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 – there is backlash against globalization, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption,
increasing government debt because of Covid-19 spendings, 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 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.
Innovation driven organization
– YG Entertainment is one of the most innovative firm in Recreational Products sector.
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.
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.
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.
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.
Digital Transformation in Recreational Products industry
- digital transformation varies from industry to industry. For YG Entertainment digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. YG Entertainment 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.
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 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.
High brand equity
– YG Entertainment has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled YG Entertainment to keep acquiring new customers and building profitable relationship with both the new and loyal 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.
Weaknesses of YG Entertainment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of YG Entertainment are -
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.
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.
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.
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.
Need for greater diversity
– YG Entertainment 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 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.
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.
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.
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.
Compensation and incentives
– The revenue per employee of YG Entertainment is just above the Recreational Products industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
YG Entertainment Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of YG Entertainment are -
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.
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.
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.
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.
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.
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.
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.
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.
Buying journey improvements
– YG Entertainment can improve the customer journey of consumers in the Recreational Products 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
– 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.
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.
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.
Leveraging digital technologies
– YG Entertainment 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 YG Entertainment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of YG Entertainment are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
