SK Telecom (17670) SWOT Analysis / TOWS Matrix / 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, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, wage bills are increasing, geopolitical disruptions, technology disruption, etc

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Introduction to SWOT Analysis of SK Telecom

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.

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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

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

The strengths of SK Telecom are -

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.

Superior customer experience

– The customer experience strategy of SK Telecom in Communications Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Ability to recruit top talent

– SK Telecom is one of the leading players in the Communications Services 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.

Strong track record of project management in the Communications Services industry

– SK Telecom 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 Communications Services industry

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

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.

Analytics focus

– SK Telecom 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 Communications Services 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.

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.

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 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.

Innovation driven organization

– SK Telecom is one of the most innovative firm in Communications Services sector.

Cross disciplinary teams

– Horizontal connected teams at the SK Telecom 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.

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

The weaknesses of SK Telecom are -

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.

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.

High cash cycle compare to competitors

SK Telecom has a high cash cycle compare to other players in the Communications Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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.

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.

Slow to strategic competitive environment developments

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

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.

Aligning sales with marketing

– From the outside it seems that SK Telecom needs to have more collaboration between its sales team and marketing team. Sales professionals in the Communications Services industry have deep experience in developing customer relationships. Marketing department at SK Telecom can leverage the sales team experience to cultivate customer relationships as SK Telecom is planning to shift buying processes online.

Workers concerns about automation

– As automation is fast increasing in the Communications Services industry, SK Telecom 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.

Increasing silos among functional specialists

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

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.

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

The opportunities of SK Telecom 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 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.

Manufacturing automation

– SK Telecom can use the latest technology developments to improve its manufacturing and designing process in Communications Services 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 SK Telecom can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

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.

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.

Loyalty marketing

– SK Telecom 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.

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.

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.

Using analytics as competitive advantage

– SK Telecom has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Services sector. This continuous investment in analytics has enabled SK Telecom to build a competitive advantage using analytics. The analytics driven competitive advantage can help SK Telecom to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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. SK Telecom 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 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.

Creating value in data economy

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

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Threats SK Telecom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of SK Telecom are -

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 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.

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.

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.

Barriers of entry lowering

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

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.

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.

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.

High dependence on third party suppliers

– SK Telecom 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.

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.

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.

Increasing wage structure of SK Telecom

– 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 SK Telecom.

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.

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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.

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