POSCO (PKX) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for POSCO (United States)

Based on various researches at Oak Spring University , POSCO is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, increasing household debt because of falling income levels, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of POSCO

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that POSCO can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the POSCO, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which POSCO 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of POSCO can be done for the following purposes –
1. Strategic planning of POSCO
2. Improving business portfolio management of POSCO
3. Assessing feasibility of the new initiative in United States
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of POSCO

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Strengths of POSCO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of POSCO are -

Diverse revenue streams

– POSCO is present in almost all the verticals within the Iron & Steel industry. This has provided POSCO 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.

Sustainable margins compare to other players in Iron & Steel industry

– POSCO has clearly differentiated products in the market place. This has enabled POSCO to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped POSCO to invest into research and development (R&D) and innovation.

Low bargaining power of suppliers

– Suppliers of POSCO in the Basic Materials sector have low bargaining power. POSCO has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps POSCO to manage not only supply disruptions but also source products at highly competitive prices.

Innovation driven organization

– POSCO is one of the most innovative firm in Iron & Steel sector.

Ability to recruit top talent

– POSCO is one of the leading players in the Iron & Steel industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Highly skilled collaborators

– POSCO 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 POSCO have helped the firm to develop new products and bring them quickly to the marketplace.

Strong track record of project management in the Iron & Steel industry

– POSCO is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

– POSCO has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. POSCO 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.

Operational resilience

– The operational resilience strategy of POSCO 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.

Superior customer experience

– The customer experience strategy of POSCO in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Organizational Resilience of POSCO

– The covid-19 pandemic has put organizational resilience at the centre of everthing POSCO does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High brand equity

– POSCO has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled POSCO to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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Weaknesses of POSCO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of POSCO are -

Employees’ less understanding of POSCO strategy

– From the outside it seems that the employees of POSCO 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.

Increasing silos among functional specialists

– The organizational structure of POSCO is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but POSCO needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help POSCO to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.

Workers concerns about automation

– As automation is fast increasing in the Iron & Steel industry, POSCO needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, POSCO is slow explore the new channels of communication. These new channels of communication can help POSCO to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.

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 POSCO supply chain. Even after few cautionary changes, POSCO is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left POSCO vulnerable to further global disruptions in South East Asia.

Interest costs

– Compare to the competition, POSCO 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.

Compensation and incentives

– The revenue per employee of POSCO is just above the Iron & Steel industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Slow decision making process

– As mentioned earlier in the report, POSCO 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. POSCO 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.

Slow to strategic competitive environment developments

– As POSCO is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.

Ability to respond to the competition

– As the decision making is very deliberative at POSCO, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. POSCO has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Capital Spending Reduction

– Even during the low interest decade, POSCO 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.

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POSCO Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of POSCO are -

Manufacturing automation

– POSCO 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.

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 POSCO in the Iron & Steel industry. Now POSCO can target international markets with far fewer capital restrictions requirements than the existing system.

Lowering marketing communication costs

– 5G expansion will open new opportunities for POSCO in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel 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 POSCO can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Buying journey improvements

– POSCO can improve the customer journey of consumers in the Iron & Steel 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.

Using analytics as competitive advantage

– POSCO has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Iron & Steel sector. This continuous investment in analytics has enabled POSCO to build a competitive advantage using analytics. The analytics driven competitive advantage can help POSCO to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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. POSCO 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. POSCO 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, POSCO 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 POSCO to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, POSCO can use these opportunities to build new business models that can help the communities that POSCO operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.

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. POSCO can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Developing new processes and practices

– POSCO 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.

Learning at scale

– Online learning technologies has now opened space for POSCO 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.

Building a culture of innovation

– managers at POSCO 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.

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Threats POSCO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of POSCO are -

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 POSCO.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for POSCO 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.

Shortening product life cycle

– it is one of the major threat that POSCO is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Technology acceleration in Forth Industrial Revolution

– POSCO has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, POSCO 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.

Environmental challenges

– POSCO 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. POSCO can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.

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 POSCO business can come under increasing regulations regarding data privacy, data security, etc.

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. POSCO needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.

Stagnating economy with rate increase

– POSCO 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.

Increasing wage structure of POSCO

– 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 POSCO.

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.

Consumer confidence and its impact on POSCO 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 Iron & Steel industry and other sectors.

High dependence on third party suppliers

– POSCO 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.

Easy access to finance

– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. POSCO can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of POSCO Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at POSCO 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 POSCO 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 POSCO 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 POSCO 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 POSCO needs to make to build a sustainable competitive advantage.

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