SWOT Analysis / TOWS Matrix for Lotte Himart (South Korea)
Based on various researches at Oak Spring University , Lotte Himart is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy,
digital marketing is dominated by two big players Facebook and Google, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lotte Himart can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lotte Himart, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lotte Himart 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 Himart can be done for the following purposes –
1. Strategic planning of Lotte Himart
2. Improving business portfolio management of Lotte Himart
3. Assessing feasibility of the new initiative in South Korea
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lotte Himart
Strengths of Lotte Himart | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lotte Himart are -
Ability to recruit top talent
– Lotte Himart is one of the leading players in the Retail (Specialty) 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.
Ability to lead change in Retail (Specialty)
– Lotte Himart is one of the leading players in the Retail (Specialty) industry in South Korea. Over the years it has not only transformed the business landscape in the Retail (Specialty) industry in South Korea but also across the existing markets. The ability to lead change has enabled Lotte Himart in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Lotte Himart is present in almost all the verticals within the Retail (Specialty) industry. This has provided Lotte Himart 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.
Highly skilled collaborators
– Lotte Himart has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Specialty) industry. Secondly the value chain collaborators of Lotte Himart have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Retail (Specialty) industry
– Lotte Himart is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Lotte Himart comprises – understanding the underlying the factors in the Retail (Specialty) 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.
Digital Transformation in Retail (Specialty) industry
- digital transformation varies from industry to industry. For Lotte Himart digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lotte Himart 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.
Low bargaining power of suppliers
– Suppliers of Lotte Himart in the Services sector have low bargaining power. Lotte Himart has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lotte Himart to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Lotte Himart has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lotte Himart staying ahead in the Retail (Specialty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Lotte Himart 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 Lotte Himart is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lotte Himart emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Lotte Himart
– The covid-19 pandemic has put organizational resilience at the centre of everthing Lotte Himart 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 Himart 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.
Weaknesses of Lotte Himart | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lotte Himart are -
No frontier risks strategy
– From the 10K / annual statement of Lotte Himart, it seems that company is thinking out the frontier risks that can impact Retail (Specialty) 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.
Need for greater diversity
– Lotte Himart 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.
Capital Spending Reduction
– Even during the low interest decade, Lotte Himart has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Specialty) industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lotte Himart is slow explore the new channels of communication. These new channels of communication can help Lotte Himart to provide better information regarding Retail (Specialty) products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Lotte Himart strategy
– From the outside it seems that the employees of Lotte Himart 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.
Products dominated business model
– Even though Lotte Himart has some of the most successful models in the Retail (Specialty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lotte Himart should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Lotte Himart is one of the leading players in the Retail (Specialty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Specialty) industry in last five years.
Compensation and incentives
– The revenue per employee of Lotte Himart is just above the Retail (Specialty) 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 bargaining power of channel partners in Retail (Specialty) industry
– because of the regulatory requirements in South Korea, Lotte Himart is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Specialty) industry.
Increasing silos among functional specialists
– The organizational structure of Lotte Himart is dominated by functional specialists. It is not different from other players in the Retail (Specialty) industry, but Lotte Himart needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lotte Himart to focus more on services in the Retail (Specialty) industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Lotte Himart, in the dynamic environment of Retail (Specialty) industry it has struggled to respond to the nimble upstart competition. Lotte Himart has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lotte Himart Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lotte Himart are -
Creating value in data economy
– The success of analytics program of Lotte Himart has opened avenues for new revenue streams for the organization in Retail (Specialty) industry. This can help Lotte Himart to build a more holistic ecosystem for Lotte Himart products in the Retail (Specialty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lotte Himart in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Specialty) industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lotte Himart can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Specialty) industry, but it has also influenced the consumer preferences. Lotte Himart can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lotte Himart 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 Lotte Himart 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, Lotte Himart can use these opportunities to build new business models that can help the communities that Lotte Himart operates in. Secondly it can use opportunities from government spending in Retail (Specialty) sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Specialty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lotte Himart 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 Himart 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.
Developing new processes and practices
– Lotte Himart can develop new processes and procedures in Retail (Specialty) 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.
Use of Bitcoin and other crypto currencies for transactions in Retail (Specialty) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lotte Himart in the Retail (Specialty) industry. Now Lotte Himart can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Lotte Himart has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled Lotte Himart to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lotte Himart to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Lotte Himart 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.
Loyalty marketing
– Lotte Himart 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 Himart is facing challenges because of the dominance of functional experts in the organization. Lotte Himart can utilize new technology in the field of Retail (Specialty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Lotte Himart External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lotte Himart are -
High dependence on third party suppliers
– Lotte Himart 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.
Stagnating economy with rate increase
– Lotte Himart can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Specialty) industry.
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 Himart 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.
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.
Consumer confidence and its impact on Lotte Himart demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Specialty) industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lotte Himart 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 Himart prominent markets.
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 Himart.
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 Himart business can come under increasing regulations regarding data privacy, data security, 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. Lotte Himart needs to understand the core reasons impacting the Retail (Specialty) industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Retail (Specialty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lotte Himart can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lotte Himart may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Specialty) sector.
Increasing wage structure of Lotte Himart
– 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 Himart.
Environmental challenges
– Lotte Himart 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 Himart can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.
Weighted SWOT Analysis of Lotte Himart Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lotte Himart 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 Himart 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 Himart 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 Himart 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 Himart needs to make to build a sustainable competitive advantage.