steel Authority 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.
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. Steel Authority needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Regulatory challenges
– Steel Authority 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Steel Authority 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 Steel Authority prominent markets.
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 Steel Authority in the Iron & Steel sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Steel Authority with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Steel Authority 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.
Increasing wage structure of Steel Authority
– 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 Steel Authority.
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 Steel Authority business can come under increasing regulations regarding data privacy, data security, etc.
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.
Consumer confidence and its impact on Steel Authority 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.
Technology acceleration in Forth Industrial Revolution
– Steel Authority has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Steel Authority 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.
High dependence on third party suppliers
– Steel Authority 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.
Weighted SWOT Analysis of Steel Authority Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Steel Authority 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 Steel Authority 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 Steel Authority 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 Authority 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 Steel Authority needs to make to build a sustainable competitive advantage.
