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GERDAU ON (GGBR3) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for GERDAU ON (Brazil)


Based on various researches at Oak Spring University , GERDAU ON is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, there is backlash against globalization, wage bills are increasing, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc



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Introduction to SWOT Analysis of GERDAU ON


SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that GERDAU ON can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the GERDAU ON, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which GERDAU ON 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 ON can be done for the following purposes –
1. Strategic planning of GERDAU ON
2. Improving business portfolio management of GERDAU ON
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 ON




Strengths of GERDAU ON | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of GERDAU ON are -

Sustainable margins compare to other players in Iron & Steel industry

– GERDAU ON has clearly differentiated products in the market place. This has enabled GERDAU ON to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped GERDAU ON to invest into research and development (R&D) and innovation.

Digital Transformation in Iron & Steel industry

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

Diverse revenue streams

– GERDAU ON is present in almost all the verticals within the Iron & Steel industry. This has provided GERDAU ON 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.

Operational resilience

– The operational resilience strategy of GERDAU ON 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.

High switching costs

– The high switching costs that GERDAU ON 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

– GERDAU ON 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 GERDAU ON have helped the firm to develop new products and bring them quickly to the marketplace.

Learning organization

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

Innovation driven organization

– GERDAU ON is one of the most innovative firm in Iron & Steel sector.

Ability to lead change in Iron & Steel

– GERDAU ON 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 ON in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– GERDAU ON 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.

Analytics focus

– GERDAU ON 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.

Successful track record of launching new products

– GERDAU ON has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. GERDAU ON 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.






Weaknesses of GERDAU ON | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of GERDAU ON are -

Employees’ less understanding of GERDAU ON strategy

– From the outside it seems that the employees of GERDAU ON 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.

No frontier risks strategy

– From the 10K / annual statement of GERDAU ON, 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.

High cash cycle compare to competitors

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

Capital Spending Reduction

– Even during the low interest decade, GERDAU ON 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, GERDAU ON 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. GERDAU ON 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.

High dependence on GERDAU ON ‘s star products

– The top 2 products and services of GERDAU ON 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 ON has relatively successful track record of launching new products.

Skills based hiring in Iron & Steel industry

– The stress on hiring functional specialists at GERDAU ON 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 ON 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 ON needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to strategic competitive environment developments

– As GERDAU ON 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.




GERDAU ON Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis


The opportunities of GERDAU ON are -

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 ON 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 GERDAU ON to increase its market reach. GERDAU ON 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.

Using analytics as competitive advantage

– GERDAU ON 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 ON to build a competitive advantage using analytics. The analytics driven competitive advantage can help GERDAU ON to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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 GERDAU ON 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 Iron & Steel industry

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

Learning at scale

– Online learning technologies has now opened space for GERDAU ON 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.

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 ON 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 ON 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.

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 ON can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Remote work and new talent hiring opportunities

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

Loyalty marketing

– GERDAU ON 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.

Reforming the budgeting process

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

Creating value in data economy

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

Building a culture of innovation

– managers at GERDAU ON 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 GERDAU ON External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis


The threats of GERDAU ON are -

High dependence on third party suppliers

– GERDAU ON 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.

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 ON 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 ON.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, GERDAU ON 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 ON prominent markets.

Shortening product life cycle

– it is one of the major threat that GERDAU ON is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for GERDAU ON 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.

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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, GERDAU ON 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.

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 GERDAU ON business can come under increasing regulations regarding data privacy, data security, etc.

Environmental challenges

– GERDAU ON 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 ON can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.

Stagnating economy with rate increase

– GERDAU ON 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.

Regulatory challenges

– GERDAU ON 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.




Weighted SWOT Analysis of GERDAU ON Template, Example


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



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