Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for S&W (South Korea)
Based on various researches at Oak Spring University , S&W is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing commodity prices, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings,
increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, etc
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Introduction to SWOT Analysis of S&W
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that S&W can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the S&W, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which S&W 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 S&W can be done for the following purposes –
1. Strategic planning of S&W
2. Improving business portfolio management of S&W
3. Assessing feasibility of the new initiative in South Korea
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of S&W
Strengths of S&W | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of S&W are -
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For S&W digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. S&W 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 Misc. Capital Goods
– S&W is one of the leading players in the Misc. Capital Goods industry in South Korea. Over the years it has not only transformed the business landscape in the Misc. Capital Goods industry in South Korea but also across the existing markets. The ability to lead change has enabled S&W in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– S&W has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – S&W staying ahead in the Misc. Capital Goods industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– S&W is one of the most innovative firm in Misc. Capital Goods sector.
Highly skilled collaborators
– S&W has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Capital Goods industry. Secondly the value chain collaborators of S&W have helped the firm to develop new products and bring them quickly to the marketplace.
– The operational resilience strategy of S&W comprises – understanding the underlying the factors in the Misc. Capital Goods 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.
Diverse revenue streams
– S&W is present in almost all the verticals within the Misc. Capital Goods industry. This has provided S&W 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.
High switching costs
– The high switching costs that S&W 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.
Sustainable margins compare to other players in Misc. Capital Goods industry
– S&W has clearly differentiated products in the market place. This has enabled S&W to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped S&W to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of S&W in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management in the Misc. Capital Goods industry
– S&W is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
- S&W 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 S&W is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at S&W emphasize – knowledge, initiative, and innovation.
Weaknesses of S&W | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of S&W are -
Skills based hiring in Misc. Capital Goods industry
– The stress on hiring functional specialists at S&W 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 S&W is one of the leading players in the Misc. Capital Goods industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Capital Goods industry in last five years.
High bargaining power of channel partners in Misc. Capital Goods industry
– because of the regulatory requirements in South Korea, S&W 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 Misc. Capital Goods industry.
– Compare to the competition, S&W 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.
Aligning sales with marketing
– From the outside it seems that S&W needs to have more collaboration between its sales team and marketing team. Sales professionals in the Misc. Capital Goods industry have deep experience in developing customer relationships. Marketing department at S&W can leverage the sales team experience to cultivate customer relationships as S&W is planning to shift buying processes online.
High cash cycle compare to competitors
S&W has a high cash cycle compare to other players in the Misc. Capital Goods industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– S&W 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.
Low market penetration in new markets
– Outside its home market of South Korea, S&W needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, S&W 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 Misc. Capital Goods industry using digital technology.
Products dominated business model
– Even though S&W has some of the most successful models in the Misc. Capital Goods industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. S&W should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at S&W, in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. S&W has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
S&W Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of S&W are -
– S&W has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Learning at scale
– Online learning technologies has now opened space for S&W 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.
Creating value in data economy
– The success of analytics program of S&W has opened avenues for new revenue streams for the organization in Misc. Capital Goods industry. This can help S&W to build a more holistic ecosystem for S&W products in the Misc. Capital Goods industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for S&W in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Capital Goods industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– S&W has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Capital Goods sector. This continuous investment in analytics has enabled S&W to build a competitive advantage using analytics. The analytics driven competitive advantage can help S&W to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, S&W 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
– S&W can develop new processes and procedures in Misc. Capital Goods 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, S&W 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 S&W to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. S&W can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 S&W 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.
Use of Bitcoin and other crypto currencies for transactions in Misc. Capital Goods industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for S&W in the Misc. Capital Goods industry. Now S&W can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, S&W is facing challenges because of the dominance of functional experts in the organization. S&W can utilize new technology in the field of Misc. Capital Goods industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at S&W 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 Misc. Capital Goods industry.
Threats S&W External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of S&W are -
– 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 S&W in the Misc. Capital Goods sector and impact the bottomline of the organization.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Capital Goods industry are lowering. It can presents S&W with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Capital Goods sector.
Shortening product life cycle
– it is one of the major threat that S&W is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
– 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.
– S&W 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. S&W can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
Increasing wage structure of S&W
– 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 S&W.
Technology acceleration in Forth Industrial Revolution
– S&W has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, S&W needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for S&W in Misc. Capital Goods industry. The Misc. Capital Goods 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.
High dependence on third party suppliers
– S&W 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.
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. S&W needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– S&W 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 Misc. Capital Goods industry.
Consumer confidence and its impact on S&W 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 Misc. Capital Goods industry and other sectors.
Weighted SWOT Analysis of S&W Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at S&W 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 S&W 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 S&W 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 S&W 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 S&W needs to make to build a sustainable competitive advantage.