SK Telecom (17670) SWOT Analysis / TOWS Matrix / MBA Resources
Communications Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for SK Telecom (South Korea)
Based on various researches at Oak Spring University , SK Telecom is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, increasing energy prices,
increasing government debt because of Covid-19 spendings, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SK Telecom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SK Telecom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SK Telecom 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 Telecom can be done for the following purposes –
1. Strategic planning of SK Telecom
2. Improving business portfolio management of SK Telecom
3. Assessing feasibility of the new initiative in South Korea
4. Making a Communications Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of SK Telecom
Strengths of SK Telecom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SK Telecom are -
Successful track record of launching new products
– SK Telecom has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. SK Telecom 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
– SK Telecom 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.
Digital Transformation in Communications Services industry
- digital transformation varies from industry to industry. For SK Telecom digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. SK Telecom 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.
High switching costs
– The high switching costs that SK Telecom 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 Telecom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – SK Telecom staying ahead in the Communications Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– SK Telecom is one of the most innovative firm in Communications Services sector.
Diverse revenue streams
– SK Telecom is present in almost all the verticals within the Communications Services industry. This has provided SK Telecom 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.
Learning organization
- SK Telecom 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 Telecom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SK Telecom emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of SK Telecom comprises – understanding the underlying the factors in the Communications Services 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.
High brand equity
– SK Telecom has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled SK Telecom to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Communications Services
– SK Telecom is one of the leading players in the Communications Services industry in South Korea. Over the years it has not only transformed the business landscape in the Communications Services industry in South Korea but also across the existing markets. The ability to lead change has enabled SK Telecom in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– SK Telecom has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Services industry. Secondly the value chain collaborators of SK Telecom have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of SK Telecom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SK Telecom are -
No frontier risks strategy
– From the 10K / annual statement of SK Telecom, it seems that company is thinking out the frontier risks that can impact Communications Services 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 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 Telecom supply chain. Even after few cautionary changes, SK Telecom is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left SK Telecom vulnerable to further global disruptions in South East Asia.
Skills based hiring in Communications Services industry
– The stress on hiring functional specialists at SK Telecom 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.
Low market penetration in new markets
– Outside its home market of South Korea, SK Telecom needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, SK Telecom 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.
High operating costs
– Compare to the competitors, SK Telecom has high operating costs in the Communications Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract SK Telecom lucrative customers.
Employees’ less understanding of SK Telecom strategy
– From the outside it seems that the employees of SK Telecom 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.
Compensation and incentives
– The revenue per employee of SK Telecom is just above the Communications Services 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.
Lack of clear differentiation of SK Telecom products
– To increase the profitability and margins on the products, SK Telecom needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, SK Telecom 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 Communications Services industry using digital technology.
Products dominated business model
– Even though SK Telecom has some of the most successful models in the Communications Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. SK Telecom should strive to include more intangible value offerings along with its core products and services.
SK Telecom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SK Telecom are -
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 Telecom can use these opportunities to build new business models that can help the communities that SK Telecom operates in. Secondly it can use opportunities from government spending in Communications Services sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, SK Telecom 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for SK Telecom 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 SK Telecom to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help SK Telecom to increase its market reach. SK Telecom 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.
Use of Bitcoin and other crypto currencies for transactions in Communications Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for SK Telecom in the Communications Services industry. Now SK Telecom can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, SK Telecom can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help SK Telecom to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Telecom 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.
Building a culture of innovation
– managers at SK Telecom 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 Communications Services industry.
Leveraging digital technologies
– SK Telecom 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.
Learning at scale
– Online learning technologies has now opened space for SK Telecom 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, SK Telecom is facing challenges because of the dominance of functional experts in the organization. SK Telecom can utilize new technology in the field of Communications Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– SK Telecom can improve the customer journey of consumers in the Communications Services 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.
Developing new processes and practices
– SK Telecom can develop new processes and procedures in Communications Services 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.
Threats SK Telecom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SK Telecom are -
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 Telecom in the Communications Services sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for SK Telecom in Communications Services industry. The Communications Services 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.
Regulatory challenges
– SK Telecom 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 Communications Services industry regulations.
Environmental challenges
– SK Telecom 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 Telecom can take advantage of this fund but it will also bring new competitors in the Communications Services industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, SK Telecom 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 Telecom prominent markets.
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 Telecom business can come under increasing regulations regarding data privacy, data security, 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.
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 Telecom needs to understand the core reasons impacting the Communications Services industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, SK Telecom may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Services 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. SK Telecom 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.
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 SK Telecom.
Stagnating economy with rate increase
– SK Telecom 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 Communications Services industry.
Weighted SWOT Analysis of SK Telecom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SK Telecom 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 Telecom 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 Telecom 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 Telecom 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 Telecom needs to make to build a sustainable competitive advantage.