Nexen (5720) SWOT Analysis / TOWS Matrix / MBA Resources
Tires
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nexen (South Korea)
Based on various researches at Oak Spring University , Nexen is operating in a macro-environment that has been destablized by – wage bills are increasing, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, technology disruption, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing energy prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nexen can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nexen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nexen 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 Nexen can be done for the following purposes –
1. Strategic planning of Nexen
2. Improving business portfolio management of Nexen
3. Assessing feasibility of the new initiative in South Korea
4. Making a Tires sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nexen
Strengths of Nexen | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nexen are -
Training and development
– Nexen has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Nexen 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 Tires 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.
Superior customer experience
– The customer experience strategy of Nexen in Tires industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Nexen is present in almost all the verticals within the Tires industry. This has provided Nexen a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of Nexen comprises – understanding the underlying the factors in the Tires 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.
High switching costs
– The high switching costs that Nexen 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.
Innovation driven organization
– Nexen is one of the most innovative firm in Tires sector.
Successful track record of launching new products
– Nexen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nexen 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.
Sustainable margins compare to other players in Tires industry
– Nexen has clearly differentiated products in the market place. This has enabled Nexen to fetch slight price premium compare to the competitors in the Tires industry. The sustainable margins have also helped Nexen to invest into research and development (R&D) and innovation.
Digital Transformation in Tires industry
- digital transformation varies from industry to industry. For Nexen digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nexen 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.
Ability to lead change in Tires
– Nexen is one of the leading players in the Tires industry in South Korea. Over the years it has not only transformed the business landscape in the Tires industry in South Korea but also across the existing markets. The ability to lead change has enabled Nexen in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Nexen
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nexen does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Nexen | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nexen are -
Employees’ less understanding of Nexen strategy
– From the outside it seems that the employees of Nexen don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Nexen has a high cash cycle compare to other players in the Tires industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Nexen, it seems that company is thinking out the frontier risks that can impact Tires 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.
Slow decision making process
– As mentioned earlier in the report, Nexen has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tires industry over the last five years. Nexen 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.
Skills based hiring in Tires industry
– The stress on hiring functional specialists at Nexen 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.
Slow to strategic competitive environment developments
– As Nexen is one of the leading players in the Tires industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Tires industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Nexen 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 Tires industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Nexen is dominated by functional specialists. It is not different from other players in the Tires industry, but Nexen needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nexen to focus more on services in the Tires industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nexen is slow explore the new channels of communication. These new channels of communication can help Nexen to provide better information regarding Tires products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Nexen products
– To increase the profitability and margins on the products, Nexen needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Nexen 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.
Nexen Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nexen are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tires industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nexen 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. Nexen 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nexen 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 Nexen to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Nexen 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.
Better consumer reach
– The expansion of the 5G network will help Nexen to increase its market reach. Nexen 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.
Buying journey improvements
– Nexen can improve the customer journey of consumers in the Tires 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, Nexen 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.
Creating value in data economy
– The success of analytics program of Nexen has opened avenues for new revenue streams for the organization in Tires industry. This can help Nexen to build a more holistic ecosystem for Nexen products in the Tires industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nexen is facing challenges because of the dominance of functional experts in the organization. Nexen can utilize new technology in the field of Tires industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nexen 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 Nexen to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Nexen 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 Tires industry.
Use of Bitcoin and other crypto currencies for transactions in Tires industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nexen in the Tires industry. Now Nexen can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Tires industry, but it has also influenced the consumer preferences. Nexen can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nexen can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Nexen External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nexen are -
Regulatory challenges
– Nexen 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 Tires industry regulations.
High dependence on third party suppliers
– Nexen 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.
Shortening product life cycle
– it is one of the major threat that Nexen is facing in Tires sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Nexen 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. Nexen can take advantage of this fund but it will also bring new competitors in the Tires industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Tires industry are lowering. It can presents Nexen with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Tires sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nexen in Tires industry. The Tires 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.
Consumer confidence and its impact on Nexen 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 Tires industry and other sectors.
Easy access to finance
– Easy access to finance in Tires industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nexen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nexen may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tires sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nexen 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 Nexen prominent markets.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Nexen
– 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 Nexen.
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 Nexen business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Nexen Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nexen 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 Nexen 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 Nexen 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 Nexen 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 Nexen needs to make to build a sustainable competitive advantage.