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, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the GERDAU PN N1 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.
Diverse revenue streams
– GERDAU PN N1 is present in almost all the verticals within the Iron & Steel industry. This has provided GERDAU PN N1 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.
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.
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.
Superior customer experience
– The customer experience strategy of GERDAU PN N1 in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of GERDAU PN N1 in the Basic Materials sector have low bargaining power. GERDAU PN N1 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps GERDAU PN N1 to manage not only supply disruptions but also source products at highly competitive prices.
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 -
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.
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.
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 cash cycle compare to competitors
GERDAU PN N1 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.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in Brazil, GERDAU PN N1 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.
Aligning sales with marketing
– From the outside it seems that GERDAU PN N1 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 GERDAU PN N1 can leverage the sales team experience to cultivate customer relationships as GERDAU PN N1 is planning to shift buying processes online.
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.
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.
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.
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.
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.
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 -
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, GERDAU PN N1 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.
Leveraging digital technologies
– GERDAU PN N1 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.
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.
Better consumer reach
– The expansion of the 5G network will help GERDAU PN N1 to increase its market reach. GERDAU PN N1 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, GERDAU PN N1 can use these opportunities to build new business models that can help the communities that GERDAU PN N1 operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
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.
Loyalty marketing
– GERDAU PN N1 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.
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.
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.
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.
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 -
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents GERDAU PN N1 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Regulatory challenges
– GERDAU PN N1 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 Iron & Steel industry regulations.
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.
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.
High dependence on third party suppliers
– GERDAU PN N1 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.
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.
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.
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.
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.