Hancom (30520) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Hancom (South Korea)
Based on various researches at Oak Spring University , Hancom is operating in a macro-environment that has been destablized by – increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing household debt because of falling income levels,
increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hancom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hancom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hancom 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 Hancom can be done for the following purposes –
1. Strategic planning of Hancom
2. Improving business portfolio management of Hancom
3. Assessing feasibility of the new initiative in South Korea
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hancom
Strengths of Hancom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hancom are -
Highly skilled collaborators
– Hancom has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of Hancom have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Hancom has one of the best training and development program in Technology 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.
Ability to recruit top talent
– Hancom is one of the leading players in the Software & Programming 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 switching costs
– The high switching costs that Hancom 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.
Diverse revenue streams
– Hancom is present in almost all the verticals within the Software & Programming industry. This has provided Hancom 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.
Ability to lead change in Software & Programming
– Hancom is one of the leading players in the Software & Programming industry in South Korea. Over the years it has not only transformed the business landscape in the Software & Programming industry in South Korea but also across the existing markets. The ability to lead change has enabled Hancom in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Hancom 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 Software & Programming 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.
Learning organization
- Hancom 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 Hancom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hancom emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Hancom 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.
Effective Research and Development (R&D)
– Hancom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hancom staying ahead in the Software & Programming industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Hancom in the Technology sector have low bargaining power. Hancom has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hancom to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Hancom has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hancom 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.
Weaknesses of Hancom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hancom are -
Ability to respond to the competition
– As the decision making is very deliberative at Hancom, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Hancom has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of Hancom, it seems that company is thinking out the frontier risks that can impact Software & Programming 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.
High bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in South Korea, Hancom 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 Software & Programming industry.
High dependence on Hancom ‘s star products
– The top 2 products and services of Hancom still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though Hancom has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Hancom is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Hancom needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hancom to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Hancom has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Software & Programming industry over the last five years. Hancom 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.
Employees’ less understanding of Hancom strategy
– From the outside it seems that the employees of Hancom 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
Hancom has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hancom is slow explore the new channels of communication. These new channels of communication can help Hancom to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of South Korea, Hancom needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Hancom has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hancom should strive to include more intangible value offerings along with its core products and services.
Hancom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hancom are -
Manufacturing automation
– Hancom can use the latest technology developments to improve its manufacturing and designing process in Software & Programming 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.
Creating value in data economy
– The success of analytics program of Hancom has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Hancom to build a more holistic ecosystem for Hancom products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hancom 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hancom 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 Hancom to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Hancom can improve the customer journey of consumers in the Software & Programming 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.
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. Hancom can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hancom can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions in Software & Programming industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hancom in the Software & Programming industry. Now Hancom can target international markets with far fewer capital restrictions requirements than the existing system.
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 Hancom 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hancom 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 Hancom to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Hancom can develop new processes and procedures in Software & Programming 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hancom can use these opportunities to build new business models that can help the communities that Hancom operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Leveraging digital technologies
– Hancom 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 Hancom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hancom 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hancom 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 Hancom prominent markets.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Hancom.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Hancom with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
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. Hancom 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.
Stagnating economy with rate increase
– Hancom 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 Software & Programming industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hancom in Software & Programming industry. The Software & Programming 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.
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 Hancom in the Software & Programming sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Software & Programming industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hancom can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Hancom business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Hancom is facing in Software & Programming sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Hancom has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, Hancom needs to keep up with the evolution of technology in the Software & Programming 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.
Regulatory challenges
– Hancom 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 Software & Programming industry regulations.
Weighted SWOT Analysis of Hancom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hancom 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 Hancom 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 Hancom 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 Hancom 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 Hancom needs to make to build a sustainable competitive advantage.