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 – technology disruption, there is increasing trade war between United States & China, geopolitical disruptions, increasing transportation and logistics costs, wage bills are increasing, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
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.
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.
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.
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.
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.
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.
Weaknesses of Shinsegae | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shinsegae are -
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.
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.
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.
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.
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 Shinsegae supply chain. Even after few cautionary changes, Shinsegae is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shinsegae vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
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 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.
Shinsegae Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shinsegae are -
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.
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.
Developing new processes and practices
– Shinsegae can develop new processes and procedures in Retail (Department & Discount) 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Shinsegae to increase its market reach. Shinsegae 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.
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.
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.
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.
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.
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.
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.
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.
Threats Shinsegae External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shinsegae are -
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. Shinsegae needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
