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 – there is backlash against globalization, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
wage bills are increasing, 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 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 -
Cross disciplinary teams
– Horizontal connected teams at the Nexen 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.
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.
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.
Analytics focus
– Nexen Tire 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 Tires 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.
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.
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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Nexen Tire in Tires industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Nexen Tire | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nexen Tire are -
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.
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.
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.
Employees’ less understanding of Nexen Tire strategy
– From the outside it seems that the employees of Nexen 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.
Skills based hiring in Tires industry
– The stress on hiring functional specialists at Nexen Tire 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 Nexen 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.
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.
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.
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.
Need for greater diversity
– Nexen 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.
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.
Nexen Tire Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nexen Tire are -
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.
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.
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.
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.
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.
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 Nexen Tire 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.
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. Nexen 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. Nexen 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nexen 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tires industry, but it has also influenced the consumer preferences. Nexen Tire can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nexen 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 Nexen Tire to hire the very best people irrespective of their geographical location.
Threats Nexen Tire External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nexen Tire are -
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.
Stagnating economy with rate increase
– Nexen Tire 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 Tires industry.
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.
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.
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.
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.
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 Nexen Tire.
Regulatory challenges
– Nexen Tire 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 Tires industry regulations.
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.
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. Nexen Tire needs to understand the core reasons impacting the Tires industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nexen Tire in Tires industry. The Tires industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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 Nexen Tire business can come under increasing regulations regarding data privacy, data security, etc.
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.