Korea Aerospac (47810) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Korea Aerospac (South Korea)

Based on various researches at Oak Spring University , Korea Aerospac is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , there is backlash against globalization, increasing commodity prices, etc

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Introduction to SWOT Analysis of Korea Aerospac

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Korea Aerospac can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Korea Aerospac, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Korea Aerospac 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Korea Aerospac can be done for the following purposes –
1. Strategic planning of Korea Aerospac
2. Improving business portfolio management of Korea Aerospac
3. Assessing feasibility of the new initiative in South Korea
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Korea Aerospac

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Strengths of Korea Aerospac | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Korea Aerospac are -

Ability to recruit top talent

– Korea Aerospac is one of the leading players in the Aerospace & Defense 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.

Successful track record of launching new products

– Korea Aerospac has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Korea Aerospac 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.

Diverse revenue streams

– Korea Aerospac is present in almost all the verticals within the Aerospace & Defense industry. This has provided Korea Aerospac 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.

Strong track record of project management in the Aerospace & Defense industry

– Korea Aerospac is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Learning organization

- Korea Aerospac 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 Korea Aerospac is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Korea Aerospac emphasize – knowledge, initiative, and innovation.

Digital Transformation in Aerospace & Defense industry

- digital transformation varies from industry to industry. For Korea Aerospac digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Korea Aerospac 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.

Sustainable margins compare to other players in Aerospace & Defense industry

– Korea Aerospac has clearly differentiated products in the market place. This has enabled Korea Aerospac to fetch slight price premium compare to the competitors in the Aerospace & Defense industry. The sustainable margins have also helped Korea Aerospac to invest into research and development (R&D) and innovation.

High brand equity

– Korea Aerospac has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Korea Aerospac to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Training and development

– Korea Aerospac has one of the best training and development program in Capital Goods 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.

Effective Research and Development (R&D)

– Korea Aerospac has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Korea Aerospac staying ahead in the Aerospace & Defense industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Low bargaining power of suppliers

– Suppliers of Korea Aerospac in the Capital Goods sector have low bargaining power. Korea Aerospac has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Korea Aerospac to manage not only supply disruptions but also source products at highly competitive prices.

High switching costs

– The high switching costs that Korea Aerospac 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.

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Weaknesses of Korea Aerospac | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Korea Aerospac are -

High bargaining power of channel partners in Aerospace & Defense industry

– because of the regulatory requirements in South Korea, Korea Aerospac 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 Aerospace & Defense industry.

Interest costs

– Compare to the competition, Korea Aerospac 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.

High dependence on Korea Aerospac ‘s star products

– The top 2 products and services of Korea Aerospac still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though Korea Aerospac has relatively successful track record of launching new products.

Slow decision making process

– As mentioned earlier in the report, Korea Aerospac has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Aerospace & Defense industry over the last five years. Korea Aerospac 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 Korea Aerospac products

– To increase the profitability and margins on the products, Korea Aerospac needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Korea Aerospac strategy

– From the outside it seems that the employees of Korea Aerospac 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.

No frontier risks strategy

– From the 10K / annual statement of Korea Aerospac, it seems that company is thinking out the frontier risks that can impact Aerospace & Defense 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.

Compensation and incentives

– The revenue per employee of Korea Aerospac is just above the Aerospace & Defense 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.

Capital Spending Reduction

– Even during the low interest decade, Korea Aerospac 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 Aerospace & Defense industry using digital technology.

High cash cycle compare to competitors

Korea Aerospac has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Need for greater diversity

– Korea Aerospac 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.

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Korea Aerospac Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Korea Aerospac 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 Korea Aerospac 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

– Korea Aerospac can improve the customer journey of consumers in the Aerospace & Defense 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.

Learning at scale

– Online learning technologies has now opened space for Korea Aerospac 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Korea Aerospac 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. Korea Aerospac 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Korea Aerospac 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Korea Aerospac in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Creating value in data economy

– The success of analytics program of Korea Aerospac has opened avenues for new revenue streams for the organization in Aerospace & Defense industry. This can help Korea Aerospac to build a more holistic ecosystem for Korea Aerospac products in the Aerospace & Defense industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Korea Aerospac can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Developing new processes and practices

– Korea Aerospac can develop new processes and procedures in Aerospace & Defense 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Korea Aerospac is facing challenges because of the dominance of functional experts in the organization. Korea Aerospac can utilize new technology in the field of Aerospace & Defense industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Manufacturing automation

– Korea Aerospac can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense 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

– Korea Aerospac 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Korea Aerospac 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 Korea Aerospac to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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Threats Korea Aerospac External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Korea Aerospac are -

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. Korea Aerospac 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.

Environmental challenges

– Korea Aerospac 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. Korea Aerospac can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

Stagnating economy with rate increase

– Korea Aerospac 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 Aerospace & Defense industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Korea Aerospac with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Korea Aerospac in Aerospace & Defense industry. The Aerospace & Defense 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.

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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Korea Aerospac 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 Korea Aerospac prominent markets.

Increasing wage structure of Korea Aerospac

– 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 Korea Aerospac.

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 Korea Aerospac in the Aerospace & Defense 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 Korea Aerospac business can come under increasing regulations regarding data privacy, data security, etc.

Shortening product life cycle

– it is one of the major threat that Korea Aerospac is facing in Aerospace & Defense sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Regulatory challenges

– Korea Aerospac 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 Aerospace & Defense industry regulations.

High dependence on third party suppliers

– Korea Aerospac 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.

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Weighted SWOT Analysis of Korea Aerospac Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Korea Aerospac 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 Korea Aerospac 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 Korea Aerospac 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 Korea Aerospac 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 Korea Aerospac needs to make to build a sustainable competitive advantage.

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