Southern Steel Bhd (STEE) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Southern Steel Bhd (Malaysia)
Based on various researches at Oak Spring University , Southern Steel Bhd is operating in a macro-environment that has been destablized by – wage bills are increasing, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, etc
Introduction to SWOT Analysis of Southern Steel Bhd
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Southern Steel Bhd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Southern Steel Bhd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Southern Steel Bhd 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 Southern Steel Bhd can be done for the following purposes –
1. Strategic planning of Southern Steel Bhd
2. Improving business portfolio management of Southern Steel Bhd
3. Assessing feasibility of the new initiative in Malaysia
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Southern Steel Bhd
Strengths of Southern Steel Bhd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Southern Steel Bhd are -
Low bargaining power of suppliers
– Suppliers of Southern Steel Bhd in the Basic Materials sector have low bargaining power. Southern Steel Bhd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Southern Steel Bhd to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Southern Steel Bhd 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 Southern Steel Bhd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Southern Steel Bhd emphasize – knowledge, initiative, and innovation.
Ability to lead change in Iron & Steel
– Southern Steel Bhd is one of the leading players in the Iron & Steel industry in Malaysia. Over the years it has not only transformed the business landscape in the Iron & Steel industry in Malaysia but also across the existing markets. The ability to lead change has enabled Southern Steel Bhd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Iron & Steel industry
– Southern Steel Bhd has clearly differentiated products in the market place. This has enabled Southern Steel Bhd to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Southern Steel Bhd to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Southern Steel Bhd 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.
Highly skilled collaborators
– Southern Steel Bhd 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 Southern Steel Bhd have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Southern Steel Bhd 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.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For Southern Steel Bhd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Southern Steel Bhd 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 Southern Steel Bhd
– The covid-19 pandemic has put organizational resilience at the centre of everthing Southern Steel Bhd 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
– Southern Steel Bhd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Southern Steel Bhd is one of the most innovative firm in Iron & Steel sector.
Diverse revenue streams
– Southern Steel Bhd is present in almost all the verticals within the Iron & Steel industry. This has provided Southern Steel Bhd a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses of Southern Steel Bhd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Southern Steel Bhd are -
Low market penetration in new markets
– Outside its home market of Malaysia, Southern Steel Bhd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Southern Steel Bhd 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 Southern Steel Bhd ‘s star products
– The top 2 products and services of Southern Steel Bhd 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 Southern Steel Bhd has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Southern Steel Bhd 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 decision making process
– As mentioned earlier in the report, Southern Steel Bhd 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. Southern Steel Bhd 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.
Ability to respond to the competition
– As the decision making is very deliberative at Southern Steel Bhd, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Southern Steel Bhd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Southern Steel Bhd is slow explore the new channels of communication. These new channels of communication can help Southern Steel Bhd to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the Iron & Steel industry, Southern Steel Bhd 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.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in Malaysia, Southern Steel Bhd 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 Southern Steel Bhd 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. Southern Steel Bhd should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Southern Steel Bhd 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.
Southern Steel Bhd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Southern Steel Bhd are -
Learning at scale
– Online learning technologies has now opened space for Southern Steel Bhd 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.
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. Southern Steel Bhd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Southern Steel Bhd can use these opportunities to build new business models that can help the communities that Southern Steel Bhd operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Southern Steel Bhd is facing challenges because of the dominance of functional experts in the organization. Southern Steel Bhd 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.
Buying journey improvements
– Southern Steel Bhd 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.
Better consumer reach
– The expansion of the 5G network will help Southern Steel Bhd to increase its market reach. Southern Steel Bhd 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.
Loyalty marketing
– Southern Steel Bhd 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.
Using analytics as competitive advantage
– Southern Steel Bhd 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 Southern Steel Bhd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Southern Steel Bhd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Southern Steel Bhd 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.
Developing new processes and practices
– Southern Steel Bhd 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.
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. Southern Steel Bhd 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. Southern Steel Bhd 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.
Manufacturing automation
– Southern Steel Bhd 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.
Building a culture of innovation
– managers at Southern Steel Bhd 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.
Threats Southern Steel Bhd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Southern Steel Bhd are -
Shortening product life cycle
– it is one of the major threat that Southern Steel Bhd is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Southern Steel Bhd 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.
Increasing wage structure of Southern Steel Bhd
– 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 Southern Steel Bhd.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Southern Steel Bhd in Iron & Steel industry. The Iron & Steel 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.
Technology acceleration in Forth Industrial Revolution
– Southern Steel Bhd has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Southern Steel Bhd 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.
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 Southern Steel Bhd business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Southern Steel Bhd 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 Southern Steel Bhd.
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 Southern Steel Bhd in the Iron & Steel sector and impact the bottomline of the organization.
Environmental challenges
– Southern Steel Bhd 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. Southern Steel Bhd can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Southern Steel Bhd 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 Southern Steel Bhd prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Southern Steel Bhd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
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. Southern Steel Bhd needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Southern Steel Bhd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Southern Steel Bhd 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 Southern Steel Bhd 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 Southern Steel Bhd 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 Southern Steel Bhd 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 Southern Steel Bhd needs to make to build a sustainable competitive advantage.