Merafe (MRFJ) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Merafe (South Africa)
Based on various researches at Oak Spring University , Merafe is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing energy prices, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing transportation and logistics costs, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Merafe can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merafe, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merafe 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 Merafe can be done for the following purposes –
1. Strategic planning of Merafe
2. Improving business portfolio management of Merafe
3. Assessing feasibility of the new initiative in South Africa
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merafe
Strengths of Merafe | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merafe are -
Superior customer experience
– The customer experience strategy of Merafe in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Merafe 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 South Africa 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.
Training and development
– Merafe 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.
Organizational Resilience of Merafe
– The covid-19 pandemic has put organizational resilience at the centre of everthing Merafe does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Merafe is one of the most innovative firm in Iron & Steel sector.
Strong track record of project management in the Iron & Steel industry
– Merafe is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Merafe 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.
Learning organization
- Merafe 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 Merafe is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Merafe emphasize – knowledge, initiative, and innovation.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For Merafe digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Merafe 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.
Sustainable margins compare to other players in Iron & Steel industry
– Merafe has clearly differentiated products in the market place. This has enabled Merafe to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Merafe to invest into research and development (R&D) and innovation.
Ability to lead change in Iron & Steel
– Merafe is one of the leading players in the Iron & Steel industry in South Africa. Over the years it has not only transformed the business landscape in the Iron & Steel industry in South Africa but also across the existing markets. The ability to lead change has enabled Merafe in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Merafe has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merafe to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Merafe | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merafe are -
Products dominated business model
– Even though Merafe 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. Merafe should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in South Africa, Merafe 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.
Lack of clear differentiation of Merafe products
– To increase the profitability and margins on the products, Merafe needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Merafe 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.
Compensation and incentives
– The revenue per employee of Merafe 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.
High operating costs
– Compare to the competitors, Merafe has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Merafe lucrative customers.
High dependence on Merafe ‘s star products
– The top 2 products and services of Merafe 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 Merafe has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Merafe 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.
Ability to respond to the competition
– As the decision making is very deliberative at Merafe, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Merafe has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Merafe strategy
– From the outside it seems that the employees of Merafe 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.
Need for greater diversity
– Merafe 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.
Merafe Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merafe are -
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. Merafe 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. Merafe 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.
Learning at scale
– Online learning technologies has now opened space for Merafe 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.
Manufacturing automation
– Merafe 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.
Loyalty marketing
– Merafe 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.
Buying journey improvements
– Merafe 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 Merafe 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.
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 Merafe in the Iron & Steel industry. Now Merafe can target international markets with far fewer capital restrictions requirements than the existing system.
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. Merafe can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Merafe 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Merafe can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Merafe 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 Merafe to hire the very best people irrespective of their geographical location.
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. Merafe can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Merafe 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.
Threats Merafe External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merafe are -
Consumer confidence and its impact on Merafe 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.
Shortening product life cycle
– it is one of the major threat that Merafe is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Merafe.
Increasing wage structure of Merafe
– 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 Merafe.
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 Merafe in the Iron & Steel sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Merafe 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
– Merafe has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Merafe 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. Merafe 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Merafe 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.
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. Merafe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Merafe 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. Merafe can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Regulatory challenges
– Merafe 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, Merafe 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 Merafe prominent markets.
Weighted SWOT Analysis of Merafe Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Merafe 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 Merafe 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 Merafe 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 Merafe 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 Merafe needs to make to build a sustainable competitive advantage.