SWOT Analysis / TOWS Matrix for Hankook Shell Oil (South Korea)
Based on various researches at Oak Spring University , Hankook Shell Oil is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs,
there is backlash against globalization, increasing energy prices, etc
Introduction to SWOT Analysis of Hankook Shell Oil
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hankook Shell Oil can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hankook Shell Oil, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hankook Shell Oil 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 Hankook Shell Oil can be done for the following purposes –
1. Strategic planning of Hankook Shell Oil
2. Improving business portfolio management of Hankook Shell Oil
3. Assessing feasibility of the new initiative in South Korea
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hankook Shell Oil
Strengths of Hankook Shell Oil | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hankook Shell Oil are -
Low bargaining power of suppliers
– Suppliers of Hankook Shell Oil in the Energy sector have low bargaining power. Hankook Shell Oil has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hankook Shell Oil to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Hankook Shell Oil comprises – understanding the underlying the factors in the Oil & Gas Operations 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.
Ability to lead change in Oil & Gas Operations
– Hankook Shell Oil is one of the leading players in the Oil & Gas Operations industry in South Korea. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in South Korea but also across the existing markets. The ability to lead change has enabled Hankook Shell Oil in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Hankook Shell Oil is one of the most innovative firm in Oil & Gas Operations sector.
Ability to recruit top talent
– Hankook Shell Oil is one of the leading players in the Oil & Gas Operations 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 Hankook Shell Oil in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Hankook Shell Oil has one of the best training and development program in Energy 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.
Learning organization
- Hankook Shell Oil 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 Hankook Shell Oil is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hankook Shell Oil emphasize – knowledge, initiative, and innovation.
High brand equity
– Hankook Shell Oil has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hankook Shell Oil to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Hankook Shell Oil 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.
Strong track record of project management in the Oil & Gas Operations industry
– Hankook Shell Oil is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For Hankook Shell Oil digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hankook Shell Oil 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.
Weaknesses of Hankook Shell Oil | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hankook Shell Oil are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hankook Shell Oil is slow explore the new channels of communication. These new channels of communication can help Hankook Shell Oil to provide better information regarding Oil & Gas Operations products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Hankook Shell Oil is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Hankook Shell Oil needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hankook Shell Oil to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.
Lack of clear differentiation of Hankook Shell Oil products
– To increase the profitability and margins on the products, Hankook Shell Oil needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Hankook Shell Oil has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Oil & Gas Operations industry over the last five years. Hankook Shell Oil 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.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas Operations industry, Hankook Shell Oil 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.
High dependence on Hankook Shell Oil ‘s star products
– The top 2 products and services of Hankook Shell Oil still accounts for major business revenue. This dependence on star products in Oil & Gas Operations industry has resulted into insufficient focus on developing new products, even though Hankook Shell Oil has relatively successful track record of launching new products.
Employees’ less understanding of Hankook Shell Oil strategy
– From the outside it seems that the employees of Hankook Shell Oil 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.
Compensation and incentives
– The revenue per employee of Hankook Shell Oil is just above the Oil & Gas Operations 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.
Ability to respond to the competition
– As the decision making is very deliberative at Hankook Shell Oil, in the dynamic environment of Oil & Gas Operations industry it has struggled to respond to the nimble upstart competition. Hankook Shell Oil has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Hankook Shell Oil 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 Oil & Gas Operations industry using digital technology.
Slow to strategic competitive environment developments
– As Hankook Shell Oil is one of the leading players in the Oil & Gas Operations industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil & Gas Operations industry in last five years.
Hankook Shell Oil Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hankook Shell Oil 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 Hankook Shell Oil 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.
Manufacturing automation
– Hankook Shell Oil can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas Operations 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hankook Shell Oil can use these opportunities to build new business models that can help the communities that Hankook Shell Oil operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Buying journey improvements
– Hankook Shell Oil can improve the customer journey of consumers in the Oil & Gas Operations 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hankook Shell Oil 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.
Better consumer reach
– The expansion of the 5G network will help Hankook Shell Oil to increase its market reach. Hankook Shell Oil 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hankook Shell Oil 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. Hankook Shell Oil 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
– Hankook Shell Oil 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hankook Shell Oil is facing challenges because of the dominance of functional experts in the organization. Hankook Shell Oil can utilize new technology in the field of Oil & Gas Operations industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas Operations industry, but it has also influenced the consumer preferences. Hankook Shell Oil can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hankook Shell Oil 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 Hankook Shell Oil to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions in Oil & Gas Operations industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hankook Shell Oil in the Oil & Gas Operations industry. Now Hankook Shell Oil can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Hankook Shell Oil has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help Hankook Shell Oil to build a more holistic ecosystem for Hankook Shell Oil products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Hankook Shell Oil External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hankook Shell Oil are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hankook Shell Oil 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 Hankook Shell Oil prominent markets.
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. Hankook Shell Oil 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 acceleration in Forth Industrial Revolution
– Hankook Shell Oil has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Hankook Shell Oil needs to keep up with the evolution of technology in the Oil & Gas Operations 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Hankook Shell Oil may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Oil & Gas Operations sector.
Easy access to finance
– Easy access to finance in Oil & Gas Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hankook Shell Oil can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Hankook Shell Oil
– 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 Hankook Shell Oil.
Regulatory challenges
– Hankook Shell Oil 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 Oil & Gas Operations industry regulations.
Consumer confidence and its impact on Hankook Shell Oil 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 Oil & Gas Operations industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Hankook Shell Oil is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Hankook Shell Oil 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 Oil & Gas Operations industry.
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 Hankook Shell Oil in the Oil & Gas Operations sector and impact the bottomline of the organization.
Environmental challenges
– Hankook Shell Oil 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. Hankook Shell Oil can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations 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 Hankook Shell Oil business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Hankook Shell Oil Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hankook Shell Oil 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 Hankook Shell Oil 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 Hankook Shell Oil 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 Hankook Shell Oil 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 Hankook Shell Oil needs to make to build a sustainable competitive advantage.
