SWOT Analysis / TOWS Matrix for Krakatau Steel Persero (Indonesia)
Based on various researches at Oak Spring University , Krakatau Steel Persero is operating in a macro-environment that has been destablized by – there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Krakatau Steel Persero
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Krakatau Steel Persero can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Krakatau Steel Persero, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Krakatau Steel Persero 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 Krakatau Steel Persero can be done for the following purposes –
1. Strategic planning of Krakatau Steel Persero
2. Improving business portfolio management of Krakatau Steel Persero
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Krakatau Steel Persero
Strengths of Krakatau Steel Persero | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Krakatau Steel Persero are -
Analytics focus
– Krakatau Steel Persero 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 Indonesia 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 Krakatau Steel Persero digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Krakatau Steel Persero 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.
Strong track record of project management in the Iron & Steel industry
– Krakatau Steel Persero is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Krakatau Steel Persero 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.
Sustainable margins compare to other players in Iron & Steel industry
– Krakatau Steel Persero has clearly differentiated products in the market place. This has enabled Krakatau Steel Persero to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Krakatau Steel Persero to invest into research and development (R&D) and innovation.
Ability to lead change in Iron & Steel
– Krakatau Steel Persero is one of the leading players in the Iron & Steel industry in Indonesia. Over the years it has not only transformed the business landscape in the Iron & Steel industry in Indonesia but also across the existing markets. The ability to lead change has enabled Krakatau Steel Persero in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Krakatau Steel Persero has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Krakatau Steel Persero 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.
Innovation driven organization
– Krakatau Steel Persero is one of the most innovative firm in Iron & Steel sector.
Training and development
– Krakatau Steel Persero 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.
Superior customer experience
– The customer experience strategy of Krakatau Steel Persero in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Krakatau Steel Persero
– The covid-19 pandemic has put organizational resilience at the centre of everthing Krakatau Steel Persero does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Krakatau Steel Persero in the Basic Materials sector have low bargaining power. Krakatau Steel Persero has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Krakatau Steel Persero to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Krakatau Steel Persero | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Krakatau Steel Persero are -
High operating costs
– Compare to the competitors, Krakatau Steel Persero 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 Krakatau Steel Persero lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Krakatau Steel Persero, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Krakatau Steel Persero has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Krakatau Steel Persero 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.
Slow to strategic competitive environment developments
– As Krakatau Steel Persero 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.
High dependence on Krakatau Steel Persero ‘s star products
– The top 2 products and services of Krakatau Steel Persero 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 Krakatau Steel Persero has relatively successful track record of launching new products.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in Indonesia, Krakatau Steel Persero 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.
Products dominated business model
– Even though Krakatau Steel Persero has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Krakatau Steel Persero should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Krakatau Steel Persero is slow explore the new channels of communication. These new channels of communication can help Krakatau Steel Persero 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 Krakatau Steel Persero is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Krakatau Steel Persero needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Krakatau Steel Persero to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Krakatau Steel Persero, 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.
Slow decision making process
– As mentioned earlier in the report, Krakatau Steel Persero 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. Krakatau Steel Persero 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.
Krakatau Steel Persero Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Krakatau Steel Persero are -
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 Krakatau Steel Persero in the Iron & Steel industry. Now Krakatau Steel Persero can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Krakatau Steel Persero 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.
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. Krakatau Steel Persero 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. Krakatau Steel Persero 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Krakatau Steel Persero 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.
Developing new processes and practices
– Krakatau Steel Persero 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Krakatau Steel Persero can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Krakatau Steel Persero 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.
Learning at scale
– Online learning technologies has now opened space for Krakatau Steel Persero 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.
Leveraging digital technologies
– Krakatau Steel Persero 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.
Buying journey improvements
– Krakatau Steel Persero 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Krakatau Steel Persero can use these opportunities to build new business models that can help the communities that Krakatau Steel Persero operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Creating value in data economy
– The success of analytics program of Krakatau Steel Persero has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Krakatau Steel Persero to build a more holistic ecosystem for Krakatau Steel Persero products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Krakatau Steel Persero 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 Krakatau Steel Persero to hire the very best people irrespective of their geographical location.
Threats Krakatau Steel Persero External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Krakatau Steel Persero are -
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. Krakatau Steel Persero can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Krakatau Steel Persero 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.
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 Krakatau Steel Persero.
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. Krakatau Steel Persero 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Krakatau Steel Persero 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 Krakatau Steel Persero prominent markets.
Stagnating economy with rate increase
– Krakatau Steel Persero 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.
Environmental challenges
– Krakatau Steel Persero 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. Krakatau Steel Persero can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
High dependence on third party suppliers
– Krakatau Steel Persero 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.
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. Krakatau Steel Persero needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Krakatau Steel Persero has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Krakatau Steel Persero 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.
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 Krakatau Steel Persero in the Iron & Steel sector and impact the bottomline of the organization.
Increasing wage structure of Krakatau Steel Persero
– 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 Krakatau Steel Persero.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Krakatau Steel Persero with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Weighted SWOT Analysis of Krakatau Steel Persero Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Krakatau Steel Persero 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 Krakatau Steel Persero 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 Krakatau Steel Persero 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 Krakatau Steel Persero 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 Krakatau Steel Persero needs to make to build a sustainable competitive advantage.
