Yinguangxia: An Epitome of Corporate Governance Flaws in China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Yinguangxia: An Epitome of Corporate Governance Flaws in China
Yinguangxia ("YGX"), a joint stock listed company in China, has captured much media attention since the mid-1990s for its contribution to China's eco-agricultural industrialisation and modernisation of traditional Chinese medicine. The astonishing leap of its share prices, about 440% in 2000, caused journalists at Caijing, a local reputable financial magazine, to be suspicious and they set off to investigate YGX. On 2 August 2001, Caijin published an article alleging YGX's misrepresentation of export activities, which involved its Tianjin subsidiary's sale of biologically extracted products to a German company, Fidelity Trading GMBH. A profit overstatement of US$93 million from 1998 to 2001 was eventually revealed by China Securities Regulatory Commission, and four of the company's senior officials, including the former CEO and CFO of YGX and Tianjin Guangxia, were sent to jail for forging documents and fraudulent misrepresentation of information. The operating licence of the company's external auditors, Zhongtianqin, was revoked and the professional certificates of its two certified public accountants were repealed. The scandal also resulted in the investors' crusading pursuit of private indemnification against their investment loss; the legal protection of private shareholders in China remained an issue of great concern in the country. Having been a top performer on the Chinese stock market, YGX's fallout has revealed the deficiencies of the corporate governance system in China. It also brings to light the problems involved in auditing practices in China.
Swot Analysis of "Yinguangxia: An Epitome of Corporate Governance Flaws in China" written by Amy Lau, Claudia H. L. Woo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ygx Ygx's facing as an external strategic factors. Some of the topics covered in Yinguangxia: An Epitome of Corporate Governance Flaws in China case study are - Strategic Management Strategies, Ethics, Financial management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Yinguangxia: An Epitome of Corporate Governance Flaws in China casestudy better are - – increasing energy prices, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, talent flight as more people leaving formal jobs, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization,
increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Yinguangxia: An Epitome of Corporate Governance Flaws in China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Yinguangxia: An Epitome of Corporate Governance Flaws in China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ygx Ygx's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ygx Ygx's 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China can be done for the following purposes –
1. Strategic planning using facts provided in Yinguangxia: An Epitome of Corporate Governance Flaws in China case study
2. Improving business portfolio management of Ygx Ygx's
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 Ygx Ygx's
Strengths Yinguangxia: An Epitome of Corporate Governance Flaws in China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ygx Ygx's in Yinguangxia: An Epitome of Corporate Governance Flaws in China Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Ygx Ygx's 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 Ygx Ygx's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Ygx Ygx's is one of the most innovative firm in sector. Manager in Yinguangxia: An Epitome of Corporate Governance Flaws in China Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Yinguangxia: An Epitome of Corporate Governance Flaws in China 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.
Learning organization
- Ygx Ygx's 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 Ygx Ygx's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Yinguangxia: An Epitome of Corporate Governance Flaws in China Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Ygx Ygx's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ygx Ygx's 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Yinguangxia: An Epitome of Corporate Governance Flaws in China firm has clearly differentiated products in the market place. This has enabled Ygx Ygx's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ygx Ygx's to invest into research and development (R&D) and innovation.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ygx Ygx's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ygx Ygx's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to recruit top talent
– Ygx Ygx's is one of the leading recruiters in the industry. Managers in the Yinguangxia: An Epitome of Corporate Governance Flaws in China are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Ygx Ygx's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ygx Ygx's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Ygx Ygx's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ygx Ygx's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Ygx Ygx's 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Ygx Ygx's 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Yinguangxia: An Epitome of Corporate Governance Flaws in China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Yinguangxia: An Epitome of Corporate Governance Flaws in China are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Yinguangxia: An Epitome of Corporate Governance Flaws in China, it seems that the employees of Ygx Ygx's 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.
Interest costs
– Compare to the competition, Ygx Ygx's 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.
Products dominated business model
– Even though Ygx Ygx's 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 - Yinguangxia: An Epitome of Corporate Governance Flaws in China should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Yinguangxia: An Epitome of Corporate Governance Flaws in China, in the dynamic environment Ygx Ygx's has struggled to respond to the nimble upstart competition. Ygx Ygx's 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
Ygx Ygx's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Yinguangxia: An Epitome of Corporate Governance Flaws in China, is just above the industry average. Ygx Ygx's 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.
Increasing silos among functional specialists
– The organizational structure of Ygx Ygx's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ygx Ygx's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ygx Ygx's to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Ygx Ygx's 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, Ygx Ygx's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Yinguangxia: An Epitome of Corporate Governance Flaws in China can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Ygx Ygx's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Ygx Ygx's 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.
Lack of clear differentiation of Ygx Ygx's products
– To increase the profitability and margins on the products, Ygx Ygx's needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Yinguangxia: An Epitome of Corporate Governance Flaws in China | 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China are -
Developing new processes and practices
– Ygx Ygx's 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.
Learning at scale
– Online learning technologies has now opened space for Ygx Ygx's 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.
Using analytics as competitive advantage
– Ygx Ygx's has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Yinguangxia: An Epitome of Corporate Governance Flaws in China - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ygx Ygx's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ygx Ygx's 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, Ygx Ygx's can use these opportunities to build new business models that can help the communities that Ygx Ygx's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Better consumer reach
– The expansion of the 5G network will help Ygx Ygx's to increase its market reach. Ygx Ygx's 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.
Leveraging digital technologies
– Ygx Ygx's 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.
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 Ygx Ygx's 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ygx Ygx's is facing challenges because of the dominance of functional experts in the organization. Yinguangxia: An Epitome of Corporate Governance Flaws in China case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Ygx Ygx's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ygx Ygx's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ygx Ygx's 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, Yinguangxia: An Epitome of Corporate Governance Flaws in China, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ygx Ygx's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Threats Yinguangxia: An Epitome of Corporate Governance Flaws in China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Yinguangxia: An Epitome of Corporate Governance Flaws in China are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ygx Ygx's 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 Ygx Ygx's in the Finance & Accounting sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ygx Ygx's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Yinguangxia: An Epitome of Corporate Governance Flaws in China, Ygx Ygx's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Ygx Ygx's.
Regulatory challenges
– Ygx Ygx's 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 Finance & Accounting industry regulations.
High dependence on third party suppliers
– Ygx Ygx's 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ygx Ygx's 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China .
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. Ygx Ygx's 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.
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.
Shortening product life cycle
– it is one of the major threat that Ygx Ygx's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Ygx Ygx's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ygx Ygx's needs to keep up with the evolution of technology in the Finance & Accounting 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.
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.
Weighted SWOT Analysis of Yinguangxia: An Epitome of Corporate Governance Flaws in China 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China 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 Yinguangxia: An Epitome of Corporate Governance Flaws in China 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 Ygx Ygx's needs to make to build a sustainable competitive advantage.
