SWOT Analysis / TOWS Matrix for Kumho Tire (South Korea)
Based on various researches at Oak Spring University , Kumho Tire is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, geopolitical disruptions, increasing government debt because of Covid-19 spendings, technology disruption, challanges to central banks by blockchain based private currencies,
increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kumho Tire can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kumho Tire, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kumho Tire 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 Kumho Tire can be done for the following purposes –
1. Strategic planning of Kumho Tire
2. Improving business portfolio management of Kumho Tire
3. Assessing feasibility of the new initiative in South Korea
4. Making a Tires sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kumho Tire
Strengths of Kumho Tire | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kumho Tire are -
Ability to lead change in Tires
– Kumho Tire is one of the leading players in the Tires industry in South Korea. Over the years it has not only transformed the business landscape in the Tires industry in South Korea but also across the existing markets. The ability to lead change has enabled Kumho Tire in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Kumho Tire is one of the leading players in the Tires 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.
Cross disciplinary teams
– Horizontal connected teams at the Kumho Tire 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.
Effective Research and Development (R&D)
– Kumho Tire has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kumho Tire staying ahead in the Tires industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Kumho Tire
– The covid-19 pandemic has put organizational resilience at the centre of everthing Kumho Tire does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Tires industry
- digital transformation varies from industry to industry. For Kumho Tire digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kumho Tire 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 switching costs
– The high switching costs that Kumho Tire 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.
Diverse revenue streams
– Kumho Tire is present in almost all the verticals within the Tires industry. This has provided Kumho Tire 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.
Successful track record of launching new products
– Kumho Tire has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kumho Tire 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.
Operational resilience
– The operational resilience strategy of Kumho Tire comprises – understanding the underlying the factors in the Tires 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.
Sustainable margins compare to other players in Tires industry
– Kumho Tire has clearly differentiated products in the market place. This has enabled Kumho Tire to fetch slight price premium compare to the competitors in the Tires industry. The sustainable margins have also helped Kumho Tire to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Kumho Tire has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tires industry. Secondly the value chain collaborators of Kumho Tire have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Kumho Tire | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kumho Tire are -
Employees’ less understanding of Kumho Tire strategy
– From the outside it seems that the employees of Kumho Tire 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.
Slow to strategic competitive environment developments
– As Kumho Tire is one of the leading players in the Tires industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Tires industry in last five years.
Products dominated business model
– Even though Kumho Tire has some of the most successful models in the Tires industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Kumho Tire should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Tires industry
– because of the regulatory requirements in South Korea, Kumho Tire 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 Tires industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kumho Tire is slow explore the new channels of communication. These new channels of communication can help Kumho Tire to provide better information regarding Tires products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Kumho Tire 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 Tires industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the Tires industry, Kumho Tire 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.
Compensation and incentives
– The revenue per employee of Kumho Tire is just above the Tires 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.
High operating costs
– Compare to the competitors, Kumho Tire has high operating costs in the Tires industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kumho Tire lucrative customers.
High dependence on Kumho Tire ‘s star products
– The top 2 products and services of Kumho Tire still accounts for major business revenue. This dependence on star products in Tires industry has resulted into insufficient focus on developing new products, even though Kumho Tire has relatively successful track record of launching new products.
Need for greater diversity
– Kumho Tire 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.
Kumho Tire Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kumho Tire are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Kumho Tire 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 Kumho Tire in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tires industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Kumho Tire has opened avenues for new revenue streams for the organization in Tires industry. This can help Kumho Tire to build a more holistic ecosystem for Kumho Tire products in the Tires industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tires industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kumho Tire 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. Kumho Tire 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.
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. Kumho Tire can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Kumho Tire to increase its market reach. Kumho Tire 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.
Leveraging digital technologies
– Kumho Tire 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
– Kumho Tire has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tires sector. This continuous investment in analytics has enabled Kumho Tire to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kumho Tire to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Kumho Tire 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kumho Tire 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 Kumho Tire to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Kumho Tire can improve the customer journey of consumers in the Tires 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kumho Tire 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 Kumho Tire to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kumho Tire can use these opportunities to build new business models that can help the communities that Kumho Tire operates in. Secondly it can use opportunities from government spending in Tires sector.
Threats Kumho Tire External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kumho Tire are -
Shortening product life cycle
– it is one of the major threat that Kumho Tire is facing in Tires sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Kumho Tire may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tires 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.
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. Kumho Tire needs to understand the core reasons impacting the Tires industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kumho Tire 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 Kumho Tire prominent markets.
Technology acceleration in Forth Industrial Revolution
– Kumho Tire has witnessed rapid integration of technology during Covid-19 in the Tires industry. As one of the leading players in the industry, Kumho Tire needs to keep up with the evolution of technology in the Tires 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.
Consumer confidence and its impact on Kumho Tire 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 Tires industry and other sectors.
Environmental challenges
– Kumho Tire 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. Kumho Tire can take advantage of this fund but it will also bring new competitors in the Tires industry.
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 Kumho Tire in the Tires sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Kumho Tire 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 Kumho Tire
– 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 Kumho Tire.
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 Kumho Tire.
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.
Weighted SWOT Analysis of Kumho Tire Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kumho Tire 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 Kumho Tire 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 Kumho Tire 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 Kumho Tire 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 Kumho Tire needs to make to build a sustainable competitive advantage.