Nongshim (4370) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nongshim (South Korea)

Based on various researches at Oak Spring University , Nongshim is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Nongshim

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nongshim can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nongshim, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nongshim 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 Nongshim can be done for the following purposes –
1. Strategic planning of Nongshim
2. Improving business portfolio management of Nongshim
3. Assessing feasibility of the new initiative in South Korea
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nongshim

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

The strengths of Nongshim are -

Effective Research and Development (R&D)

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

Operational resilience

– The operational resilience strategy of Nongshim comprises – understanding the underlying the factors in the Food Processing 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.

Learning organization

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

Digital Transformation in Food Processing industry

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

High brand equity

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

Low bargaining power of suppliers

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

Cross disciplinary teams

– Horizontal connected teams at the Nongshim 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.

Highly skilled collaborators

– Nongshim has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Food Processing industry. Secondly the value chain collaborators of Nongshim have helped the firm to develop new products and bring them quickly to the marketplace.

Training and development

– Nongshim has one of the best training and development program in Consumer/Non-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.

Superior customer experience

– The customer experience strategy of Nongshim in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Sustainable margins compare to other players in Food Processing industry

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

Innovation driven organization

– Nongshim is one of the most innovative firm in Food Processing sector.

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

The weaknesses of Nongshim are -

Interest costs

– Compare to the competition, Nongshim 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.

Compensation and incentives

– The revenue per employee of Nongshim is just above the Food Processing 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 Nongshim is dominated by functional specialists. It is not different from other players in the Food Processing industry, but Nongshim needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nongshim to focus more on services in the Food Processing industry rather than just following the product oriented approach.

Skills based hiring in Food Processing industry

– The stress on hiring functional specialists at Nongshim 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.

Low market penetration in new markets

– Outside its home market of South Korea, Nongshim needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Workers concerns about automation

– As automation is fast increasing in the Food Processing industry, Nongshim 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.

Aligning sales with marketing

– From the outside it seems that Nongshim needs to have more collaboration between its sales team and marketing team. Sales professionals in the Food Processing industry have deep experience in developing customer relationships. Marketing department at Nongshim can leverage the sales team experience to cultivate customer relationships as Nongshim is planning to shift buying processes online.

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 Nongshim supply chain. Even after few cautionary changes, Nongshim is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nongshim vulnerable to further global disruptions in South East Asia.

High operating costs

– Compare to the competitors, Nongshim has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nongshim lucrative customers.

Employees’ less understanding of Nongshim strategy

– From the outside it seems that the employees of Nongshim 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.

Ability to respond to the competition

– As the decision making is very deliberative at Nongshim, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Nongshim has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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

The opportunities of Nongshim are -

Manufacturing automation

– Nongshim can use the latest technology developments to improve its manufacturing and designing process in Food Processing 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.

Buying journey improvements

– Nongshim can improve the customer journey of consumers in the Food Processing 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.

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 Nongshim 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.

Leveraging digital technologies

– Nongshim 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.

Using analytics as competitive advantage

– Nongshim has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Food Processing sector. This continuous investment in analytics has enabled Nongshim to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nongshim to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Use of Bitcoin and other crypto currencies for transactions in Food Processing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nongshim in the Food Processing industry. Now Nongshim can target international markets with far fewer capital restrictions requirements than the existing system.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Food Processing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nongshim 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. Nongshim 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nongshim to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nongshim to hire the very best people irrespective of their geographical location.

Low interest rates

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

Developing new processes and practices

– Nongshim can develop new processes and procedures in Food Processing 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. Nongshim can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Loyalty marketing

– Nongshim 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.

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. Nongshim can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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

The threats of Nongshim are -

Stagnating economy with rate increase

– Nongshim 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 Food Processing industry.

Easy access to finance

– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nongshim can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 Nongshim in the Food Processing sector and impact the bottomline of the organization.

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.

Shortening product life cycle

– it is one of the major threat that Nongshim is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. Nongshim needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.

Regulatory challenges

– Nongshim 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 Food Processing industry regulations.

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. Nongshim 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nongshim in Food Processing industry. The Food Processing 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.

Environmental challenges

– Nongshim 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. Nongshim can take advantage of this fund but it will also bring new competitors in the Food Processing industry.

Technology acceleration in Forth Industrial Revolution

– Nongshim has witnessed rapid integration of technology during Covid-19 in the Food Processing industry. As one of the leading players in the industry, Nongshim needs to keep up with the evolution of technology in the Food Processing 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 Nongshim.

Consumer confidence and its impact on Nongshim 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 Food Processing industry and other sectors.

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Weighted SWOT Analysis of Nongshim Template, Example

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

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