SK Hynix Inc (660) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for SK Hynix Inc (South Korea)
Based on various researches at Oak Spring University , SK Hynix Inc is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, cloud computing is disrupting traditional business models, technology disruption,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SK Hynix Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SK Hynix Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SK Hynix Inc 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 SK Hynix Inc can be done for the following purposes –
1. Strategic planning of SK Hynix Inc
2. Improving business portfolio management of SK Hynix Inc
3. Assessing feasibility of the new initiative in South Korea
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of SK Hynix Inc
Strengths of SK Hynix Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SK Hynix Inc are -
Sustainable margins compare to other players in Semiconductors industry
– SK Hynix Inc has clearly differentiated products in the market place. This has enabled SK Hynix Inc to fetch slight price premium compare to the competitors in the Semiconductors industry. The sustainable margins have also helped SK Hynix Inc to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of SK Hynix Inc in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– SK Hynix Inc has one of the best training and development program in Technology 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.
High switching costs
– The high switching costs that SK Hynix Inc 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.
Effective Research and Development (R&D)
– SK Hynix Inc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – SK Hynix Inc staying ahead in the Semiconductors industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– SK Hynix Inc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. SK Hynix Inc 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.
High brand equity
– SK Hynix Inc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled SK Hynix Inc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- SK Hynix Inc 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 SK Hynix Inc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SK Hynix Inc emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of SK Hynix Inc in the Technology sector have low bargaining power. SK Hynix Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps SK Hynix Inc to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Semiconductors
– SK Hynix Inc is one of the leading players in the Semiconductors industry in South Korea. Over the years it has not only transformed the business landscape in the Semiconductors industry in South Korea but also across the existing markets. The ability to lead change has enabled SK Hynix Inc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For SK Hynix Inc digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. SK Hynix Inc 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.
Innovation driven organization
– SK Hynix Inc is one of the most innovative firm in Semiconductors sector.
Weaknesses of SK Hynix Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SK Hynix Inc are -
Compensation and incentives
– The revenue per employee of SK Hynix Inc is just above the Semiconductors 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 Semiconductors industry
– The stress on hiring functional specialists at SK Hynix Inc 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.
Ability to respond to the competition
– As the decision making is very deliberative at SK Hynix Inc, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. SK Hynix Inc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on SK Hynix Inc ‘s star products
– The top 2 products and services of SK Hynix Inc still accounts for major business revenue. This dependence on star products in Semiconductors industry has resulted into insufficient focus on developing new products, even though SK Hynix Inc has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that SK Hynix Inc needs to have more collaboration between its sales team and marketing team. Sales professionals in the Semiconductors industry have deep experience in developing customer relationships. Marketing department at SK Hynix Inc can leverage the sales team experience to cultivate customer relationships as SK Hynix Inc is planning to shift buying processes online.
No frontier risks strategy
– From the 10K / annual statement of SK Hynix Inc, it seems that company is thinking out the frontier risks that can impact Semiconductors 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.
Interest costs
– Compare to the competition, SK Hynix Inc 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.
Slow decision making process
– As mentioned earlier in the report, SK Hynix Inc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Semiconductors industry over the last five years. SK Hynix Inc 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.
Increasing silos among functional specialists
– The organizational structure of SK Hynix Inc is dominated by functional specialists. It is not different from other players in the Semiconductors industry, but SK Hynix Inc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help SK Hynix Inc to focus more on services in the Semiconductors industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, SK Hynix Inc needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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 SK Hynix Inc supply chain. Even after few cautionary changes, SK Hynix Inc is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left SK Hynix Inc vulnerable to further global disruptions in South East Asia.
SK Hynix Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SK Hynix Inc are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects SK Hynix Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for SK Hynix Inc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Semiconductors industry, and it will provide faster access to the consumers.
Developing new processes and practices
– SK Hynix Inc can develop new processes and procedures in Semiconductors industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, SK Hynix Inc can use these opportunities to build new business models that can help the communities that SK Hynix Inc operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
Use of Bitcoin and other crypto currencies for transactions in Semiconductors industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for SK Hynix Inc in the Semiconductors industry. Now SK Hynix Inc 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 SK Hynix Inc 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.
Better consumer reach
– The expansion of the 5G network will help SK Hynix Inc to increase its market reach. SK Hynix Inc 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, SK Hynix Inc 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.
Loyalty marketing
– SK Hynix Inc 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, SK Hynix Inc is facing challenges because of the dominance of functional experts in the organization. SK Hynix Inc can utilize new technology in the field of Semiconductors industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Semiconductors industry, but it has also influenced the consumer preferences. SK Hynix Inc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– SK Hynix Inc can use the latest technology developments to improve its manufacturing and designing process in Semiconductors 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Semiconductors industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. SK Hynix Inc 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. SK Hynix Inc 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 SK Hynix Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SK Hynix Inc are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents SK Hynix Inc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, SK Hynix Inc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Semiconductors sector.
Regulatory challenges
– SK Hynix Inc 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 Semiconductors industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, SK Hynix Inc 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 SK Hynix Inc prominent markets.
Technology acceleration in Forth Industrial Revolution
– SK Hynix Inc has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, SK Hynix Inc needs to keep up with the evolution of technology in the Semiconductors 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. SK Hynix Inc 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for SK Hynix Inc in Semiconductors industry. The Semiconductors 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.
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 SK Hynix Inc business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– SK Hynix Inc 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.
Shortening product life cycle
– it is one of the major threat that SK Hynix Inc is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– SK Hynix Inc 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. SK Hynix Inc can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
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. SK Hynix Inc needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Semiconductors industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. SK Hynix Inc 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 SK Hynix Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SK Hynix Inc 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 SK Hynix Inc 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 SK Hynix Inc 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 SK Hynix Inc 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 SK Hynix Inc needs to make to build a sustainable competitive advantage.
