SWOT Analysis / TOWS Matrix for Lotte Confectionery (South Korea)
Based on various researches at Oak Spring University , Lotte Confectionery is operating in a macro-environment that has been destablized by – technology disruption, wage bills are increasing, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, increasing energy prices, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models,
increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Lotte Confectionery
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lotte Confectionery can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lotte Confectionery, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lotte Confectionery 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 Lotte Confectionery can be done for the following purposes –
1. Strategic planning of Lotte Confectionery
2. Improving business portfolio management of Lotte Confectionery
3. Assessing feasibility of the new initiative in South Korea
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lotte Confectionery
Strengths of Lotte Confectionery | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lotte Confectionery are -
Analytics focus
– Lotte Confectionery 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 Food Processing 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 Food Processing
– Lotte Confectionery is one of the leading players in the Food Processing industry in South Korea. Over the years it has not only transformed the business landscape in the Food Processing industry in South Korea but also across the existing markets. The ability to lead change has enabled Lotte Confectionery in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Lotte Confectionery in the Consumer/Non-Cyclical sector have low bargaining power. Lotte Confectionery has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lotte Confectionery to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Lotte Confectionery is present in almost all the verticals within the Food Processing industry. This has provided Lotte Confectionery 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
- Lotte Confectionery 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 Lotte Confectionery is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lotte Confectionery emphasize – knowledge, initiative, and innovation.
High brand equity
– Lotte Confectionery has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lotte Confectionery to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Food Processing industry
– Lotte Confectionery 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 Food Processing industry
– Lotte Confectionery has clearly differentiated products in the market place. This has enabled Lotte Confectionery to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Lotte Confectionery to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Lotte Confectionery has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lotte Confectionery staying ahead in the Food Processing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Lotte Confectionery has one of the best training and development program in Consumer/Non-Cyclical 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.
Superior customer experience
– The customer experience strategy of Lotte Confectionery in Food Processing 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 Lotte Confectionery 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.
Weaknesses of Lotte Confectionery | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lotte Confectionery are -
Need for greater diversity
– Lotte Confectionery 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.
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 Lotte Confectionery supply chain. Even after few cautionary changes, Lotte Confectionery is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lotte Confectionery vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Lotte Confectionery, it seems that company is thinking out the frontier risks that can impact Food Processing 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 Food Processing industry
– because of the regulatory requirements in South Korea, Lotte Confectionery 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 Food Processing industry.
Capital Spending Reduction
– Even during the low interest decade, Lotte Confectionery 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 Food Processing industry using digital technology.
Interest costs
– Compare to the competition, Lotte Confectionery 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.
Slow to strategic competitive environment developments
– As Lotte Confectionery is one of the leading players in the Food Processing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Food Processing industry in last five years.
High dependence on Lotte Confectionery ‘s star products
– The top 2 products and services of Lotte Confectionery still accounts for major business revenue. This dependence on star products in Food Processing industry has resulted into insufficient focus on developing new products, even though Lotte Confectionery has relatively successful track record of launching new products.
High cash cycle compare to competitors
Lotte Confectionery has a high cash cycle compare to other players in the Food Processing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Lotte Confectionery needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at Lotte Confectionery can leverage the sales team experience to cultivate customer relationships as Lotte Confectionery is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Lotte Confectionery has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Food Processing industry over the last five years. Lotte Confectionery even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lotte Confectionery Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lotte Confectionery 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 Lotte Confectionery 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.
Buying journey improvements
– Lotte Confectionery can improve the customer journey of consumers in the Food Processing 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.
Better consumer reach
– The expansion of the 5G network will help Lotte Confectionery to increase its market reach. Lotte Confectionery 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. Lotte Confectionery can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Lotte Confectionery 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lotte Confectionery 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 Lotte Confectionery to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lotte Confectionery in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Food Processing industry, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Lotte Confectionery 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 Food Processing industry.
Creating value in data economy
– The success of analytics program of Lotte Confectionery has opened avenues for new revenue streams for the organization in Food Processing industry. This can help Lotte Confectionery to build a more holistic ecosystem for Lotte Confectionery products in the Food Processing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Lotte Confectionery can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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.
Leveraging digital technologies
– Lotte Confectionery 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lotte Confectionery 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.
Using analytics as competitive advantage
– Lotte Confectionery has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Lotte Confectionery to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lotte Confectionery to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Lotte Confectionery External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lotte Confectionery are -
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 Lotte Confectionery in the Food Processing sector and impact the bottomline of the organization.
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 Lotte Confectionery 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. Lotte Confectionery 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. Lotte Confectionery needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lotte Confectionery 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 Lotte Confectionery prominent markets.
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 Lotte Confectionery.
Regulatory challenges
– Lotte Confectionery 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 Food Processing industry regulations.
Shortening product life cycle
– it is one of the major threat that Lotte Confectionery is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Lotte Confectionery
– 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 Lotte Confectionery.
Technology acceleration in Forth Industrial Revolution
– Lotte Confectionery has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Lotte Confectionery needs to keep up with the evolution of technology in the Food Processing 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Lotte Confectionery with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
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 dependence on third party suppliers
– Lotte Confectionery 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 Lotte Confectionery Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lotte Confectionery 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 Lotte Confectionery 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 Lotte Confectionery 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 Lotte Confectionery 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 Lotte Confectionery needs to make to build a sustainable competitive advantage.
