Nam Hwa Construction (91590) SWOT Analysis / TOWS Matrix / MBA Resources
Construction Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nam Hwa Construction (South Korea)
Based on various researches at Oak Spring University , Nam Hwa Construction is operating in a macro-environment that has been destablized by – increasing energy prices, increasing transportation and logistics costs, geopolitical disruptions, talent flight as more people leaving formal jobs, wage bills are increasing, central banks are concerned over increasing inflation, technology disruption,
challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Nam Hwa Construction
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nam Hwa Construction can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nam Hwa Construction, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nam Hwa Construction 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 Nam Hwa Construction can be done for the following purposes –
1. Strategic planning of Nam Hwa Construction
2. Improving business portfolio management of Nam Hwa Construction
3. Assessing feasibility of the new initiative in South Korea
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nam Hwa Construction
Strengths of Nam Hwa Construction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nam Hwa Construction are -
Low bargaining power of suppliers
– Suppliers of Nam Hwa Construction in the Capital Goods sector have low bargaining power. Nam Hwa Construction has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nam Hwa Construction to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Construction Services industry
– Nam Hwa Construction 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 Construction Services industry
- digital transformation varies from industry to industry. For Nam Hwa Construction digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nam Hwa Construction 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.
Training and development
– Nam Hwa Construction has one of the best training and development program in Capital Goods 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.
Sustainable margins compare to other players in Construction Services industry
– Nam Hwa Construction has clearly differentiated products in the market place. This has enabled Nam Hwa Construction to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Nam Hwa Construction to invest into research and development (R&D) and innovation.
Analytics focus
– Nam Hwa Construction 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 Construction Services 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
- Nam Hwa Construction 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 Nam Hwa Construction is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nam Hwa Construction emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Nam Hwa Construction
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nam Hwa Construction does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Nam Hwa Construction 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.
Ability to lead change in Construction Services
– Nam Hwa Construction is one of the leading players in the Construction Services industry in South Korea. Over the years it has not only transformed the business landscape in the Construction Services industry in South Korea but also across the existing markets. The ability to lead change has enabled Nam Hwa Construction in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Nam Hwa Construction has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nam Hwa Construction 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.
High brand equity
– Nam Hwa Construction has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nam Hwa Construction to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Nam Hwa Construction | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nam Hwa Construction are -
Products dominated business model
– Even though Nam Hwa Construction has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nam Hwa Construction should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Nam Hwa Construction has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, Nam Hwa Construction has high operating costs in the Construction Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nam Hwa Construction lucrative customers.
High bargaining power of channel partners in Construction Services industry
– because of the regulatory requirements in South Korea, Nam Hwa Construction 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 Construction Services industry.
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 Nam Hwa Construction supply chain. Even after few cautionary changes, Nam Hwa Construction is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nam Hwa Construction vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Nam Hwa Construction, it seems that company is thinking out the frontier risks that can impact Construction Services 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.
Ability to respond to the competition
– As the decision making is very deliberative at Nam Hwa Construction, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Nam Hwa Construction has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Nam Hwa Construction 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 dependence on Nam Hwa Construction ‘s star products
– The top 2 products and services of Nam Hwa Construction still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Nam Hwa Construction has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Nam Hwa Construction is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.
Need for greater diversity
– Nam Hwa Construction 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.
Nam Hwa Construction Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nam Hwa Construction are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Nam Hwa Construction 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.
Developing new processes and practices
– Nam Hwa Construction can develop new processes and procedures in Construction Services 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.
Buying journey improvements
– Nam Hwa Construction can improve the customer journey of consumers in the Construction Services 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nam Hwa Construction can use these opportunities to build new business models that can help the communities that Nam Hwa Construction operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Building a culture of innovation
– managers at Nam Hwa Construction 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 Construction Services industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nam Hwa Construction 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 Nam Hwa Construction to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nam Hwa Construction in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nam Hwa Construction can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nam Hwa Construction is facing challenges because of the dominance of functional experts in the organization. Nam Hwa Construction can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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 Nam Hwa Construction 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Nam Hwa Construction can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nam Hwa Construction in the Construction Services industry. Now Nam Hwa Construction can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Nam Hwa Construction can use the latest technology developments to improve its manufacturing and designing process in Construction Services 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.
Threats Nam Hwa Construction External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nam Hwa Construction are -
Environmental challenges
– Nam Hwa Construction 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. Nam Hwa Construction can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nam Hwa Construction may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.
Shortening product life cycle
– it is one of the major threat that Nam Hwa Construction is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.
Stagnating economy with rate increase
– Nam Hwa Construction 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 Construction Services industry.
High dependence on third party suppliers
– Nam Hwa Construction 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.
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 Nam Hwa Construction
– 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 Nam Hwa Construction.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nam Hwa Construction in Construction Services industry. The Construction Services 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nam Hwa Construction 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 Nam Hwa Construction prominent markets.
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 Nam Hwa Construction business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Nam Hwa Construction 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 Construction Services industry regulations.
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. Nam Hwa Construction 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.
Weighted SWOT Analysis of Nam Hwa Construction Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nam Hwa Construction 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 Nam Hwa Construction 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 Nam Hwa Construction 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 Nam Hwa Construction 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 Nam Hwa Construction needs to make to build a sustainable competitive advantage.