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POSCO SWOT & PESTLE Analysis

ID : 52401753| Jul 2018| 15 pages

COMPANY PROFILE -POSCO

Business Sector :Iron & Steel Making Company

Operating Geography :South Korea, Asia, Global

About POSCO :

Headquartered in Pohang, South Korea it started operations in 1968 for manufacturing and selling rolled steel products. The company has gradually ventured into various related businesses that uses steel products or supplies requisite raw materials for manufacturing. Also, it has diversified risk by expanding its operating geography as mentioned above. Recently, it took up restructuring initiative that resulted in a financial effect worth KRW 7 trillion. It achieved an operating profit of 3.7 billion dollars for FY – 2017. It has around 130, 000 employees as of May, 2017.

The mission statement of USS POSCO states “To Conduct Business in A Manner That Provides Maximum Value to Our Customers, Owners and Employees.” ; With a vision of “To Be the Safest, Most Competitive Flat Rolled Steel Company.”

POSCO Revenue :


28,554 billion KRW (listed in NYSE:PKX) as of FY - 2017
24325 billion KRW as of FY - 2016

Competitive Analysis of POSCO

SWOT
PESTLE
The SWOT analysis of POSCO is presented below:
Strengths
Weaknesses
1. Consistently strong financial performance
2. Global Presence
3. People – Centric organisation
4. In – house research capability
1. Problematic Cash Conversion Cycle
Opportunities
Threats
1. Expected Growth in steel demand in developing economies
2. Expected Consolidation of the sector
3. New Ventures and Restructuring Endeavour
1. Competitors
2. Problem of Over - Capacity
3. Substitute Products
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Detailed SWOT Analysis of POSCO

 

Strength

1. Consistently strong financial performance: In last 3 years, the profits have increased continuously from negative to very high positive numbers (from -86.56 million to 2.68 billion i.e. 0% to 5% with respect to the revenue of the company), indicating an improvement in the situation. Retained earnings have improve, which now stands at 54% of the total asset value, albeit cost of goods sold has increased as compared to last year. Though there was a minor decrease in property, plant and equipment and of course in production, due to certain rationalization but it is able to maintain its profit margin as compared to last year’s margin. Interest coverage ratio has also increased from 0.76 to 1.86, showing a massive improvement in the financials of the company.

2. Global Presence: Under Great Voyager program it is continually expanding to newer geographies where there are customers and opportunities leveraging its know-how in the steel making industry segment. Also, it is moving into frontier unexplored areas such as North and South Poles, interiors of Africa and Siberia. These places have requisite resources in abundance. Apart from moving into newer geographies, it also has diversified business portfolio e.g.: POSCO Daewoo, POSCO E&C, POSCO Chemtech, POSCO Energy, POSCO C&C and POSCO ICT. Some of its subsidiaries are POSCO Maharastra, POSCO Mexico, POSCO Vietnam, and POSCO SS Vienna. It also has partnership with various steel players around the world as well.

3. People focused organization: Knowledge centric organization, with support for personal development of employees. It is also establishing a family management system in which it aims to improve trust and communication, harmony and synergy amongst the employees to improve their productivity. Focus on establishing a flexible and creative corporate culture would help in swift response to changes and generation of novel ideas.

4. In-house research capability: Posco has invested in establishing PosTech, in which students and faculties are involved in improving existing technologies and developing novel technologies. Delving into the segments of Lithium extraction and bio - pharma will be based on the studies and research done by students and faculties of PosTech, established 32 years back. PosLX, a technology for Li extraction, has been developed which will substantially reduce the time of extraction from one year to one month.

Weakness

1. Problematic Cash Conversion Cycle: The Company, as any capital intensive company faces a problematic cash conversion cycle. Analyzing, its financial statement revealed that it takes around 3 years for its net receivables to convert to cash. This manifests the power of buyers of the Company. Recently, its asset turnover ratio has increased but still is very low. Working capital requirement, as a percentage of sales, has remained at 20%. Also, the ratio of Non – Cash Working Capital has reduced which suggests that non – cash current asset have reduced and cash has been realized more effectively, as compared to last year.

Opportunity

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Threat

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Major Competitors :

Arcelor Mittal , Nippon Steel, HBIS Group, China Baowu Group, Wuhan Iron and Steel Group, Tata Steel, NSSMC Group
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TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
References used in POSCO Analysis Report

1. www.posco.com/

2. http://www.theinvestor.co.kr/view.php?ud=20180401000202

3. http://www.posco.com/homepage/docs/eng5/jsp/invest/financial/s91b5010040c.jsp?mdex=posco22AA

Copyrights and Disclaimer

POSCO SWOT and PESTLE analysis has been conducted by Abhishek Mishra and reviewed by senior analysts from Barakaat Consulting.

Copyright of POSCO SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.

POSCO SWOT & PESTLE Analysis
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