SWOT Analysis / TOWS Matrix for Nexen Tire (South Korea)
Based on various researches at Oak Spring University , Nexen Tire is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, increasing energy prices, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation,
technology disruption, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nexen Tire can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nexen Tire, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nexen 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 Nexen Tire can be done for the following purposes –
1. Strategic planning of Nexen Tire
2. Improving business portfolio management of Nexen 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 Nexen Tire
Strengths of Nexen Tire | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nexen Tire are -
Learning organization
- Nexen Tire 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 Nexen Tire is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nexen Tire emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Nexen 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.
Sustainable margins compare to other players in Tires industry
– Nexen Tire has clearly differentiated products in the market place. This has enabled Nexen Tire to fetch slight price premium compare to the competitors in the Tires industry. The sustainable margins have also helped Nexen Tire to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Nexen Tire in the Consumer Cyclical sector have low bargaining power. Nexen Tire has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nexen Tire to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Nexen Tire is one of the most innovative firm in Tires sector.
Ability to recruit top talent
– Nexen 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.
Highly skilled collaborators
– Nexen 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 Nexen Tire have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Tires industry
- digital transformation varies from industry to industry. For Nexen Tire digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nexen 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.
Ability to lead change in Tires
– Nexen 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 Nexen Tire in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Tires industry
– Nexen Tire is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Nexen Tire has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nexen Tire to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy of Nexen 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.
Weaknesses of Nexen Tire | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nexen Tire are -
No frontier risks strategy
– From the 10K / annual statement of Nexen Tire, it seems that company is thinking out the frontier risks that can impact Tires 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.
Slow to strategic competitive environment developments
– As Nexen 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.
High dependence on Nexen Tire ‘s star products
– The top 2 products and services of Nexen 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 Nexen Tire has relatively successful track record of launching new products.
Lack of clear differentiation of Nexen Tire products
– To increase the profitability and margins on the products, Nexen Tire needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Nexen 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 Nexen Tire lucrative customers.
Aligning sales with marketing
– From the outside it seems that Nexen Tire needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tires industry have deep experience in developing customer relationships. Marketing department at Nexen Tire can leverage the sales team experience to cultivate customer relationships as Nexen Tire is planning to shift buying processes online.
Products dominated business model
– Even though Nexen 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. Nexen Tire should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of South Korea, Nexen Tire needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative at Nexen Tire, in the dynamic environment of Tires industry it has struggled to respond to the nimble upstart competition. Nexen Tire has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Nexen Tire supply chain. Even after few cautionary changes, Nexen Tire is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nexen Tire vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nexen Tire is slow explore the new channels of communication. These new channels of communication can help Nexen Tire to provide better information regarding Tires products and services. It can also build an online community to further reach out to potential customers.
Nexen Tire Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nexen Tire are -
Developing new processes and practices
– Nexen Tire can develop new processes and procedures in Tires 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.
Loyalty marketing
– Nexen Tire 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.
Manufacturing automation
– Nexen Tire can use the latest technology developments to improve its manufacturing and designing process in Tires 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nexen Tire can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Nexen 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.
Creating value in data economy
– The success of analytics program of Nexen Tire has opened avenues for new revenue streams for the organization in Tires industry. This can help Nexen Tire to build a more holistic ecosystem for Nexen Tire products in the Tires industry by providing – data insight services, data privacy related products, data based consulting services, 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, Nexen Tire can use these opportunities to build new business models that can help the communities that Nexen Tire operates in. Secondly it can use opportunities from government spending in Tires sector.
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. Nexen Tire can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Nexen 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 Nexen Tire to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nexen Tire to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nexen 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 Nexen 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nexen 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.
Building a culture of innovation
– managers at Nexen Tire 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 Tires industry.
Learning at scale
– Online learning technologies has now opened space for Nexen 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.
Threats Nexen Tire External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nexen Tire are -
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.
High dependence on third party suppliers
– Nexen 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.
Easy access to finance
– Easy access to finance in Tires industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nexen Tire 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, Nexen 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 Nexen Tire prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nexen 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.
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 Nexen Tire in the Tires 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.
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. Nexen Tire 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.
Increasing wage structure of Nexen 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 Nexen Tire.
Technology acceleration in Forth Industrial Revolution
– Nexen Tire has witnessed rapid integration of technology during Covid-19 in the Tires industry. As one of the leading players in the industry, Nexen 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.
Shortening product life cycle
– it is one of the major threat that Nexen Tire is facing in Tires sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tires industry are lowering. It can presents Nexen Tire with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tires sector.
Environmental challenges
– Nexen 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. Nexen Tire can take advantage of this fund but it will also bring new competitors in the Tires industry.
Weighted SWOT Analysis of Nexen Tire Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nexen 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 Nexen 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 Nexen 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 Nexen 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 Nexen Tire needs to make to build a sustainable competitive advantage.