The COFCO Group SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The COFCO Group
COFCO was China's sole legitimate window for agricultural foreign trade before 1987. The reform of China's foreign trade system beginning in 1987 cost COFCO its monopoly position. Subsequently, the SOE giant capitalized on its foreign trade expertise to strategically move upstream in the food industrial chain. Additionally, COFCO made investments in unrelated areas. These unrelated diversification activities were stopped by the new Chairman Ning Gaoning, appointed in 2004. He cared greatly about the innate logic for future mergers and acquisitions. The company, under his leadership, focused on its weaknesses and strengths, to identify a focused overall strategy. He brought the "whole industry chain" concept to COFCO with three clear goals in mind: 1) to shape "farmland to table" food processing to assure customers of safe, high-quality food, 2) to unite COFCO's segmented business units, and enable them to gain competitive edge over local companies 3) to increase the company's strength to compete with global food companies. The case depicts COFCO's historical transformations, identifies its mergers and acquisitions since 2005 and shows its financing history. Information is provided about several domestic and overseas competitors to illustrate COFCO's role in a larger China environment. It is not only a market player but also a main force in China's pillar industry and the only domestic food company that can rival global food companies in China's domestic market.
Authors :: F. Warren McFarlan, Zheng Xiaoming, Ziqian Zhao
Swot Analysis of "The COFCO Group" written by F. Warren McFarlan, Zheng Xiaoming, Ziqian Zhao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cofco Cofco's facing as an external strategic factors. Some of the topics covered in The COFCO Group case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the The COFCO Group casestudy better are - – technology disruption, increasing energy prices, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The COFCO Group case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cofco Cofco's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cofco Cofco'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 The COFCO Group can be done for the following purposes –
1. Strategic planning using facts provided in The COFCO Group case study
2. Improving business portfolio management of Cofco Cofco's
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cofco Cofco's
Strengths The COFCO Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cofco Cofco's in The COFCO Group Harvard Business Review case study are -
Effective Research and Development (R&D)
– Cofco Cofco'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 The COFCO Group - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Cofco Cofco's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cofco Cofco's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Cofco Cofco's 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.
Diverse revenue streams
– Cofco Cofco's is present in almost all the verticals within the industry. This has provided firm in The COFCO Group 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.
Successful track record of launching new products
– Cofco Cofco's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cofco Cofco'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.
Innovation driven organization
– Cofco Cofco's is one of the most innovative firm in sector. Manager in The COFCO Group Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Strategy & Execution field
– Cofco Cofco'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 Cofco Cofco's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Cofco Cofco's 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.
Strong track record of project management
– Cofco Cofco's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Strategy & Execution industry
– The COFCO Group firm has clearly differentiated products in the market place. This has enabled Cofco Cofco's to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Cofco Cofco's to invest into research and development (R&D) and innovation.
Learning organization
- Cofco Cofco'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 Cofco Cofco's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The COFCO Group Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Cofco Cofco's is one of the leading recruiters in the industry. Managers in the The COFCO Group are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses The COFCO Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The COFCO Group are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The COFCO Group 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 Cofco Cofco's has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Cofco Cofco's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The COFCO Group can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Cofco Cofco's 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.
Increasing silos among functional specialists
– The organizational structure of Cofco Cofco's is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Cofco Cofco's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cofco Cofco's to focus more on services rather than just following the product oriented approach.
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 Cofco Cofco's supply chain. Even after few cautionary changes mentioned in the HBR case study - The COFCO Group, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cofco Cofco's vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, F. Warren McFarlan, Zheng Xiaoming, Ziqian Zhao suggests that, Cofco Cofco's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to strategic competitive environment developments
– As The COFCO Group HBR case study mentions - Cofco Cofco's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Cofco Cofco's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Interest costs
– Compare to the competition, Cofco Cofco'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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The COFCO Group, is just above the industry average. Cofco Cofco'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.
High operating costs
– Compare to the competitors, firm in the HBR case study The COFCO Group 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 Cofco Cofco's 's lucrative customers.
Opportunities The COFCO Group | 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 The COFCO Group are -
Buying journey improvements
– Cofco Cofco's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The COFCO Group 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cofco Cofco'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 Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Cofco Cofco'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 The COFCO Group - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cofco Cofco's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Cofco Cofco's 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 Strategy & Execution segment.
Developing new processes and practices
– Cofco Cofco's can develop new processes and procedures in Strategy & Execution 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.
Manufacturing automation
– Cofco Cofco's can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cofco Cofco's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Cofco Cofco'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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cofco Cofco's 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. Cofco Cofco's 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Cofco Cofco's in the consumer business. Now Cofco Cofco's can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cofco Cofco'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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cofco Cofco's is facing challenges because of the dominance of functional experts in the organization. The COFCO Group 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 Strategy & Execution industry, but it has also influenced the consumer preferences. Cofco Cofco's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats The COFCO Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The COFCO Group are -
Increasing wage structure of Cofco Cofco's
– 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 Cofco Cofco's.
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 Cofco Cofco's in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cofco Cofco'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 The COFCO Group .
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.
Technology acceleration in Forth Industrial Revolution
– Cofco Cofco's has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Cofco Cofco's needs to keep up with the evolution of technology in the Strategy & Execution 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.
Shortening product life cycle
– it is one of the major threat that Cofco Cofco's is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cofco Cofco's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Cofco Cofco'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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cofco Cofco's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Cofco Cofco's 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.
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 Cofco Cofco's business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The COFCO Group, Cofco Cofco'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 Strategy & Execution .
Regulatory challenges
– Cofco Cofco'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 Strategy & Execution industry regulations.
Weighted SWOT Analysis of The COFCO Group 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 The COFCO Group 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 The COFCO Group 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 The COFCO Group 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 The COFCO Group 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 Cofco Cofco's needs to make to build a sustainable competitive advantage.