SWOT Analysis / TOWS Matrix for Lotte Chilsung Beverage (South Korea)
Based on various researches at Oak Spring University , Lotte Chilsung Beverage is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, geopolitical disruptions,
talent flight as more people leaving formal jobs, there is backlash against globalization, etc
Introduction to SWOT Analysis of Lotte Chilsung Beverage
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lotte Chilsung Beverage can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lotte Chilsung Beverage, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lotte Chilsung Beverage 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 Lotte Chilsung Beverage can be done for the following purposes –
1. Strategic planning of Lotte Chilsung Beverage
2. Improving business portfolio management of Lotte Chilsung Beverage
3. Assessing feasibility of the new initiative in South Korea
4. Making a Beverages (Nonalcoholic) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lotte Chilsung Beverage
Strengths of Lotte Chilsung Beverage | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lotte Chilsung Beverage are -
Organizational Resilience of Lotte Chilsung Beverage
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lotte Chilsung Beverage does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Lotte Chilsung Beverage 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.
High brand equity
– Lotte Chilsung Beverage has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lotte Chilsung Beverage to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Beverages (Nonalcoholic) industry
- digital transformation varies from industry to industry. For Lotte Chilsung Beverage digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lotte Chilsung Beverage 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.
Diverse revenue streams
– Lotte Chilsung Beverage is present in almost all the verticals within the Beverages (Nonalcoholic) industry. This has provided Lotte Chilsung Beverage 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.
Low bargaining power of suppliers
– Suppliers of Lotte Chilsung Beverage in the Consumer/Non-Cyclical sector have low bargaining power. Lotte Chilsung Beverage has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lotte Chilsung Beverage to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Lotte Chilsung Beverage 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.
Ability to recruit top talent
– Lotte Chilsung Beverage is one of the leading players in the Beverages (Nonalcoholic) 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.
Operational resilience
– The operational resilience strategy of Lotte Chilsung Beverage comprises – understanding the underlying the factors in the Beverages (Nonalcoholic) 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.
Effective Research and Development (R&D)
– Lotte Chilsung Beverage has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lotte Chilsung Beverage staying ahead in the Beverages (Nonalcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Beverages (Nonalcoholic)
– Lotte Chilsung Beverage is one of the leading players in the Beverages (Nonalcoholic) industry in South Korea. Over the years it has not only transformed the business landscape in the Beverages (Nonalcoholic) industry in South Korea but also across the existing markets. The ability to lead change has enabled Lotte Chilsung Beverage in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Lotte Chilsung Beverage is one of the most innovative firm in Beverages (Nonalcoholic) sector.
Weaknesses of Lotte Chilsung Beverage | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lotte Chilsung Beverage are -
High cash cycle compare to competitors
Lotte Chilsung Beverage has a high cash cycle compare to other players in the Beverages (Nonalcoholic) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Products dominated business model
– Even though Lotte Chilsung Beverage has some of the most successful models in the Beverages (Nonalcoholic) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lotte Chilsung Beverage should strive to include more intangible value offerings along with its core products and services.
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 Lotte Chilsung Beverage supply chain. Even after few cautionary changes, Lotte Chilsung Beverage is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lotte Chilsung Beverage vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Beverages (Nonalcoholic) industry, Lotte Chilsung Beverage 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.
Skills based hiring in Beverages (Nonalcoholic) industry
– The stress on hiring functional specialists at Lotte Chilsung Beverage 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.
Compensation and incentives
– The revenue per employee of Lotte Chilsung Beverage is just above the Beverages (Nonalcoholic) 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.
Slow to strategic competitive environment developments
– As Lotte Chilsung Beverage is one of the leading players in the Beverages (Nonalcoholic) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Beverages (Nonalcoholic) industry in last five years.
Lack of clear differentiation of Lotte Chilsung Beverage products
– To increase the profitability and margins on the products, Lotte Chilsung Beverage needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Lotte Chilsung Beverage ‘s star products
– The top 2 products and services of Lotte Chilsung Beverage still accounts for major business revenue. This dependence on star products in Beverages (Nonalcoholic) industry has resulted into insufficient focus on developing new products, even though Lotte Chilsung Beverage has relatively successful track record of launching new products.
Need for greater diversity
– Lotte Chilsung Beverage 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 operating costs
– Compare to the competitors, Lotte Chilsung Beverage has high operating costs in the Beverages (Nonalcoholic) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lotte Chilsung Beverage lucrative customers.
Lotte Chilsung Beverage Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lotte Chilsung Beverage are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Beverages (Nonalcoholic) industry, but it has also influenced the consumer preferences. Lotte Chilsung Beverage can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lotte Chilsung Beverage 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.
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. Lotte Chilsung Beverage can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Lotte Chilsung Beverage 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.
Buying journey improvements
– Lotte Chilsung Beverage can improve the customer journey of consumers in the Beverages (Nonalcoholic) 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lotte Chilsung Beverage in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Beverages (Nonalcoholic) industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Lotte Chilsung Beverage 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.
Using analytics as competitive advantage
– Lotte Chilsung Beverage has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Beverages (Nonalcoholic) sector. This continuous investment in analytics has enabled Lotte Chilsung Beverage to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lotte Chilsung Beverage to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Lotte Chilsung Beverage 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.
Building a culture of innovation
– managers at Lotte Chilsung Beverage 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 Beverages (Nonalcoholic) industry.
Better consumer reach
– The expansion of the 5G network will help Lotte Chilsung Beverage to increase its market reach. Lotte Chilsung Beverage 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Beverages (Nonalcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lotte Chilsung Beverage 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. Lotte Chilsung Beverage 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 Lotte Chilsung Beverage can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Lotte Chilsung Beverage External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lotte Chilsung Beverage are -
High dependence on third party suppliers
– Lotte Chilsung Beverage 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lotte Chilsung Beverage 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 Lotte Chilsung Beverage prominent markets.
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. Lotte Chilsung Beverage 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.
Technology acceleration in Forth Industrial Revolution
– Lotte Chilsung Beverage has witnessed rapid integration of technology during Covid-19 in the Beverages (Nonalcoholic) industry. As one of the leading players in the industry, Lotte Chilsung Beverage needs to keep up with the evolution of technology in the Beverages (Nonalcoholic) 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 Lotte Chilsung Beverage.
Regulatory challenges
– Lotte Chilsung Beverage 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 Beverages (Nonalcoholic) industry regulations.
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 Lotte Chilsung Beverage in the Beverages (Nonalcoholic) sector and impact the bottomline of the organization.
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.
Easy access to finance
– Easy access to finance in Beverages (Nonalcoholic) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lotte Chilsung Beverage can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Lotte Chilsung Beverage is facing in Beverages (Nonalcoholic) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Lotte Chilsung Beverage 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. Lotte Chilsung Beverage can take advantage of this fund but it will also bring new competitors in the Beverages (Nonalcoholic) industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lotte Chilsung Beverage may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Beverages (Nonalcoholic) sector.
Increasing wage structure of Lotte Chilsung Beverage
– 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 Lotte Chilsung Beverage.
Weighted SWOT Analysis of Lotte Chilsung Beverage Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lotte Chilsung Beverage 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 Lotte Chilsung Beverage 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 Lotte Chilsung Beverage 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 Lotte Chilsung Beverage 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 Lotte Chilsung Beverage needs to make to build a sustainable competitive advantage.
