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 – competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, geopolitical disruptions, there is backlash against globalization, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing energy prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
Analytics focus
– Lotte Chilsung Beverage is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Beverages (Nonalcoholic) industry. The technology infrastructure of South Korea is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Lotte Chilsung Beverage in Beverages (Nonalcoholic) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Lotte Chilsung Beverage 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.
Successful track record of launching new products
– Lotte Chilsung Beverage has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lotte Chilsung Beverage 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.
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.
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.
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.
Sustainable margins compare to other players in Beverages (Nonalcoholic) industry
– Lotte Chilsung Beverage has clearly differentiated products in the market place. This has enabled Lotte Chilsung Beverage to fetch slight price premium compare to the competitors in the Beverages (Nonalcoholic) industry. The sustainable margins have also helped Lotte Chilsung Beverage to invest into research and development (R&D) and innovation.
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.
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.
Highly skilled collaborators
– Lotte Chilsung Beverage has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Beverages (Nonalcoholic) industry. Secondly the value chain collaborators of Lotte Chilsung Beverage have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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 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.
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.
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.
High bargaining power of channel partners in Beverages (Nonalcoholic) industry
– because of the regulatory requirements in South Korea, Lotte Chilsung Beverage 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 Beverages (Nonalcoholic) industry.
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.
Increasing silos among functional specialists
– The organizational structure of Lotte Chilsung Beverage is dominated by functional specialists. It is not different from other players in the Beverages (Nonalcoholic) industry, but Lotte Chilsung Beverage needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lotte Chilsung Beverage to focus more on services in the Beverages (Nonalcoholic) industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Lotte Chilsung Beverage 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 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.
No frontier risks strategy
– From the 10K / annual statement of Lotte Chilsung Beverage, it seems that company is thinking out the frontier risks that can impact Beverages (Nonalcoholic) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
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 -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lotte Chilsung Beverage is facing challenges because of the dominance of functional experts in the organization. Lotte Chilsung Beverage can utilize new technology in the field of Beverages (Nonalcoholic) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lotte Chilsung Beverage can use these opportunities to build new business models that can help the communities that Lotte Chilsung Beverage operates in. Secondly it can use opportunities from government spending in Beverages (Nonalcoholic) sector.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lotte Chilsung Beverage 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 Lotte Chilsung Beverage to hire the very best people irrespective of their geographical location.
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.
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.
Manufacturing automation
– Lotte Chilsung Beverage can use the latest technology developments to improve its manufacturing and designing process in Beverages (Nonalcoholic) 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.
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.
Creating value in data economy
– The success of analytics program of Lotte Chilsung Beverage has opened avenues for new revenue streams for the organization in Beverages (Nonalcoholic) industry. This can help Lotte Chilsung Beverage to build a more holistic ecosystem for Lotte Chilsung Beverage products in the Beverages (Nonalcoholic) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Lotte Chilsung Beverage can develop new processes and procedures in Beverages (Nonalcoholic) 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.
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.
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.
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 -
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.
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.
Consumer confidence and its impact on Lotte Chilsung Beverage 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 Beverages (Nonalcoholic) industry and other sectors.
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.
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.
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.
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.
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.
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.
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. Lotte Chilsung Beverage needs to understand the core reasons impacting the Beverages (Nonalcoholic) industry. This will help it in building a better workplace.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lotte Chilsung Beverage business can come under increasing regulations regarding data privacy, data security, etc.
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.