Tata Sponge Iron (TTSP) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Tata Sponge Iron (India)

Based on various researches at Oak Spring University , Tata Sponge Iron 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%, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Tata Sponge Iron

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Tata Sponge Iron can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tata Sponge Iron, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tata Sponge Iron 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Tata Sponge Iron can be done for the following purposes –
1. Strategic planning of Tata Sponge Iron
2. Improving business portfolio management of Tata Sponge Iron
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 Tata Sponge Iron

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Strengths of Tata Sponge Iron | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Tata Sponge Iron are -

Training and development

– Tata Sponge Iron has one of the best training and development program in Basic Materials industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Highly skilled collaborators

– Tata Sponge Iron 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 Tata Sponge Iron have helped the firm to develop new products and bring them quickly to the marketplace.

Organizational Resilience of Tata Sponge Iron

– The covid-19 pandemic has put organizational resilience at the centre of everthing Tata Sponge Iron does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Strong track record of project management in the Iron & Steel industry

– Tata Sponge Iron is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Learning organization

- Tata Sponge Iron 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 Tata Sponge Iron is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Tata Sponge Iron emphasize – knowledge, initiative, and innovation.

High brand equity

– Tata Sponge Iron has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tata Sponge Iron to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Operational resilience

– The operational resilience strategy of Tata Sponge Iron 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.

Innovation driven organization

– Tata Sponge Iron is one of the most innovative firm in Iron & Steel sector.

Diverse revenue streams

– Tata Sponge Iron is present in almost all the verticals within the Iron & Steel industry. This has provided Tata Sponge Iron 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.

High switching costs

– The high switching costs that Tata Sponge Iron 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.

Successful track record of launching new products

– Tata Sponge Iron has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tata Sponge Iron 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.

Effective Research and Development (R&D)

– Tata Sponge Iron has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Tata Sponge Iron 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.

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Weaknesses of Tata Sponge Iron | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Tata Sponge Iron are -

Interest costs

– Compare to the competition, Tata Sponge Iron 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 Tata Sponge Iron, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Tata Sponge Iron has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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 Tata Sponge Iron supply chain. Even after few cautionary changes, Tata Sponge Iron is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tata Sponge Iron vulnerable to further global disruptions in South East Asia.

Lack of clear differentiation of Tata Sponge Iron products

– To increase the profitability and margins on the products, Tata Sponge Iron needs to provide more differentiated products than what it is currently offering in the marketplace.

High dependence on Tata Sponge Iron ‘s star products

– The top 2 products and services of Tata Sponge Iron 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 Tata Sponge Iron has relatively successful track record of launching new products.

Increasing silos among functional specialists

– The organizational structure of Tata Sponge Iron is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Tata Sponge Iron needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tata Sponge Iron to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.

High cash cycle compare to competitors

Tata Sponge Iron has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High bargaining power of channel partners in Iron & Steel industry

– because of the regulatory requirements in India, Tata Sponge Iron 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.

Slow to strategic competitive environment developments

– As Tata Sponge Iron is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.

Need for greater diversity

– Tata Sponge Iron 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.

No frontier risks strategy

– From the 10K / annual statement of Tata Sponge Iron, 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.

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Tata Sponge Iron Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Tata Sponge Iron are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for Tata Sponge Iron 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tata Sponge Iron 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 Tata Sponge Iron to hire the very best people irrespective of their geographical location.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tata Sponge Iron can use these opportunities to build new business models that can help the communities that Tata Sponge Iron operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.

Use of Bitcoin and other crypto currencies for transactions in Iron & Steel industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Tata Sponge Iron in the Iron & Steel industry. Now Tata Sponge Iron can target international markets with far fewer capital restrictions requirements than the existing system.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Tata Sponge Iron 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 Tata Sponge Iron 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

– Tata Sponge Iron 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 Tata Sponge Iron to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tata Sponge Iron 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

– Tata Sponge Iron can develop new processes and procedures in Iron & Steel 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.

Buying journey improvements

– Tata Sponge Iron 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Tata Sponge Iron 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.

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 Tata Sponge Iron 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Tata Sponge Iron is facing challenges because of the dominance of functional experts in the organization. Tata Sponge Iron can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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. Tata Sponge Iron can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tata Sponge Iron 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. Tata Sponge Iron 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.

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Threats Tata Sponge Iron External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Tata Sponge Iron are -

Stagnating economy with rate increase

– Tata Sponge Iron 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 Iron & Steel industry.

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 Tata Sponge Iron in the Iron & Steel sector and impact the bottomline of the organization.

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. Tata Sponge Iron needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Tata Sponge Iron 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 Tata Sponge Iron prominent markets.

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. Tata Sponge Iron can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Regulatory challenges

– Tata Sponge Iron 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 wage structure of Tata Sponge Iron

– 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 Tata Sponge Iron.

Consumer confidence and its impact on Tata Sponge Iron 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Tata Sponge Iron with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.

Technology acceleration in Forth Industrial Revolution

– Tata Sponge Iron has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Tata Sponge Iron 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.

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 Tata Sponge Iron.

High dependence on third party suppliers

– Tata Sponge Iron 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.

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Weighted SWOT Analysis of Tata Sponge Iron Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Tata Sponge Iron 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 Tata Sponge Iron 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 Tata Sponge Iron 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 Tata Sponge Iron 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 Tata Sponge Iron needs to make to build a sustainable competitive advantage.

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