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 – increasing government debt because of Covid-19 spendings, increasing energy prices, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion,
customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, 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 -
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.
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.
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.
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.
Highly skilled collaborators
– Hankook Shell Oil has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil & Gas Operations industry. Secondly the value chain collaborators of Hankook Shell Oil have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Hankook Shell Oil has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hankook Shell Oil staying ahead in the Oil & Gas Operations industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Analytics focus
– Hankook Shell Oil 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 Oil & Gas Operations 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.
Organizational Resilience of Hankook Shell Oil
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hankook Shell Oil does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Hankook Shell Oil has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hankook Shell Oil 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.
Innovation driven organization
– Hankook Shell Oil is one of the most innovative firm in Oil & Gas Operations sector.
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.
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 -
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.
Aligning sales with marketing
– From the outside it seems that Hankook Shell Oil needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil & Gas Operations industry have deep experience in developing customer relationships. Marketing department at Hankook Shell Oil can leverage the sales team experience to cultivate customer relationships as Hankook Shell Oil is planning to shift buying processes online.
High cash cycle compare to competitors
Hankook Shell Oil has a high cash cycle compare to other players in the Oil & Gas Operations industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of South Korea, Hankook Shell Oil needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
No frontier risks strategy
– From the 10K / annual statement of Hankook Shell Oil, it seems that company is thinking out the frontier risks that can impact Oil & Gas Operations 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.
Interest costs
– Compare to the competition, Hankook Shell Oil 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.
High bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in South Korea, Hankook Shell Oil is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Oil & Gas Operations industry.
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.
Products dominated business model
– Even though Hankook Shell Oil has some of the most successful models in the Oil & Gas Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hankook Shell Oil should strive to include more intangible value offerings along with its core products and services.
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 -
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.
Learning at scale
– Online learning technologies has now opened space for Hankook Shell Oil 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.
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.
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.
Developing new processes and practices
– Hankook Shell Oil can develop new processes and procedures in Oil & Gas Operations 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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hankook Shell Oil can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Building a culture of innovation
– managers at Hankook Shell Oil 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 Oil & Gas Operations industry.
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.
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.
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 -
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.
High dependence on third party suppliers
– Hankook Shell Oil 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.
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.
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 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 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents Hankook Shell Oil with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas Operations sector.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hankook Shell Oil in Oil & Gas Operations industry. The Oil & Gas Operations 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.
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.
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.
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.