Southern Steel Bhd (STEE) SWOT Analysis / TOWS Matrix / 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, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc

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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.

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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

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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 -

Operational resilience

– The operational resilience strategy of Southern Steel Bhd 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.

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.

Training and development

– Southern Steel Bhd 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.

High brand equity

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

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.

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.

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.

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.

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.

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.

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.

Effective Research and Development (R&D)

– Southern Steel Bhd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Southern Steel Bhd 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 Southern Steel Bhd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Southern Steel Bhd are -

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.

Skills based hiring in Iron & Steel industry

– The stress on hiring functional specialists at Southern Steel Bhd has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

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.

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.

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.

Lack of clear differentiation of Southern Steel Bhd products

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

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.

No frontier risks strategy

– From the 10K / annual statement of Southern Steel Bhd, 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.

Need for greater diversity

– Southern Steel Bhd 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.

Interest costs

– Compare to the competition, Southern Steel Bhd 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.

Aligning sales with marketing

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

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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 -

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.

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 Southern Steel Bhd in the Iron & Steel industry. Now Southern Steel Bhd can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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.

Leveraging digital technologies

– Southern Steel Bhd 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.

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 Southern Steel Bhd 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Southern Steel Bhd 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.

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.

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.

Creating value in data economy

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

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.

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.

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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 -

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.

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.

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.

Learning curve for new practices

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

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.

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.

Stagnating economy with rate increase

– Southern Steel Bhd 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.

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.

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.

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.

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. Southern Steel Bhd 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.

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.

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.

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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.

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