Shanda Games: A Buyout of a Chinese Family Firm SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Shanda Games: A Buyout of a Chinese Family Firm
A controlling shareholder of the NYSE-listed Chinese online gaming company Shanda Games has offered a buyout at USD6.90 per American Depositary Share (ADS); each ADS consists of two ordinary shares. The offer provides a premium of 22 per cent to the stock's Friday close. Throughout the previous year, Shanda Games' ADS had typically traded in the range of USD3.00 to 4.50.As Shanda Games' independent directors attempt to evaluate the offer, they wonder: Should the shareholders accept it as it is? Should they ask for a higher price? Or should they look for the alternatives? Emir HrnjiA‡ is affiliated with National University of Singapore. David Reeb is affiliated with National University of Singapore.
Swot Analysis of "Shanda Games: A Buyout of a Chinese Family Firm" written by Emir Hrnjic, David Reeb includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Shanda Games facing as an external strategic factors. Some of the topics covered in Shanda Games: A Buyout of a Chinese Family Firm case study are - Strategic Management Strategies, IT, Strategy and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Shanda Games: A Buyout of a Chinese Family Firm casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing energy prices, technology disruption, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices,
competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Shanda Games: A Buyout of a Chinese Family Firm
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Shanda Games: A Buyout of a Chinese Family Firm case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shanda Games, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shanda Games 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 Shanda Games: A Buyout of a Chinese Family Firm can be done for the following purposes –
1. Strategic planning using facts provided in Shanda Games: A Buyout of a Chinese Family Firm case study
2. Improving business portfolio management of Shanda Games
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Shanda Games
Strengths Shanda Games: A Buyout of a Chinese Family Firm | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shanda Games in Shanda Games: A Buyout of a Chinese Family Firm Harvard Business Review case study are -
Effective Research and Development (R&D)
– Shanda Games has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Shanda Games: A Buyout of a Chinese Family Firm - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Shanda Games has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Shanda Games: A Buyout of a Chinese Family Firm HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Shanda Games has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shanda Games to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Shanda Games 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 Shanda Games 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.
Analytics focus
– Shanda Games 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 industry. The technology infrastructure suggested by Emir Hrnjic, David Reeb can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in Finance & Accounting industry
– Shanda Games: A Buyout of a Chinese Family Firm firm has clearly differentiated products in the market place. This has enabled Shanda Games to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Shanda Games to invest into research and development (R&D) and innovation.
Ability to lead change in Finance & Accounting field
– Shanda Games is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Shanda Games in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Shanda Games is present in almost all the verticals within the industry. This has provided firm in Shanda Games: A Buyout of a Chinese Family Firm case study 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.
Operational resilience
– The operational resilience strategy in the Shanda Games: A Buyout of a Chinese Family Firm Harvard Business Review case study comprises – understanding the underlying the factors in the 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.
Ability to recruit top talent
– Shanda Games is one of the leading recruiters in the industry. Managers in the Shanda Games: A Buyout of a Chinese Family Firm are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Shanda Games has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shanda Games 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.
Weaknesses Shanda Games: A Buyout of a Chinese Family Firm | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shanda Games: A Buyout of a Chinese Family Firm are -
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 Shanda Games supply chain. Even after few cautionary changes mentioned in the HBR case study - Shanda Games: A Buyout of a Chinese Family Firm, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shanda Games vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Shanda Games is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Shanda Games needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Shanda Games to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Shanda Games: A Buyout of a Chinese Family Firm HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Shanda Games has relatively successful track record of launching new products.
Products dominated business model
– Even though Shanda Games has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Shanda Games: A Buyout of a Chinese Family Firm should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Shanda Games 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Shanda Games: A Buyout of a Chinese Family Firm, it seems that the employees of Shanda Games 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.
No frontier risks strategy
– After analyzing the HBR case study Shanda Games: A Buyout of a Chinese Family Firm, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. 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.
Low market penetration in new markets
– Outside its home market of Shanda Games, firm in the HBR case study Shanda Games: A Buyout of a Chinese Family Firm needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Shanda Games 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Shanda Games: A Buyout of a Chinese Family Firm has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Shanda Games 's lucrative customers.
High cash cycle compare to competitors
Shanda Games has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Shanda Games: A Buyout of a Chinese Family Firm | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Shanda Games: A Buyout of a Chinese Family Firm are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Shanda Games 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, as suggested in case study, Shanda Games: A Buyout of a Chinese Family Firm, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Shanda Games can develop new processes and procedures in Finance & Accounting 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Shanda Games 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 Shanda Games to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Shanda Games 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.
Manufacturing automation
– Shanda Games can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. 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.
Building a culture of innovation
– managers at Shanda Games 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 Finance & Accounting segment.
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. Shanda Games can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Shanda Games has opened avenues for new revenue streams for the organization in the industry. This can help Shanda Games to build a more holistic ecosystem as suggested in the Shanda Games: A Buyout of a Chinese Family Firm case study. Shanda Games can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shanda Games 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Shanda Games 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
– Shanda Games can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Shanda Games: A Buyout of a Chinese Family Firm suggest that firm 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.
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 Shanda Games 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shanda Games can use these opportunities to build new business models that can help the communities that Shanda Games operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats Shanda Games: A Buyout of a Chinese Family Firm External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Shanda Games: A Buyout of a Chinese Family Firm are -
Environmental challenges
– Shanda Games 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. Shanda Games can take advantage of this fund but it will also bring new competitors in the Finance & Accounting 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 Shanda Games.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Shanda Games with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the 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 Shanda Games business can come under increasing regulations regarding data privacy, data security, 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. Shanda Games 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Shanda Games in the Finance & Accounting industry. The Finance & Accounting 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.
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 Shanda Games in the Finance & Accounting sector and impact the bottomline of the organization.
Consumer confidence and its impact on Shanda Games 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 the industry and other sectors.
Increasing wage structure of Shanda Games
– 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 Shanda Games.
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. Shanda Games needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Shanda Games 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 prominent markets illustrated in HBR case study Shanda Games: A Buyout of a Chinese Family Firm .
High dependence on third party suppliers
– Shanda Games 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.
Stagnating economy with rate increase
– Shanda Games 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 field.
Weighted SWOT Analysis of Shanda Games: A Buyout of a Chinese Family Firm Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Shanda Games: A Buyout of a Chinese Family Firm 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 the case study Shanda Games: A Buyout of a Chinese Family Firm 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 the Harvard case study Shanda Games: A Buyout of a Chinese Family Firm 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 Shanda Games: A Buyout of a Chinese Family Firm is 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 Shanda Games needs to make to build a sustainable competitive advantage.
