SWOT Analysis / TOWS Matrix for KT&G Corp (South Korea)
Based on various researches at Oak Spring University , KT&G Corp is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, there is backlash against globalization, 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%, wage bills are increasing, geopolitical disruptions, increasing commodity prices,
increasing transportation and logistics costs, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that KT&G Corp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the KT&G Corp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which KT&G Corp 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 KT&G Corp can be done for the following purposes –
1. Strategic planning of KT&G Corp
2. Improving business portfolio management of KT&G Corp
3. Assessing feasibility of the new initiative in South Korea
4. Making a Tobacco sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of KT&G Corp
Strengths of KT&G Corp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of KT&G Corp are -
Low bargaining power of suppliers
– Suppliers of KT&G Corp in the Consumer/Non-Cyclical sector have low bargaining power. KT&G Corp has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps KT&G Corp to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the KT&G Corp 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.
Organizational Resilience of KT&G Corp
– The covid-19 pandemic has put organizational resilience at the centre of everthing KT&G Corp does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Tobacco industry
– KT&G Corp is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of KT&G Corp in Tobacco industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- KT&G Corp 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 KT&G Corp is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at KT&G Corp emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– KT&G Corp has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. KT&G Corp 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.
Sustainable margins compare to other players in Tobacco industry
– KT&G Corp has clearly differentiated products in the market place. This has enabled KT&G Corp to fetch slight price premium compare to the competitors in the Tobacco industry. The sustainable margins have also helped KT&G Corp to invest into research and development (R&D) and innovation.
Digital Transformation in Tobacco industry
- digital transformation varies from industry to industry. For KT&G Corp digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. KT&G Corp 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.
Highly skilled collaborators
– KT&G Corp has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tobacco industry. Secondly the value chain collaborators of KT&G Corp have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– KT&G Corp is one of the leading players in the Tobacco 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.
Ability to lead change in Tobacco
– KT&G Corp is one of the leading players in the Tobacco industry in South Korea. Over the years it has not only transformed the business landscape in the Tobacco industry in South Korea but also across the existing markets. The ability to lead change has enabled KT&G Corp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of KT&G Corp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of KT&G Corp are -
Aligning sales with marketing
– From the outside it seems that KT&G Corp needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tobacco industry have deep experience in developing customer relationships. Marketing department at KT&G Corp can leverage the sales team experience to cultivate customer relationships as KT&G Corp is planning to shift buying processes online.
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 KT&G Corp supply chain. Even after few cautionary changes, KT&G Corp is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left KT&G Corp vulnerable to further global disruptions in South East Asia.
Skills based hiring in Tobacco industry
– The stress on hiring functional specialists at KT&G Corp 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 bargaining power of channel partners in Tobacco industry
– because of the regulatory requirements in South Korea, KT&G Corp 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 Tobacco industry.
Increasing silos among functional specialists
– The organizational structure of KT&G Corp is dominated by functional specialists. It is not different from other players in the Tobacco industry, but KT&G Corp needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help KT&G Corp to focus more on services in the Tobacco industry rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Tobacco industry, KT&G Corp 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.
Lack of clear differentiation of KT&G Corp products
– To increase the profitability and margins on the products, KT&G Corp needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of South Korea, KT&G Corp needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of KT&G Corp strategy
– From the outside it seems that the employees of KT&G Corp 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.
High dependence on KT&G Corp ‘s star products
– The top 2 products and services of KT&G Corp still accounts for major business revenue. This dependence on star products in Tobacco industry has resulted into insufficient focus on developing new products, even though KT&G Corp has relatively successful track record of launching new products.
Need for greater diversity
– KT&G Corp 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.
KT&G Corp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of KT&G Corp are -
Leveraging digital technologies
– KT&G Corp 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.
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 KT&G Corp 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.
Learning at scale
– Online learning technologies has now opened space for KT&G Corp 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects KT&G Corp can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for KT&G Corp in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tobacco industry, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, KT&G Corp 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 KT&G Corp to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, KT&G Corp can use these opportunities to build new business models that can help the communities that KT&G Corp operates in. Secondly it can use opportunities from government spending in Tobacco sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tobacco industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. KT&G Corp 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. KT&G Corp 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.
Creating value in data economy
– The success of analytics program of KT&G Corp has opened avenues for new revenue streams for the organization in Tobacco industry. This can help KT&G Corp to build a more holistic ecosystem for KT&G Corp products in the Tobacco industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at KT&G Corp 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 Tobacco industry.
Using analytics as competitive advantage
– KT&G Corp has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tobacco sector. This continuous investment in analytics has enabled KT&G Corp to build a competitive advantage using analytics. The analytics driven competitive advantage can help KT&G Corp to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, KT&G Corp 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.
Buying journey improvements
– KT&G Corp can improve the customer journey of consumers in the Tobacco 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 KT&G Corp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of KT&G Corp are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, KT&G Corp 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 KT&G Corp prominent markets.
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.
Increasing wage structure of KT&G Corp
– 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 KT&G Corp.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, KT&G Corp may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tobacco sector.
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 KT&G Corp business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– KT&G Corp 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. KT&G Corp can take advantage of this fund but it will also bring new competitors in the Tobacco industry.
Easy access to finance
– Easy access to finance in Tobacco industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. KT&G Corp can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– KT&G Corp 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 Tobacco 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.
Stagnating economy with rate increase
– KT&G Corp 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 Tobacco industry.
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. KT&G Corp 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 dependence on third party suppliers
– KT&G Corp 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.
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. KT&G Corp needs to understand the core reasons impacting the Tobacco industry. This will help it in building a better workplace.
Weighted SWOT Analysis of KT&G Corp Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at KT&G Corp 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 KT&G Corp 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 KT&G Corp 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 KT&G Corp 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 KT&G Corp needs to make to build a sustainable competitive advantage.
