SWOT Analysis / TOWS Matrix for Hankook Tire (South Korea)
Based on various researches at Oak Spring University , Hankook Tire is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, there is increasing trade war between United States & China, increasing commodity prices, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%,
increasing transportation and logistics costs, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hankook Tire can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hankook Tire, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hankook Tire 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 Hankook Tire can be done for the following purposes –
1. Strategic planning of Hankook Tire
2. Improving business portfolio management of Hankook Tire
3. Assessing feasibility of the new initiative in South Korea
4. Making a Tires sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hankook Tire
Strengths of Hankook Tire | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hankook Tire are -
Learning organization
- Hankook Tire 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 Hankook Tire is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hankook Tire emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Hankook Tire has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hankook Tire 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.
Strong track record of project management in the Tires industry
– Hankook Tire is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Hankook Tire is one of the most innovative firm in Tires sector.
High switching costs
– The high switching costs that Hankook Tire 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.
Training and development
– Hankook Tire has one of the best training and development program in Consumer 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.
Highly skilled collaborators
– Hankook Tire has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tires industry. Secondly the value chain collaborators of Hankook Tire have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Hankook Tire is one of the leading players in the Tires 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.
High brand equity
– Hankook Tire has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hankook Tire to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Hankook Tire in Tires industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Hankook Tire is present in almost all the verticals within the Tires industry. This has provided Hankook Tire 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.
Analytics focus
– Hankook Tire 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 Tires 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.
Weaknesses of Hankook Tire | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hankook Tire are -
Compensation and incentives
– The revenue per employee of Hankook Tire is just above the Tires 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hankook Tire is slow explore the new channels of communication. These new channels of communication can help Hankook Tire to provide better information regarding Tires products and services. It can also build an online community to further reach out to potential customers.
High dependence on Hankook Tire ‘s star products
– The top 2 products and services of Hankook Tire still accounts for major business revenue. This dependence on star products in Tires industry has resulted into insufficient focus on developing new products, even though Hankook Tire has relatively successful track record of launching new products.
Need for greater diversity
– Hankook Tire 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.
Skills based hiring in Tires industry
– The stress on hiring functional specialists at Hankook Tire 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, Hankook Tire 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 Tires industry using digital technology.
High operating costs
– Compare to the competitors, Hankook Tire has high operating costs in the Tires industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hankook Tire lucrative customers.
Low market penetration in new markets
– Outside its home market of South Korea, Hankook Tire needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Hankook Tire has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tires industry over the last five years. Hankook Tire 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.
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 Hankook Tire supply chain. Even after few cautionary changes, Hankook Tire is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hankook Tire vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Hankook Tire has a high cash cycle compare to other players in the Tires industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Hankook Tire Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hankook Tire are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Hankook Tire 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hankook Tire is facing challenges because of the dominance of functional experts in the organization. Hankook Tire can utilize new technology in the field of Tires industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hankook Tire 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
– Hankook Tire can improve the customer journey of consumers in the Tires 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hankook Tire can use these opportunities to build new business models that can help the communities that Hankook Tire operates in. Secondly it can use opportunities from government spending in Tires sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hankook Tire in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tires industry, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Hankook Tire 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 Tires industry.
Better consumer reach
– The expansion of the 5G network will help Hankook Tire to increase its market reach. Hankook Tire 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.
Loyalty marketing
– Hankook Tire 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.
Manufacturing automation
– Hankook Tire can use the latest technology developments to improve its manufacturing and designing process in Tires 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.
Use of Bitcoin and other crypto currencies for transactions in Tires industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hankook Tire in the Tires industry. Now Hankook Tire can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Hankook Tire has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tires sector. This continuous investment in analytics has enabled Hankook Tire to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hankook Tire to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Hankook Tire has opened avenues for new revenue streams for the organization in Tires industry. This can help Hankook Tire to build a more holistic ecosystem for Hankook Tire products in the Tires industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Hankook Tire External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hankook Tire are -
Technology acceleration in Forth Industrial Revolution
– Hankook Tire has witnessed rapid integration of technology during Covid-19 in the Tires industry. As one of the leading players in the industry, Hankook Tire needs to keep up with the evolution of technology in the Tires 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 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. Hankook Tire needs to understand the core reasons impacting the Tires industry. This will help it in building a better workplace.
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. Hankook Tire 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hankook Tire may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tires sector.
Stagnating economy with rate increase
– Hankook Tire 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 Tires industry.
Increasing wage structure of Hankook Tire
– 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 Hankook Tire.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tires industry are lowering. It can presents Hankook Tire with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tires sector.
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 Hankook Tire in the Tires 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 Hankook Tire business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Hankook Tire 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 Tires industry and other sectors.
Easy access to finance
– Easy access to finance in Tires industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hankook Tire can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Hankook Tire 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. Hankook Tire can take advantage of this fund but it will also bring new competitors in the Tires industry.
Weighted SWOT Analysis of Hankook Tire Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hankook Tire 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 Hankook Tire 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 Hankook Tire 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 Hankook Tire 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 Hankook Tire needs to make to build a sustainable competitive advantage.