LG Chem (51915) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for LG Chem (South Korea)

Based on various researches at Oak Spring University , LG Chem is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , there is backlash against globalization, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of LG Chem

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

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

The strengths of LG Chem are -

Diverse revenue streams

– LG Chem is present in almost all the verticals within the Chemical Manufacturing industry. This has provided LG Chem 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.

Highly skilled collaborators

– LG Chem has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of LG Chem have helped the firm to develop new products and bring them quickly to the marketplace.

Learning organization

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

High brand equity

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

Sustainable margins compare to other players in Chemical Manufacturing industry

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

Superior customer experience

– The customer experience strategy of LG Chem in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that LG Chem 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.

Strong track record of project management in the Chemical Manufacturing industry

– LG Chem is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

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

Digital Transformation in Chemical Manufacturing industry

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

Analytics focus

– LG Chem 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 Chemical Manufacturing industry. The technology infrastructure of South Korea 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.

Low bargaining power of suppliers

– Suppliers of LG Chem in the Basic Materials sector have low bargaining power. LG Chem has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps LG Chem to manage not only supply disruptions but also source products at highly competitive prices.

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

The weaknesses of LG Chem are -

Employees’ less understanding of LG Chem strategy

– From the outside it seems that the employees of LG Chem 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 LG Chem, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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 bargaining power of channel partners in Chemical Manufacturing industry

– because of the regulatory requirements in South Korea, LG Chem 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 Chemical Manufacturing industry.

Products dominated business model

– Even though LG Chem has some of the most successful models in the Chemical Manufacturing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. LG Chem should strive to include more intangible value offerings along with its core products and services.

Ability to respond to the competition

– As the decision making is very deliberative at LG Chem, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. LG Chem has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at LG Chem 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 LG Chem is just above the Chemical Manufacturing 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 dependence on LG Chem ‘s star products

– The top 2 products and services of LG Chem still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though LG Chem has relatively successful track record of launching new products.

Need for greater diversity

– LG Chem 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.

Slow to strategic competitive environment developments

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

Capital Spending Reduction

– Even during the low interest decade, LG Chem 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 Chemical Manufacturing industry using digital technology.

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

The opportunities of LG Chem are -

Low interest rates

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

Creating value in data economy

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

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 LG Chem 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 LG Chem can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Developing new processes and practices

– LG Chem can develop new processes and procedures in Chemical Manufacturing 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for LG Chem in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.

Better consumer reach

– The expansion of the 5G network will help LG Chem to increase its market reach. LG Chem 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.

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

Learning at scale

– Online learning technologies has now opened space for LG Chem 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.

Buying journey improvements

– LG Chem can improve the customer journey of consumers in the Chemical Manufacturing 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, LG Chem is facing challenges because of the dominance of functional experts in the organization. LG Chem can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, LG Chem can use these opportunities to build new business models that can help the communities that LG Chem operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

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

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Threats LG Chem External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of LG Chem are -

Technology acceleration in Forth Industrial Revolution

– LG Chem has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, LG Chem needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

Increasing wage structure of LG Chem

– 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 LG Chem.

Shortening product life cycle

– it is one of the major threat that LG Chem is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, LG Chem may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

Stagnating economy with rate increase

– LG Chem 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 Chemical Manufacturing industry.

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 LG Chem.

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.

Consumer confidence and its impact on LG Chem 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 Chemical Manufacturing industry and other sectors.

Regulatory challenges

– LG Chem 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 Chemical Manufacturing industry regulations.

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.

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 LG Chem 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 LG Chem in Chemical Manufacturing industry. The Chemical Manufacturing 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 Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. LG Chem can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of LG Chem Template, Example

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

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