Shandong Iron and Steel (600022) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Shandong Iron and Steel (China)
Based on various researches at Oak Spring University , Shandong Iron and Steel is operating in a macro-environment that has been destablized by – geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs,
central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Shandong Iron and Steel
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shandong Iron and Steel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shandong Iron and Steel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shandong Iron and 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 Shandong Iron and Steel can be done for the following purposes –
1. Strategic planning of Shandong Iron and Steel
2. Improving business portfolio management of Shandong Iron and Steel
3. Assessing feasibility of the new initiative in China
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shandong Iron and Steel
Strengths of Shandong Iron and Steel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shandong Iron and Steel are -
Ability to recruit top talent
– Shandong Iron and Steel is one of the leading players in the Iron & Steel industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Shandong Iron and 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 Shandong Iron and Steel have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Shandong Iron and 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 Shandong Iron and Steel
– The covid-19 pandemic has put organizational resilience at the centre of everthing Shandong Iron and Steel 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
– Shandong Iron and Steel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shandong Iron and 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.
Learning organization
- Shandong Iron and 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 Shandong Iron and Steel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Shandong Iron and Steel emphasize – knowledge, initiative, and innovation.
Training and development
– Shandong Iron and Steel 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.
Ability to lead change in Iron & Steel
– Shandong Iron and Steel is one of the leading players in the Iron & Steel industry in China. Over the years it has not only transformed the business landscape in the Iron & Steel industry in China but also across the existing markets. The ability to lead change has enabled Shandong Iron and Steel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Shandong Iron and Steel in the Basic Materials sector have low bargaining power. Shandong Iron and Steel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shandong Iron and Steel to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Iron & Steel industry
– Shandong Iron and Steel is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Shandong Iron and 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.
Superior customer experience
– The customer experience strategy of Shandong Iron and Steel in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Shandong Iron and Steel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shandong Iron and Steel are -
Low market penetration in new markets
– Outside its home market of China, Shandong Iron and Steel needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Shandong Iron and Steel supply chain. Even after few cautionary changes, Shandong Iron and Steel is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shandong Iron and Steel vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Shandong Iron and Steel products
– To increase the profitability and margins on the products, Shandong Iron and Steel needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Shandong Iron and Steel is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Shandong Iron and Steel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Shandong Iron and Steel to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Shandong Iron and 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.
High dependence on Shandong Iron and Steel ‘s star products
– The top 2 products and services of Shandong Iron and 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 Shandong Iron and Steel has relatively successful track record of launching new products.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at Shandong Iron and 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.
Slow to strategic competitive environment developments
– As Shandong Iron and Steel 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, Shandong Iron and 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. Shandong Iron and 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.
Need for greater diversity
– Shandong Iron and Steel 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.
Interest costs
– Compare to the competition, Shandong Iron and 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.
Shandong Iron and Steel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shandong Iron and Steel are -
Better consumer reach
– The expansion of the 5G network will help Shandong Iron and Steel to increase its market reach. Shandong Iron and Steel 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Shandong Iron and 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 Shandong Iron and 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, Shandong Iron and Steel is facing challenges because of the dominance of functional experts in the organization. Shandong Iron and 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.
Creating value in data economy
– The success of analytics program of Shandong Iron and Steel has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Shandong Iron and Steel to build a more holistic ecosystem for Shandong Iron and Steel products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Shandong Iron and Steel 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 Shandong Iron and Steel to build a competitive advantage using analytics. The analytics driven competitive advantage can help Shandong Iron and Steel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Shandong Iron and Steel 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Shandong Iron and 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 Shandong Iron and Steel to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Shandong Iron and Steel 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.
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. Shandong Iron and Steel can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Shandong Iron and 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.
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. Shandong Iron and Steel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shandong Iron and 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shandong Iron and Steel can use these opportunities to build new business models that can help the communities that Shandong Iron and Steel operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Threats Shandong Iron and Steel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shandong Iron and Steel are -
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.
Environmental challenges
– Shandong Iron and Steel 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. Shandong Iron and Steel can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Consumer confidence and its impact on Shandong Iron and Steel 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.
Stagnating economy with rate increase
– Shandong Iron and 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.
Technology acceleration in Forth Industrial Revolution
– Shandong Iron and Steel has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Shandong Iron and 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.
Increasing wage structure of Shandong Iron and 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 Shandong Iron and Steel.
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 Shandong Iron and Steel business can come under increasing regulations regarding data privacy, data security, 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.
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 Shandong Iron and Steel.
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 Shandong Iron and Steel in the Iron & Steel sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Shandong Iron and 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.
Shortening product life cycle
– it is one of the major threat that Shandong Iron and Steel is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Shandong Iron and Steel 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 Shandong Iron and Steel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Shandong Iron and 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 Shandong Iron and 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 Shandong Iron and 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 Shandong Iron and 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 Shandong Iron and Steel needs to make to build a sustainable competitive advantage.