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 – increasing household debt because of falling income levels, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , 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 -
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.
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.
Organizational Resilience of SK Hynix Inc
– The covid-19 pandemic has put organizational resilience at the centre of everthing SK Hynix Inc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Ability to recruit top talent
– SK Hynix Inc is one of the leading players in the Semiconductors industry in South Korea. It is in a position to attract the best talent available in South Korea. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– SK Hynix Inc is one of the most innovative firm in Semiconductors sector.
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.
Operational resilience
– The operational resilience strategy of SK Hynix Inc comprises – understanding the underlying the factors in the Semiconductors 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.
Strong track record of project management in the Semiconductors industry
– SK Hynix Inc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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 -
Capital Spending Reduction
– Even during the low interest decade, SK Hynix Inc 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 Semiconductors industry using digital technology.
Low market penetration in new markets
– Outside its home market of South Korea, SK Hynix Inc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
High bargaining power of channel partners in Semiconductors industry
– because of the regulatory requirements in South Korea, SK Hynix Inc 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 Semiconductors industry.
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.
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.
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.
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.
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.
Lack of clear differentiation of SK Hynix Inc products
– To increase the profitability and margins on the products, SK Hynix Inc needs to provide more differentiated products than what it is currently offering in the marketplace.
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 -
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.
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.
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.
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.
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.
Leveraging digital technologies
– SK Hynix Inc 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.
Building a culture of innovation
– managers at SK Hynix Inc 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 Semiconductors industry.
Buying journey improvements
– SK Hynix Inc can improve the customer journey of consumers in the Semiconductors 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.
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 SK Hynix Inc 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 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.
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.
Creating value in data economy
– The success of analytics program of SK Hynix Inc has opened avenues for new revenue streams for the organization in Semiconductors industry. This can help SK Hynix Inc to build a more holistic ecosystem for SK Hynix Inc products in the Semiconductors industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 -
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.
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.
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.
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.
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.
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 SK Hynix Inc in the Semiconductors sector and impact the bottomline of the organization.
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.
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.
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.
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.
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.
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.
Consumer confidence and its impact on SK Hynix Inc 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 Semiconductors industry and other sectors.
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.