YG Entertainment (122870) SWOT Analysis / TOWS Matrix / MBA Resources
Recreational Products
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for YG Entertainment (South Korea)
Based on various researches at Oak Spring University , YG Entertainment is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing household debt because of falling income levels,
increasing commodity prices, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that YG Entertainment can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the YG Entertainment, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which YG Entertainment 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 YG Entertainment can be done for the following purposes –
1. Strategic planning of YG Entertainment
2. Improving business portfolio management of YG Entertainment
3. Assessing feasibility of the new initiative in South Korea
4. Making a Recreational Products sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of YG Entertainment
Strengths of YG Entertainment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of YG Entertainment are -
Learning organization
- YG Entertainment 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 YG Entertainment is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at YG Entertainment emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Recreational Products industry
– YG Entertainment 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 YG Entertainment comprises – understanding the underlying the factors in the Recreational Products 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.
Organizational Resilience of YG Entertainment
– The covid-19 pandemic has put organizational resilience at the centre of everthing YG Entertainment does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Recreational Products
– YG Entertainment is one of the leading players in the Recreational Products industry in South Korea. Over the years it has not only transformed the business landscape in the Recreational Products industry in South Korea but also across the existing markets. The ability to lead change has enabled YG Entertainment in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– YG Entertainment is present in almost all the verticals within the Recreational Products industry. This has provided YG Entertainment 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.
Sustainable margins compare to other players in Recreational Products industry
– YG Entertainment has clearly differentiated products in the market place. This has enabled YG Entertainment to fetch slight price premium compare to the competitors in the Recreational Products industry. The sustainable margins have also helped YG Entertainment to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of YG Entertainment in the Consumer Cyclical sector have low bargaining power. YG Entertainment has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps YG Entertainment to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– YG Entertainment has one of the best training and development program in Consumer Cyclical 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.
Ability to recruit top talent
– YG Entertainment is one of the leading players in the Recreational Products 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.
Superior customer experience
– The customer experience strategy of YG Entertainment in Recreational Products industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– YG Entertainment 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 Recreational Products 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.
Weaknesses of YG Entertainment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of YG Entertainment are -
Employees’ less understanding of YG Entertainment strategy
– From the outside it seems that the employees of YG Entertainment 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.
High cash cycle compare to competitors
YG Entertainment has a high cash cycle compare to other players in the Recreational Products industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative at YG Entertainment, in the dynamic environment of Recreational Products industry it has struggled to respond to the nimble upstart competition. YG Entertainment has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, YG Entertainment has high operating costs in the Recreational Products industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract YG Entertainment lucrative customers.
Increasing silos among functional specialists
– The organizational structure of YG Entertainment is dominated by functional specialists. It is not different from other players in the Recreational Products industry, but YG Entertainment needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help YG Entertainment to focus more on services in the Recreational Products industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, YG Entertainment is slow explore the new channels of communication. These new channels of communication can help YG Entertainment to provide better information regarding Recreational Products products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though YG Entertainment has some of the most successful models in the Recreational Products industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. YG Entertainment should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, YG Entertainment 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 Recreational Products industry using digital technology.
Interest costs
– Compare to the competition, YG Entertainment 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.
No frontier risks strategy
– From the 10K / annual statement of YG Entertainment, it seems that company is thinking out the frontier risks that can impact Recreational Products 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.
High dependence on YG Entertainment ‘s star products
– The top 2 products and services of YG Entertainment still accounts for major business revenue. This dependence on star products in Recreational Products industry has resulted into insufficient focus on developing new products, even though YG Entertainment has relatively successful track record of launching new products.
YG Entertainment Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of YG Entertainment are -
Use of Bitcoin and other crypto currencies for transactions in Recreational Products industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for YG Entertainment in the Recreational Products industry. Now YG Entertainment can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects YG Entertainment 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 Recreational Products industry, but it has also influenced the consumer preferences. YG Entertainment can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of YG Entertainment has opened avenues for new revenue streams for the organization in Recreational Products industry. This can help YG Entertainment to build a more holistic ecosystem for YG Entertainment products in the Recreational Products 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 YG Entertainment in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Recreational Products industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, YG Entertainment 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.
Loyalty marketing
– YG Entertainment 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Recreational Products industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. YG Entertainment 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. YG Entertainment 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.
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. YG Entertainment can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, YG Entertainment 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 YG Entertainment to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– YG Entertainment can develop new processes and procedures in Recreational Products 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.
Building a culture of innovation
– managers at YG Entertainment 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 Recreational Products industry.
Manufacturing automation
– YG Entertainment can use the latest technology developments to improve its manufacturing and designing process in Recreational Products 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.
Threats YG Entertainment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of YG Entertainment are -
Shortening product life cycle
– it is one of the major threat that YG Entertainment is facing in Recreational Products sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 YG Entertainment business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on YG Entertainment 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 Recreational Products industry and other sectors.
Increasing wage structure of YG Entertainment
– 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 YG Entertainment.
Stagnating economy with rate increase
– YG Entertainment 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 Recreational Products industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for YG Entertainment in Recreational Products industry. The Recreational Products 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.
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 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. YG Entertainment needs to understand the core reasons impacting the Recreational Products industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, YG Entertainment may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Recreational Products sector.
Environmental challenges
– YG Entertainment 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. YG Entertainment can take advantage of this fund but it will also bring new competitors in the Recreational Products industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, YG Entertainment 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 YG Entertainment prominent markets.
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 Recreational Products industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. YG Entertainment can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of YG Entertainment Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at YG Entertainment 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 YG Entertainment 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 YG Entertainment 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 YG Entertainment 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 YG Entertainment needs to make to build a sustainable competitive advantage.