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 – challanges to central banks by blockchain based private currencies, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , geopolitical disruptions, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, 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 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 -
Organizational Resilience of SK Chemicals
– The covid-19 pandemic has put organizational resilience at the centre of everthing SK Chemicals does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– SK Chemicals is one of the most innovative firm in Chemicals - Plastics & Rubber sector.
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.
Ability to lead change in Chemicals - Plastics & Rubber
– SK Chemicals is one of the leading players in the Chemicals - Plastics & Rubber industry in South Korea. Over the years it has not only transformed the business landscape in the Chemicals - Plastics & Rubber industry in South Korea but also across the existing markets. The ability to lead change has enabled SK Chemicals in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Effective Research and Development (R&D)
– SK Chemicals has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – SK Chemicals staying ahead in the Chemicals - Plastics & Rubber industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- SK Chemicals 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 SK Chemicals is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at SK Chemicals emphasize – knowledge, initiative, and innovation.
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.
Sustainable margins compare to other players in Chemicals - Plastics & Rubber industry
– SK Chemicals has clearly differentiated products in the market place. This has enabled SK Chemicals to fetch slight price premium compare to the competitors in the Chemicals - Plastics & Rubber industry. The sustainable margins have also helped SK Chemicals to invest into research and development (R&D) and innovation.
Weaknesses of SK Chemicals | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SK Chemicals are -
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.
Interest costs
– Compare to the competition, SK Chemicals 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.
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.
Skills based hiring in Chemicals - Plastics & Rubber industry
– The stress on hiring functional specialists at SK Chemicals 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, SK Chemicals is slow explore the new channels of communication. These new channels of communication can help SK Chemicals to provide better information regarding Chemicals - Plastics & Rubber products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, SK Chemicals 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 Chemicals - Plastics & Rubber industry using digital technology.
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.
Slow decision making process
– As mentioned earlier in the report, SK Chemicals has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemicals - Plastics & Rubber industry over the last five years. SK Chemicals even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though SK Chemicals has some of the most successful models in the Chemicals - Plastics & Rubber industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. SK Chemicals should strive to include more intangible value offerings along with its core products and services.
SK Chemicals Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of SK Chemicals are -
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.
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.
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.
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.
Loyalty marketing
– SK Chemicals 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Chemicals - Plastics & Rubber industry, but it has also influenced the consumer preferences. SK Chemicals can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Using analytics as competitive advantage
– SK Chemicals has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemicals - Plastics & Rubber sector. This continuous investment in analytics has enabled SK Chemicals to build a competitive advantage using analytics. The analytics driven competitive advantage can help SK Chemicals to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Learning at scale
– Online learning technologies has now opened space for SK Chemicals 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.
Developing new processes and practices
– SK Chemicals can develop new processes and procedures in Chemicals - Plastics & Rubber 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, SK Chemicals can use these opportunities to build new business models that can help the communities that SK Chemicals operates in. Secondly it can use opportunities from government spending in Chemicals - Plastics & Rubber sector.
Threats SK Chemicals External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of SK Chemicals are -
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.
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.
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.
Consumer confidence and its impact on SK Chemicals 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 Chemicals - Plastics & Rubber industry and other sectors.
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.
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.
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, SK Chemicals 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 SK Chemicals prominent markets.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemicals - Plastics & Rubber industry are lowering. It can presents SK Chemicals with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemicals - Plastics & Rubber sector.
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.