YG Entertainment (122870) SWOT Analysis / TOWS Matrix / 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 – competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, there is backlash against globalization, etc

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Introduction to SWOT Analysis of YG Entertainment

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.

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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

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Strengths of YG Entertainment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of YG Entertainment are -

High switching costs

– The high switching costs that YG Entertainment 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.

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.

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.

Cross disciplinary teams

– Horizontal connected teams at the YG Entertainment 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.

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.

Highly skilled collaborators

– YG Entertainment has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Recreational Products industry. Secondly the value chain collaborators of YG Entertainment have helped the firm to develop new products and bring them quickly to the marketplace.

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.

Effective Research and Development (R&D)

– YG Entertainment has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – YG Entertainment staying ahead in the Recreational Products industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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.

Innovation driven organization

– YG Entertainment is one of the most innovative firm in Recreational Products sector.

Successful track record of launching new products

– YG Entertainment has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. YG Entertainment 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.

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Weaknesses of YG Entertainment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of YG Entertainment are -

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.

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.

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.

Low market penetration in new markets

– Outside its home market of South Korea, YG Entertainment needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Lack of clear differentiation of YG Entertainment products

– To increase the profitability and margins on the products, YG Entertainment needs to provide more differentiated products than what it is currently offering in the marketplace.

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 YG Entertainment supply chain. Even after few cautionary changes, YG Entertainment is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left YG Entertainment vulnerable to further global disruptions in South East Asia.

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.

Workers concerns about automation

– As automation is fast increasing in the Recreational Products industry, YG Entertainment needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Slow to strategic competitive environment developments

– As YG Entertainment is one of the leading players in the Recreational Products industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Recreational Products industry in last five years.

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.

Skills based hiring in Recreational Products industry

– The stress on hiring functional specialists at YG Entertainment 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.

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YG Entertainment Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of YG Entertainment are -

Using analytics as competitive advantage

– YG Entertainment has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Recreational Products sector. This continuous investment in analytics has enabled YG Entertainment to build a competitive advantage using analytics. The analytics driven competitive advantage can help YG Entertainment to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, YG Entertainment can use these opportunities to build new business models that can help the communities that YG Entertainment operates in. Secondly it can use opportunities from government spending in Recreational Products sector.

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.

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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, YG Entertainment is facing challenges because of the dominance of functional experts in the organization. YG Entertainment can utilize new technology in the field of Recreational Products industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for YG Entertainment 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 YG Entertainment 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 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.

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.

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 YG Entertainment 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 YG Entertainment 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

– 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.

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Threats YG Entertainment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of YG Entertainment are -

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.

Technology acceleration in Forth Industrial Revolution

– YG Entertainment has witnessed rapid integration of technology during Covid-19 in the Recreational Products industry. As one of the leading players in the industry, YG Entertainment needs to keep up with the evolution of technology in the Recreational Products 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.

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.

High dependence on third party suppliers

– YG Entertainment 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.

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.

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. YG Entertainment 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 YG Entertainment in the Recreational Products sector and impact the bottomline of the organization.

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.

Regulatory challenges

– YG Entertainment 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 Recreational Products industry regulations.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Recreational Products industry are lowering. It can presents YG Entertainment with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Recreational Products sector.

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.

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.

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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.

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