SWOT Analysis / TOWS Matrix for Lotte Shopping (South Korea)
Based on various researches at Oak Spring University , Lotte Shopping is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, increasing commodity prices, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, there is backlash against globalization,
wage bills are increasing, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lotte Shopping can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lotte Shopping, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lotte Shopping 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 Shopping can be done for the following purposes –
1. Strategic planning of Lotte Shopping
2. Improving business portfolio management of Lotte Shopping
3. Assessing feasibility of the new initiative in South Korea
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lotte Shopping
Strengths of Lotte Shopping | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lotte Shopping are -
Learning organization
- Lotte Shopping 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 Shopping is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lotte Shopping emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Retail (Department & Discount) industry
– Lotte Shopping is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Lotte Shopping
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lotte Shopping does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Retail (Department & Discount) industry
– Lotte Shopping has clearly differentiated products in the market place. This has enabled Lotte Shopping to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped Lotte Shopping to invest into research and development (R&D) and innovation.
Ability to lead change in Retail (Department & Discount)
– Lotte Shopping is one of the leading players in the Retail (Department & Discount) industry in South Korea. Over the years it has not only transformed the business landscape in the Retail (Department & Discount) industry in South Korea but also across the existing markets. The ability to lead change has enabled Lotte Shopping in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Lotte Shopping comprises – understanding the underlying the factors in the Retail (Department & Discount) 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 switching costs
– The high switching costs that Lotte Shopping 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.
Low bargaining power of suppliers
– Suppliers of Lotte Shopping in the Services sector have low bargaining power. Lotte Shopping has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lotte Shopping to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For Lotte Shopping digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lotte Shopping 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.
Training and development
– Lotte Shopping 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.
Cross disciplinary teams
– Horizontal connected teams at the Lotte Shopping 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.
Innovation driven organization
– Lotte Shopping is one of the most innovative firm in Retail (Department & Discount) sector.
Weaknesses of Lotte Shopping | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lotte Shopping are -
Skills based hiring in Retail (Department & Discount) industry
– The stress on hiring functional specialists at Lotte Shopping 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.
Capital Spending Reduction
– Even during the low interest decade, Lotte Shopping 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 Retail (Department & Discount) industry using digital technology.
Employees’ less understanding of Lotte Shopping strategy
– From the outside it seems that the employees of Lotte Shopping 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.
Need for greater diversity
– Lotte Shopping 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.
Slow to strategic competitive environment developments
– As Lotte Shopping is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Lotte Shopping has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Department & Discount) industry over the last five years. Lotte Shopping 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.
Lack of clear differentiation of Lotte Shopping products
– To increase the profitability and margins on the products, Lotte Shopping needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Retail (Department & Discount) industry
– because of the regulatory requirements in South Korea, Lotte Shopping 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 Retail (Department & Discount) industry.
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 Shopping supply chain. Even after few cautionary changes, Lotte Shopping is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lotte Shopping vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Lotte Shopping is dominated by functional specialists. It is not different from other players in the Retail (Department & Discount) industry, but Lotte Shopping needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lotte Shopping to focus more on services in the Retail (Department & Discount) industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Lotte Shopping, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. Lotte Shopping has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lotte Shopping Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lotte Shopping are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lotte Shopping can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lotte Shopping 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 Lotte Shopping 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 Lotte Shopping to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Lotte Shopping 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lotte Shopping in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Department & Discount) industry, and it will provide faster access to the consumers.
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. Lotte Shopping can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Lotte Shopping to increase its market reach. Lotte Shopping 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.
Building a culture of innovation
– managers at Lotte Shopping 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 Retail (Department & Discount) industry.
Manufacturing automation
– Lotte Shopping can use the latest technology developments to improve its manufacturing and designing process in Retail (Department & Discount) 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Department & Discount) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lotte Shopping 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. Lotte Shopping 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.
Buying journey improvements
– Lotte Shopping can improve the customer journey of consumers in the Retail (Department & Discount) 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.
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 Shopping 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.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lotte Shopping in the Retail (Department & Discount) industry. Now Lotte Shopping can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Lotte Shopping External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lotte Shopping are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lotte Shopping in Retail (Department & Discount) industry. The Retail (Department & Discount) 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lotte Shopping may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Department & Discount) sector.
Technology acceleration in Forth Industrial Revolution
– Lotte Shopping has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, Lotte Shopping needs to keep up with the evolution of technology in the Retail (Department & Discount) 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.
High dependence on third party suppliers
– Lotte Shopping 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.
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 Shopping in the Retail (Department & Discount) sector and impact the bottomline of the organization.
Regulatory challenges
– Lotte Shopping 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 Retail (Department & Discount) industry regulations.
Consumer confidence and its impact on Lotte Shopping 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 Retail (Department & Discount) industry and other sectors.
Environmental challenges
– Lotte Shopping 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. Lotte Shopping can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
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 Shopping.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lotte Shopping 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 Shopping prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents Lotte Shopping with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) sector.
Easy access to finance
– Easy access to finance in Retail (Department & Discount) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lotte Shopping can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Shopping business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Lotte Shopping Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lotte Shopping 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 Shopping 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 Shopping 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 Shopping 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 Shopping needs to make to build a sustainable competitive advantage.
