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 – increasing transportation and logistics costs, technology disruption, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, there is backlash against globalization, geopolitical disruptions,
supply chains are disrupted by pandemic , increasing energy prices, 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 -
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.
Superior customer experience
– The customer experience strategy of Shinsegae in Retail (Department & Discount) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management in the Retail (Department & Discount) industry
– Shinsegae 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
- Shinsegae 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 Shinsegae is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Shinsegae emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Shinsegae in the Services sector have low bargaining power. Shinsegae has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shinsegae to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Shinsegae 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.
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.
Innovation driven organization
– Shinsegae is one of the most innovative firm in Retail (Department & Discount) sector.
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.
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.
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.
Training and development
– Shinsegae 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.
Weaknesses of Shinsegae | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shinsegae are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Shinsegae is slow explore the new channels of communication. These new channels of communication can help Shinsegae to provide better information regarding Retail (Department & Discount) products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Compensation and incentives
– The revenue per employee of Shinsegae is just above the Retail (Department & Discount) 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Shinsegae, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. Shinsegae has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Products dominated business model
– Even though Shinsegae has some of the most successful models in the Retail (Department & Discount) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Shinsegae should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of South Korea, Shinsegae needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Shinsegae products
– To increase the profitability and margins on the products, Shinsegae 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, 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.
Shinsegae Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shinsegae are -
Buying journey improvements
– Shinsegae 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shinsegae 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Shinsegae 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.
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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Shinsegae 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 Shinsegae to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Shinsegae 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.
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.
Threats Shinsegae External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shinsegae are -
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.
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.
Stagnating economy with rate increase
– Shinsegae 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 Retail (Department & Discount) industry.
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.
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 Shinsegae.
High dependence on third party suppliers
– Shinsegae 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.
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. Shinsegae 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Shinsegae 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.
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.
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.
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.
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.
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.