SWOT Analysis / TOWS Matrix for Dongbu Steel (South Korea)
Based on various researches at Oak Spring University , Dongbu Steel is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, wage bills are increasing, increasing commodity prices, central banks are concerned over increasing inflation, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%,
banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Dongbu Steel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dongbu Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dongbu Steel 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 Dongbu Steel can be done for the following purposes –
1. Strategic planning of Dongbu Steel
2. Improving business portfolio management of Dongbu Steel
3. Assessing feasibility of the new initiative in South Korea
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Dongbu Steel
Strengths of Dongbu Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dongbu Steel are -
Diverse revenue streams
– Dongbu Steel is present in almost all the verticals within the Iron & Steel industry. This has provided Dongbu Steel 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.
Superior customer experience
– The customer experience strategy of Dongbu Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Dongbu Steel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Dongbu Steel staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Dongbu Steel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Dongbu Steel 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 Iron & Steel industry
– Dongbu Steel has clearly differentiated products in the market place. This has enabled Dongbu Steel to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped Dongbu Steel to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Dongbu Steel in the Basic Materials sector have low bargaining power. Dongbu Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dongbu Steel to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Iron & Steel
– Dongbu Steel is one of the leading players in the Iron & Steel industry in South Korea. Over the years it has not only transformed the business landscape in the Iron & Steel industry in South Korea but also across the existing markets. The ability to lead change has enabled Dongbu Steel 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 Dongbu Steel comprises – understanding the underlying the factors in the Iron & Steel 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.
Organizational Resilience of Dongbu Steel
– The covid-19 pandemic has put organizational resilience at the centre of everthing Dongbu Steel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Dongbu Steel 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.
Highly skilled collaborators
– Dongbu Steel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Dongbu Steel have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Dongbu Steel 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 Dongbu Steel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Dongbu Steel emphasize – knowledge, initiative, and innovation.
Weaknesses of Dongbu Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dongbu Steel are -
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at Dongbu Steel 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.
Ability to respond to the competition
– As the decision making is very deliberative at Dongbu Steel, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Dongbu Steel has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Dongbu Steel ‘s star products
– The top 2 products and services of Dongbu Steel still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though Dongbu Steel has relatively successful track record of launching new products.
Lack of clear differentiation of Dongbu Steel products
– To increase the profitability and margins on the products, Dongbu Steel needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Dongbu Steel has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Dongbu Steel lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Dongbu Steel 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 Iron & Steel industry using digital technology.
High cash cycle compare to competitors
Dongbu Steel has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Dongbu Steel 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dongbu Steel is slow explore the new channels of communication. These new channels of communication can help Dongbu Steel to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Dongbu Steel has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Dongbu Steel 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Dongbu Steel supply chain. Even after few cautionary changes, Dongbu Steel is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Dongbu Steel vulnerable to further global disruptions in South East Asia.
Dongbu Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Dongbu Steel are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Dongbu Steel 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 Dongbu Steel to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Dongbu Steel 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 Dongbu Steel 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, Dongbu Steel is facing challenges because of the dominance of functional experts in the organization. Dongbu Steel can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Dongbu Steel can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Dongbu Steel 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. Dongbu Steel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Dongbu Steel can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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 Dongbu Steel 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 Iron & Steel industry.
Use of Bitcoin and other crypto currencies for transactions in Iron & Steel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Dongbu Steel in the Iron & Steel industry. Now Dongbu Steel can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Dongbu Steel 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. Dongbu Steel 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
– Dongbu Steel 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.
Developing new processes and practices
– Dongbu Steel can develop new processes and procedures in Iron & Steel 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Dongbu Steel 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.
Threats Dongbu Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Dongbu Steel are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Dongbu Steel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
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. Dongbu Steel needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Dongbu Steel may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Dongbu Steel in Iron & Steel industry. The Iron & Steel 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 Dongbu Steel in the Iron & Steel sector and impact the bottomline of the organization.
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 Dongbu Steel business can come under increasing regulations regarding data privacy, data security, etc.
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.
Regulatory challenges
– Dongbu Steel 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 Iron & Steel industry regulations.
Technology acceleration in Forth Industrial Revolution
– Dongbu Steel has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Dongbu Steel needs to keep up with the evolution of technology in the Iron & Steel 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.
Stagnating economy with rate increase
– Dongbu Steel 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 Iron & Steel industry.
Shortening product life cycle
– it is one of the major threat that Dongbu Steel is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Dongbu Steel
– 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 Dongbu Steel.
Weighted SWOT Analysis of Dongbu Steel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Dongbu Steel 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 Dongbu Steel 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 Dongbu Steel 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 Dongbu Steel 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 Dongbu Steel needs to make to build a sustainable competitive advantage.
