Shinsegae (4170) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Shinsegae (South Korea)
Based on various researches at Oak Spring University , Shinsegae is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, there is backlash against globalization, increasing commodity prices, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google,
increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shinsegae can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shinsegae, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shinsegae 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 Shinsegae can be done for the following purposes –
1. Strategic planning of Shinsegae
2. Improving business portfolio management of Shinsegae
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 Shinsegae
Strengths of Shinsegae | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shinsegae are -
Diverse revenue streams
– Shinsegae is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided Shinsegae 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.
Cross disciplinary teams
– Horizontal connected teams at the Shinsegae 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.
Ability to lead change in Retail (Department & Discount)
– Shinsegae 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 Shinsegae in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Shinsegae
– The covid-19 pandemic has put organizational resilience at the centre of everthing Shinsegae 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
– Shinsegae has clearly differentiated products in the market place. This has enabled Shinsegae to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped Shinsegae to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Shinsegae has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Shinsegae staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Shinsegae has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shinsegae 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.
High brand equity
– Shinsegae has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shinsegae to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Shinsegae is one of the most innovative firm in Retail (Department & Discount) sector.
Ability to recruit top talent
– Shinsegae is one of the leading players in the Retail (Department & Discount) 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.
Highly skilled collaborators
– Shinsegae has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Department & Discount) industry. Secondly the value chain collaborators of Shinsegae have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For Shinsegae digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Shinsegae 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.
Weaknesses of Shinsegae | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shinsegae are -
Employees’ less understanding of Shinsegae strategy
– From the outside it seems that the employees of Shinsegae 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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Department & Discount) industry, Shinsegae 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.
High operating costs
– Compare to the competitors, Shinsegae has high operating costs in the Retail (Department & Discount) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Shinsegae lucrative customers.
High dependence on Shinsegae ‘s star products
– The top 2 products and services of Shinsegae still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though Shinsegae has relatively successful track record of launching new products.
Need for greater diversity
– Shinsegae 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 bargaining power of channel partners in Retail (Department & Discount) industry
– because of the regulatory requirements in South Korea, Shinsegae 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.
Interest costs
– Compare to the competition, Shinsegae 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.
Capital Spending Reduction
– Even during the low interest decade, Shinsegae 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.
No frontier risks strategy
– From the 10K / annual statement of Shinsegae, it seems that company is thinking out the frontier risks that can impact Retail (Department & Discount) 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.
Increasing silos among functional specialists
– The organizational structure of Shinsegae is dominated by functional specialists. It is not different from other players in the Retail (Department & Discount) industry, but Shinsegae needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Shinsegae to focus more on services in the Retail (Department & Discount) industry rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Shinsegae 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.
Shinsegae Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shinsegae are -
Using analytics as competitive advantage
– Shinsegae has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Department & Discount) sector. This continuous investment in analytics has enabled Shinsegae to build a competitive advantage using analytics. The analytics driven competitive advantage can help Shinsegae to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Shinsegae 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Shinsegae can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Shinsegae can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Shinsegae has opened avenues for new revenue streams for the organization in Retail (Department & Discount) industry. This can help Shinsegae to build a more holistic ecosystem for Shinsegae products in the Retail (Department & Discount) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Department & Discount) industry, but it has also influenced the consumer preferences. Shinsegae can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Shinsegae 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. Shinsegae 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.
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 Shinsegae 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 Shinsegae 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shinsegae can use these opportunities to build new business models that can help the communities that Shinsegae operates in. Secondly it can use opportunities from government spending in Retail (Department & Discount) sector.
Loyalty marketing
– Shinsegae 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
– Shinsegae 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.
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 Shinsegae in the Retail (Department & Discount) industry. Now Shinsegae can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Shinsegae External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shinsegae are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents Shinsegae 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.
Environmental challenges
– Shinsegae 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. Shinsegae can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Shinsegae 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 Shinsegae prominent markets.
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 Shinsegae in the Retail (Department & Discount) sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Shinsegae has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, Shinsegae 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.
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 Shinsegae business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Shinsegae 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Shinsegae 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.
Shortening product life cycle
– it is one of the major threat that Shinsegae is facing in Retail (Department & Discount) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Shinsegae
– 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 Shinsegae.
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. Shinsegae 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
– Shinsegae 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.
Weighted SWOT Analysis of Shinsegae Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Shinsegae 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 Shinsegae 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 Shinsegae 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 Shinsegae 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 Shinsegae needs to make to build a sustainable competitive advantage.