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 – increasing transportation and logistics costs, geopolitical disruptions, increasing household debt because of falling income levels, increasing energy prices, central banks are concerned over increasing inflation, there is backlash against globalization, cloud computing is disrupting traditional business models, wage bills are increasing, increasing government debt because of Covid-19 spendings, 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 -

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.

Analytics focus

– POSCO 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 Iron & Steel industry. The technology infrastructure of United States 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.

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.

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.

Cross disciplinary teams

– Horizontal connected teams at the POSCO 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.

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.

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.

High switching costs

– The high switching costs that POSCO 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.

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.

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.

Effective Research and Development (R&D)

– POSCO has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – POSCO 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.

Training and development

– POSCO has one of the best training and development program in Basic Materials 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.

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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 -

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.

High cash cycle compare to competitors

POSCO 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.

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.

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.

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.

Products dominated business model

– Even though POSCO has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. POSCO should strive to include more intangible value offerings along with its core products and services.

No frontier risks strategy

– From the 10K / annual statement of POSCO, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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.

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.

Need for greater diversity

– POSCO 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.

Lack of clear differentiation of POSCO products

– To increase the profitability and margins on the products, POSCO needs to provide more differentiated products than what it is currently offering in the marketplace.

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.

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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 -

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.

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.

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.

Better consumer reach

– The expansion of the 5G network will help POSCO to increase its market reach. POSCO will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for POSCO 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 POSCO to hire the very best people irrespective of their geographical location.

Leveraging digital technologies

– POSCO 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.

Creating value in data economy

– The success of analytics program of POSCO has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help POSCO to build a more holistic ecosystem for POSCO products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, 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, 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.

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.

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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, POSCO 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.

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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 -

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.

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.

Regulatory challenges

– POSCO 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

– 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.

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. POSCO 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, POSCO 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 POSCO prominent markets.

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.

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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, POSCO 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.

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.

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.

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.

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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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