SK Chemicals (285130) SWOT Analysis / TOWS Matrix / MBA Resources
Chemicals - Plastics & Rubber
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for SK Chemicals (South Korea)
Based on various researches at Oak Spring University , SK Chemicals is operating in a macro-environment that has been destablized by – increasing commodity prices, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, increasing energy prices,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that SK Chemicals can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the SK Chemicals, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which SK Chemicals 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 SK Chemicals can be done for the following purposes –
1. Strategic planning of SK Chemicals
2. Improving business portfolio management of SK Chemicals
3. Assessing feasibility of the new initiative in South Korea
4. Making a Chemicals - Plastics & Rubber sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of SK Chemicals
Strengths of SK Chemicals | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of SK Chemicals are -
High brand equity
– SK Chemicals has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled SK Chemicals to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that SK Chemicals 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.
Digital Transformation in Chemicals - Plastics & Rubber industry
- digital transformation varies from industry to industry. For SK Chemicals digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. SK Chemicals 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 recruit top talent
– SK Chemicals is one of the leading players in the Chemicals - Plastics & Rubber 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.
Training and development
– SK Chemicals has one of the best training and development program in Basic Materials 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.
Analytics focus
– SK Chemicals 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 Chemicals - Plastics & Rubber 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.
Low bargaining power of suppliers
– Suppliers of SK Chemicals in the Basic Materials sector have low bargaining power. SK Chemicals has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps SK Chemicals to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– SK Chemicals has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. SK Chemicals 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.
Superior customer experience
– The customer experience strategy of SK Chemicals in Chemicals - Plastics & Rubber industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– SK Chemicals is one of the most innovative firm in Chemicals - Plastics & Rubber sector.
Diverse revenue streams
– SK Chemicals is present in almost all the verticals within the Chemicals - Plastics & Rubber industry. This has provided SK Chemicals 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
– SK Chemicals has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemicals - Plastics & Rubber industry. Secondly the value chain collaborators of SK Chemicals have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of SK Chemicals | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SK Chemicals are -
Low market penetration in new markets
– Outside its home market of South Korea, SK Chemicals needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, SK Chemicals has high operating costs in the Chemicals - Plastics & Rubber industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract SK Chemicals lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at SK Chemicals, in the dynamic environment of Chemicals - Plastics & Rubber industry it has struggled to respond to the nimble upstart competition. SK Chemicals has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
SK Chemicals has a high cash cycle compare to other players in the Chemicals - Plastics & Rubber industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of SK Chemicals strategy
– From the outside it seems that the employees of SK Chemicals 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.
Need for greater diversity
– SK Chemicals 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 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 SK Chemicals supply chain. Even after few cautionary changes, SK Chemicals is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left SK Chemicals vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Chemicals - Plastics & Rubber industry
– because of the regulatory requirements in South Korea, SK Chemicals 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 Chemicals - Plastics & Rubber industry.
Increasing silos among functional specialists
– The organizational structure of SK Chemicals is dominated by functional specialists. It is not different from other players in the Chemicals - Plastics & Rubber industry, but SK Chemicals needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help SK Chemicals to focus more on services in the Chemicals - Plastics & Rubber industry rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As SK Chemicals is one of the leading players in the Chemicals - Plastics & Rubber industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemicals - Plastics & Rubber industry in last five years.
High dependence on SK Chemicals ‘s star products
– The top 2 products and services of SK Chemicals still accounts for major business revenue. This dependence on star products in Chemicals - Plastics & Rubber industry has resulted into insufficient focus on developing new products, even though SK Chemicals has relatively successful track record of launching new products.
SK Chemicals Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SK Chemicals are -
Buying journey improvements
– SK Chemicals can improve the customer journey of consumers in the Chemicals - Plastics & Rubber 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.
Better consumer reach
– The expansion of the 5G network will help SK Chemicals to increase its market reach. SK Chemicals 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, SK Chemicals 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 SK Chemicals to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 SK Chemicals 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 Chemicals - Plastics & Rubber industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. SK Chemicals 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. SK Chemicals 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.
Building a culture of innovation
– managers at SK Chemicals 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 Chemicals - Plastics & Rubber industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for SK Chemicals in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemicals - Plastics & Rubber industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for SK Chemicals 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 SK Chemicals to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, SK Chemicals 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects SK Chemicals can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. SK Chemicals can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– SK Chemicals can use the latest technology developments to improve its manufacturing and designing process in Chemicals - Plastics & Rubber 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.
Leveraging digital technologies
– SK Chemicals 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.
Threats SK Chemicals External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SK Chemicals 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.
Environmental challenges
– SK Chemicals 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. SK Chemicals can take advantage of this fund but it will also bring new competitors in the Chemicals - Plastics & Rubber industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, SK Chemicals may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemicals - Plastics & Rubber sector.
Shortening product life cycle
– it is one of the major threat that SK Chemicals is facing in Chemicals - Plastics & Rubber sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– SK Chemicals 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 Chemicals - Plastics & Rubber industry.
Regulatory challenges
– SK Chemicals 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 Chemicals - Plastics & Rubber industry regulations.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for SK Chemicals in Chemicals - Plastics & Rubber industry. The Chemicals - Plastics & Rubber 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.
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. SK Chemicals 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.
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 SK Chemicals in the Chemicals - Plastics & Rubber sector and impact the bottomline of the organization.
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 SK Chemicals.
Easy access to finance
– Easy access to finance in Chemicals - Plastics & Rubber industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. SK Chemicals can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of SK Chemicals
– 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 SK Chemicals.
Weighted SWOT Analysis of SK Chemicals Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at SK Chemicals 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 SK Chemicals 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 SK Chemicals 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 SK Chemicals 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 SK Chemicals needs to make to build a sustainable competitive advantage.