SK Innovation (96770) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for SK Innovation (South Korea)
Based on various researches at Oak Spring University , SK Innovation is operating in a macro-environment that has been destablized by – technology disruption, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, talent flight as more people leaving formal jobs,
central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SK Innovation can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SK Innovation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SK Innovation 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 Innovation can be done for the following purposes –
1. Strategic planning of SK Innovation
2. Improving business portfolio management of SK Innovation
3. Assessing feasibility of the new initiative in South Korea
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of SK Innovation
Strengths of SK Innovation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SK Innovation are -
Organizational Resilience of SK Innovation
– The covid-19 pandemic has put organizational resilience at the centre of everthing SK Innovation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– SK Innovation has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled SK Innovation to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– SK Innovation has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil & Gas Operations industry. Secondly the value chain collaborators of SK Innovation have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of SK Innovation comprises – understanding the underlying the factors in the Oil & Gas Operations 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.
Ability to lead change in Oil & Gas Operations
– SK Innovation is one of the leading players in the Oil & Gas Operations industry in South Korea. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in South Korea but also across the existing markets. The ability to lead change has enabled SK Innovation in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of SK Innovation in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the SK Innovation 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.
Analytics focus
– SK Innovation 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 Oil & Gas Operations 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.
Learning organization
- SK Innovation 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 Innovation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SK Innovation emphasize – knowledge, initiative, and innovation.
Training and development
– SK Innovation has one of the best training and development program in Energy 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 Oil & Gas Operations industry
- digital transformation varies from industry to industry. For SK Innovation digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. SK Innovation 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.
Strong track record of project management in the Oil & Gas Operations industry
– SK Innovation is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of SK Innovation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SK Innovation are -
No frontier risks strategy
– From the 10K / annual statement of SK Innovation, it seems that company is thinking out the frontier risks that can impact Oil & Gas Operations 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.
Lack of clear differentiation of SK Innovation products
– To increase the profitability and margins on the products, SK Innovation needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas Operations industry, SK Innovation 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 Innovation supply chain. Even after few cautionary changes, SK Innovation is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left SK Innovation vulnerable to further global disruptions in South East Asia.
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at SK Innovation 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.
Need for greater diversity
– SK Innovation 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.
Products dominated business model
– Even though SK Innovation has some of the most successful models in the Oil & Gas Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. SK Innovation should strive to include more intangible value offerings along with its core products and services.
High dependence on SK Innovation ‘s star products
– The top 2 products and services of SK Innovation still accounts for major business revenue. This dependence on star products in Oil & Gas Operations industry has resulted into insufficient focus on developing new products, even though SK Innovation has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at SK Innovation, in the dynamic environment of Oil & Gas Operations industry it has struggled to respond to the nimble upstart competition. SK Innovation has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that SK Innovation needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil & Gas Operations industry have deep experience in developing customer relationships. Marketing department at SK Innovation can leverage the sales team experience to cultivate customer relationships as SK Innovation is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of SK Innovation is just above the Oil & Gas Operations 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.
SK Innovation Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SK Innovation are -
Developing new processes and practices
– SK Innovation can develop new processes and procedures in Oil & Gas Operations 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for SK Innovation 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 Innovation to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of SK Innovation has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help SK Innovation to build a more holistic ecosystem for SK Innovation products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, SK Innovation 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, SK Innovation 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 Innovation to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. SK Innovation 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 Innovation 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.
Better consumer reach
– The expansion of the 5G network will help SK Innovation to increase its market reach. SK Innovation 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.
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 Innovation 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas Operations industry, but it has also influenced the consumer preferences. SK Innovation can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– SK Innovation has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas Operations sector. This continuous investment in analytics has enabled SK Innovation to build a competitive advantage using analytics. The analytics driven competitive advantage can help SK Innovation to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Innovation can use these opportunities to build new business models that can help the communities that SK Innovation operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects SK Innovation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– SK Innovation can improve the customer journey of consumers in the Oil & Gas Operations 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.
Threats SK Innovation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SK Innovation are -
Regulatory challenges
– SK Innovation 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 Oil & Gas Operations industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, SK Innovation 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 Innovation prominent markets.
Technology acceleration in Forth Industrial Revolution
– SK Innovation has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, SK Innovation needs to keep up with the evolution of technology in the Oil & Gas Operations 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.
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 Innovation in the Oil & Gas Operations sector and impact the bottomline of the organization.
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 Innovation may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Oil & Gas Operations sector.
Consumer confidence and its impact on SK Innovation 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 Oil & Gas Operations industry and other sectors.
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 Innovation business can come under increasing regulations regarding data privacy, data security, etc.
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 Innovation 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.
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 Innovation needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Oil & Gas Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. SK Innovation can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– SK Innovation 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.
Weighted SWOT Analysis of SK Innovation Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SK Innovation 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 Innovation 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 Innovation 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 Innovation 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 Innovation needs to make to build a sustainable competitive advantage.