SWOT Analysis / TOWS Matrix for GERDAU PN N1 (Brazil)
Based on various researches at Oak Spring University , GERDAU PN N1 is operating in a macro-environment that has been destablized by – there is backlash against globalization, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, geopolitical disruptions, supply chains are disrupted by pandemic ,
talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that GERDAU PN N1 can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the GERDAU PN N1, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which GERDAU PN N1 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 GERDAU PN N1 can be done for the following purposes –
1. Strategic planning of GERDAU PN N1
2. Improving business portfolio management of GERDAU PN N1
3. Assessing feasibility of the new initiative in Brazil
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of GERDAU PN N1
Strengths of GERDAU PN N1 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of GERDAU PN N1 are -
Training and development
– GERDAU PN N1 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.
Sustainable margins compare to other players in Iron & Steel industry
– GERDAU PN N1 has clearly differentiated products in the market place. This has enabled GERDAU PN N1 to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped GERDAU PN N1 to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– GERDAU PN N1 is one of the leading players in the Iron & Steel industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that GERDAU PN N1 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.
Innovation driven organization
– GERDAU PN N1 is one of the most innovative firm in Iron & Steel sector.
Ability to lead change in Iron & Steel
– GERDAU PN N1 is one of the leading players in the Iron & Steel industry in Brazil. Over the years it has not only transformed the business landscape in the Iron & Steel industry in Brazil but also across the existing markets. The ability to lead change has enabled GERDAU PN N1 in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of GERDAU PN N1 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.
Analytics focus
– GERDAU PN N1 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 Brazil 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.
Learning organization
- GERDAU PN N1 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 GERDAU PN N1 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at GERDAU PN N1 emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Iron & Steel industry
– GERDAU PN N1 is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– GERDAU PN N1 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. GERDAU PN N1 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.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For GERDAU PN N1 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. GERDAU PN N1 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.
Weaknesses of GERDAU PN N1 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of GERDAU PN N1 are -
Capital Spending Reduction
– Even during the low interest decade, GERDAU PN N1 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.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at GERDAU PN N1 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.
Compensation and incentives
– The revenue per employee of GERDAU PN N1 is just above the Iron & Steel industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Low market penetration in new markets
– Outside its home market of Brazil, GERDAU PN N1 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– GERDAU PN N1 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.
Slow to strategic competitive environment developments
– As GERDAU PN N1 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.
Products dominated business model
– Even though GERDAU PN N1 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. GERDAU PN N1 should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at GERDAU PN N1, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. GERDAU PN N1 has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on GERDAU PN N1 ‘s star products
– The top 2 products and services of GERDAU PN N1 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 GERDAU PN N1 has relatively successful track record of launching new products.
Lack of clear differentiation of GERDAU PN N1 products
– To increase the profitability and margins on the products, GERDAU PN N1 needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of GERDAU PN N1 strategy
– From the outside it seems that the employees of GERDAU PN N1 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.
GERDAU PN N1 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of GERDAU PN N1 are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. GERDAU PN N1 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 GERDAU PN N1 in the Iron & Steel industry. Now GERDAU PN N1 can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– GERDAU PN N1 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.
Building a culture of innovation
– managers at GERDAU PN N1 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, GERDAU PN N1 is facing challenges because of the dominance of functional experts in the organization. GERDAU PN N1 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for GERDAU PN N1 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.
Using analytics as competitive advantage
– GERDAU PN N1 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 GERDAU PN N1 to build a competitive advantage using analytics. The analytics driven competitive advantage can help GERDAU PN N1 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, GERDAU PN N1 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 GERDAU PN N1 to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– GERDAU PN N1 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.
Learning at scale
– Online learning technologies has now opened space for GERDAU PN N1 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. GERDAU PN N1 can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects GERDAU PN N1 can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. GERDAU PN N1 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. GERDAU PN N1 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.
Threats GERDAU PN N1 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of GERDAU PN N1 are -
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. GERDAU PN N1 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.
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 GERDAU PN N1.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, GERDAU PN N1 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 GERDAU PN N1 prominent markets.
Environmental challenges
– GERDAU PN N1 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. GERDAU PN N1 can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
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.
Stagnating economy with rate increase
– GERDAU PN N1 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, GERDAU PN N1 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.
Technology acceleration in Forth Industrial Revolution
– GERDAU PN N1 has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, GERDAU PN N1 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.
Increasing wage structure of GERDAU PN N1
– 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 GERDAU PN N1.
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. GERDAU PN N1 needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that GERDAU PN N1 is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on GERDAU PN N1 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.
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. GERDAU PN N1 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of GERDAU PN N1 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at GERDAU PN N1 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 GERDAU PN N1 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 GERDAU PN N1 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 GERDAU PN N1 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 GERDAU PN N1 needs to make to build a sustainable competitive advantage.