Phumelela (PHMJ) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Phumelela (South Africa)

Based on various researches at Oak Spring University , Phumelela is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Phumelela

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Phumelela can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Phumelela, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Phumelela 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 Phumelela can be done for the following purposes –
1. Strategic planning of Phumelela
2. Improving business portfolio management of Phumelela
3. Assessing feasibility of the new initiative in South Africa
4. Making a Recreational Activities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Phumelela

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

The strengths of Phumelela are -

Successful track record of launching new products

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

Training and development

– Phumelela has one of the best training and development program in Services 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

– Phumelela 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 Recreational Activities 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.

Operational resilience

– The operational resilience strategy of Phumelela comprises – understanding the underlying the factors in the Recreational Activities 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.

Learning organization

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

Effective Research and Development (R&D)

– Phumelela has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Phumelela staying ahead in the Recreational Activities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Sustainable margins compare to other players in Recreational Activities industry

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

Ability to recruit top talent

– Phumelela is one of the leading players in the Recreational Activities industry in South Africa. It is in a position to attract the best talent available in South Africa. The firm has a robust talent identification program that helps in identifying the brightest.

Cross disciplinary teams

– Horizontal connected teams at the Phumelela 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

– Phumelela is present in almost all the verticals within the Recreational Activities industry. This has provided Phumelela 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.

High brand equity

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

Ability to lead change in Recreational Activities

– Phumelela is one of the leading players in the Recreational Activities industry in South Africa. Over the years it has not only transformed the business landscape in the Recreational Activities industry in South Africa but also across the existing markets. The ability to lead change has enabled Phumelela in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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

The weaknesses of Phumelela are -

Employees’ less understanding of Phumelela strategy

– From the outside it seems that the employees of Phumelela 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.

High cash cycle compare to competitors

Phumelela has a high cash cycle compare to other players in the Recreational Activities 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 operating costs

– Compare to the competitors, Phumelela has high operating costs in the Recreational Activities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Phumelela lucrative customers.

No frontier risks strategy

– From the 10K / annual statement of Phumelela, it seems that company is thinking out the frontier risks that can impact Recreational Activities 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.

Increasing silos among functional specialists

– The organizational structure of Phumelela is dominated by functional specialists. It is not different from other players in the Recreational Activities industry, but Phumelela needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Phumelela to focus more on services in the Recreational Activities industry rather than just following the product oriented approach.

Slow decision making process

– As mentioned earlier in the report, Phumelela has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Recreational Activities industry over the last five years. Phumelela 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.

Lack of clear differentiation of Phumelela products

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

Capital Spending Reduction

– Even during the low interest decade, Phumelela 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 Recreational Activities industry using digital technology.

Slow to strategic competitive environment developments

– As Phumelela is one of the leading players in the Recreational Activities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Recreational Activities industry in last five years.

Compensation and incentives

– The revenue per employee of Phumelela is just above the Recreational Activities 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 Recreational Activities industry

– The stress on hiring functional specialists at Phumelela 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.

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

The opportunities of Phumelela are -

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 Phumelela 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Phumelela is facing challenges because of the dominance of functional experts in the organization. Phumelela can utilize new technology in the field of Recreational Activities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Leveraging digital technologies

– Phumelela 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.

Using analytics as competitive advantage

– Phumelela has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Recreational Activities sector. This continuous investment in analytics has enabled Phumelela to build a competitive advantage using analytics. The analytics driven competitive advantage can help Phumelela 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 Phumelela has opened avenues for new revenue streams for the organization in Recreational Activities industry. This can help Phumelela to build a more holistic ecosystem for Phumelela products in the Recreational Activities industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Building a culture of innovation

– managers at Phumelela 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 Recreational Activities industry.

Manufacturing automation

– Phumelela can use the latest technology developments to improve its manufacturing and designing process in Recreational Activities 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.

Reforming the budgeting process

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Phumelela can use these opportunities to build new business models that can help the communities that Phumelela operates in. Secondly it can use opportunities from government spending in Recreational Activities sector.

Buying journey improvements

– Phumelela can improve the customer journey of consumers in the Recreational Activities 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.

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Phumelela 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.

Better consumer reach

– The expansion of the 5G network will help Phumelela to increase its market reach. Phumelela 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 Phumelela External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Phumelela are -

Easy access to finance

– Easy access to finance in Recreational Activities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Phumelela can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 Phumelela in the Recreational Activities sector and impact the bottomline of the organization.

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Phumelela in Recreational Activities industry. The Recreational Activities 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.

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.

Increasing wage structure of Phumelela

– 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 Phumelela.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Recreational Activities industry are lowering. It can presents Phumelela with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Recreational Activities sector.

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. Phumelela 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 Phumelela is facing in Recreational Activities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Stagnating economy with rate increase

– Phumelela 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 Recreational Activities industry.

High dependence on third party suppliers

– Phumelela 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.

Consumer confidence and its impact on Phumelela 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 Recreational Activities industry and other sectors.

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.

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Weighted SWOT Analysis of Phumelela Template, Example

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

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