Lotte Chemical (LOTT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lotte Chemical (Malaysia)

Based on various researches at Oak Spring University , Lotte Chemical is operating in a macro-environment that has been destablized by – increasing energy prices, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, technology disruption, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Lotte Chemical

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lotte Chemical can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lotte Chemical, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lotte Chemical 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 Lotte Chemical can be done for the following purposes –
1. Strategic planning of Lotte Chemical
2. Improving business portfolio management of Lotte Chemical
3. Assessing feasibility of the new initiative in Malaysia
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lotte Chemical

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Strengths of Lotte Chemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Lotte Chemical are -

Effective Research and Development (R&D)

– Lotte Chemical has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lotte Chemical staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Organizational Resilience of Lotte Chemical

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

Ability to lead change in Chemical Manufacturing

– Lotte Chemical is one of the leading players in the Chemical Manufacturing industry in Malaysia. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Malaysia but also across the existing markets. The ability to lead change has enabled Lotte Chemical in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Innovation driven organization

– Lotte Chemical is one of the most innovative firm in Chemical Manufacturing sector.

Digital Transformation in Chemical Manufacturing industry

- digital transformation varies from industry to industry. For Lotte Chemical digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lotte Chemical 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

– Lotte Chemical has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Lotte Chemical have helped the firm to develop new products and bring them quickly to the marketplace.

Cross disciplinary teams

– Horizontal connected teams at the Lotte Chemical 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.

Low bargaining power of suppliers

– Suppliers of Lotte Chemical in the Basic Materials sector have low bargaining power. Lotte Chemical has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lotte Chemical to manage not only supply disruptions but also source products at highly competitive prices.

Strong track record of project management in the Chemical Manufacturing industry

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

Diverse revenue streams

– Lotte Chemical is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Lotte Chemical 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.

Learning organization

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

Ability to recruit top talent

– Lotte Chemical is one of the leading players in the Chemical Manufacturing industry in Malaysia. It is in a position to attract the best talent available in Malaysia. The firm has a robust talent identification program that helps in identifying the brightest.

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Weaknesses of Lotte Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Lotte Chemical are -

Interest costs

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

Products dominated business model

– Even though Lotte Chemical has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lotte Chemical should strive to include more intangible value offerings along with its core products and services.

Aligning sales with marketing

– From the outside it seems that Lotte Chemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Lotte Chemical can leverage the sales team experience to cultivate customer relationships as Lotte Chemical is planning to shift buying processes online.

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

Lack of clear differentiation of Lotte Chemical products

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

Low market penetration in new markets

– Outside its home market of Malaysia, Lotte Chemical needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High dependence on Lotte Chemical ‘s star products

– The top 2 products and services of Lotte Chemical still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Lotte Chemical has relatively successful track record of launching new products.

No frontier risks strategy

– From the 10K / annual statement of Lotte Chemical, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.

Employees’ less understanding of Lotte Chemical strategy

– From the outside it seems that the employees of Lotte Chemical 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.

Slow decision making process

– As mentioned earlier in the report, Lotte Chemical has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Lotte Chemical 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.

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Lotte Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Lotte Chemical are -

Building a culture of innovation

– managers at Lotte Chemical 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 Chemical Manufacturing industry.

Creating value in data economy

– The success of analytics program of Lotte Chemical has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Lotte Chemical to build a more holistic ecosystem for Lotte Chemical products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Buying journey improvements

– Lotte Chemical can improve the customer journey of consumers in the Chemical Manufacturing 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Lotte Chemical in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Lotte Chemical can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Learning at scale

– Online learning technologies has now opened space for Lotte Chemical 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 Lotte Chemical 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.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

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

Better consumer reach

– The expansion of the 5G network will help Lotte Chemical to increase its market reach. Lotte Chemical 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.

Remote work and new talent hiring opportunities

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

Using analytics as competitive advantage

– Lotte Chemical has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Lotte Chemical to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lotte Chemical to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Increase in government spending

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

Loyalty marketing

– Lotte Chemical 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.

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Threats Lotte Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Lotte Chemical are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Lotte Chemical may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing 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.

Increasing wage structure of Lotte Chemical

– 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 Lotte Chemical.

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 Lotte Chemical in the Chemical Manufacturing sector and impact the bottomline of the organization.

Consumer confidence and its impact on Lotte Chemical 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 Chemical Manufacturing industry and other sectors.

Barriers of entry lowering

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

Technology acceleration in Forth Industrial Revolution

– Lotte Chemical has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Lotte Chemical needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

Regulatory challenges

– Lotte Chemical 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 Chemical Manufacturing industry regulations.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Lotte Chemical 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 Lotte Chemical prominent markets.

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lotte Chemical can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 Lotte Chemical.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Lotte Chemical in Chemical Manufacturing industry. The Chemical Manufacturing 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.

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 Lotte Chemical business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of Lotte Chemical Template, Example

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

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