Hang Lung Properties and the Chengdu Decision (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Hang Lung Properties and the Chengdu Decision (A)
To maximize their effectiveness, color cases should be printed in color.A residential real estate developer competes in a heated auction for a prime retail development site in the interior of China during the 2009 boom. Total project cost might be in excess of $1billion US for over 4,000,000 square feet of building. Hang Lung Properties has enjoyed success in residential building in Hong Kong but has focused on very limited projects in China, notably two retail properties in Shanghai. After a decade in Shanghai the firm decides to enter second tier Chinese cities including Chengdu, a city of 11 million in interior China. The case covers Hang Lung Properties' due diligence and thought process with respect to anticipated rental income, construction costs, and land costs. The auction includes many other well capitalized firms and the price escalates. Hang Lung's team must decide whether to participate or withdraw. Students need to use judgment with respect to estimates of key variables including stabilized income, construction cost, and minimum expectations for return on investment in order to prepare their bids. The (B) case goes into further steps in the auction as well as Hang Lung Properties' internal discipline with respect to asset types, infrastructure in target cities, and baseline returns.
Authors :: John D. Macomber, Michael Shih-ta Chen, Keith Chi-ho Wong
Swot Analysis of "Hang Lung Properties and the Chengdu Decision (A)" written by John D. Macomber, Michael Shih-ta Chen, Keith Chi-ho Wong includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hang Lung facing as an external strategic factors. Some of the topics covered in Hang Lung Properties and the Chengdu Decision (A) case study are - Strategic Management Strategies, International business, Negotiations and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Hang Lung Properties and the Chengdu Decision (A) casestudy better are - – there is increasing trade war between United States & China, wage bills are increasing, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels,
customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Hang Lung Properties and the Chengdu Decision (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hang Lung Properties and the Chengdu Decision (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hang Lung, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hang Lung 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 Hang Lung Properties and the Chengdu Decision (A) can be done for the following purposes –
1. Strategic planning using facts provided in Hang Lung Properties and the Chengdu Decision (A) case study
2. Improving business portfolio management of Hang Lung
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 Hang Lung
Strengths Hang Lung Properties and the Chengdu Decision (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hang Lung in Hang Lung Properties and the Chengdu Decision (A) Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Hang Lung 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 Hang Lung in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Hang Lung has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hang Lung to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Hang Lung 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 Hang Lung Properties and the Chengdu Decision (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Hang Lung in the sector have low bargaining power. Hang Lung Properties and the Chengdu Decision (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hang Lung to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Hang Lung is one of the leading recruiters in the industry. Managers in the Hang Lung Properties and the Chengdu Decision (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Hang Lung in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Hang Lung Properties and the Chengdu Decision (A) 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.
High switching costs
– The high switching costs that Hang Lung 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.
Training and development
– Hang Lung has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hang Lung Properties and the Chengdu Decision (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Hang Lung digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hang Lung 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Hang Lung Properties and the Chengdu Decision (A) firm has clearly differentiated products in the market place. This has enabled Hang Lung to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Hang Lung to invest into research and development (R&D) and innovation.
Strong track record of project management
– Hang Lung is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Hang Lung Properties and the Chengdu Decision (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hang Lung Properties and the Chengdu Decision (A) are -
Skills based hiring
– The stress on hiring functional specialists at Hang Lung 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hang Lung Properties and the Chengdu Decision (A), is just above the industry average. Hang Lung 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.
Interest costs
– Compare to the competition, Hang Lung 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Hang Lung Properties and the Chengdu Decision (A) 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 Hang Lung has relatively successful track record of launching new products.
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 Hang Lung supply chain. Even after few cautionary changes mentioned in the HBR case study - Hang Lung Properties and the Chengdu Decision (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hang Lung vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Hang Lung 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hang Lung Properties and the Chengdu Decision (A), it seems that the employees of Hang Lung 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.
Aligning sales with marketing
– It come across in the case study Hang Lung Properties and the Chengdu Decision (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hang Lung Properties and the Chengdu Decision (A) can leverage the sales team experience to cultivate customer relationships as Hang Lung is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hang Lung Properties and the Chengdu Decision (A), in the dynamic environment Hang Lung has struggled to respond to the nimble upstart competition. Hang Lung has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Hang Lung 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. Hang Lung 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Hang Lung 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.
Opportunities Hang Lung Properties and the Chengdu Decision (A) | 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 Hang Lung Properties and the Chengdu Decision (A) are -
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 Hang Lung in the consumer business. Now Hang Lung can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Hang Lung can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hang Lung Properties and the Chengdu Decision (A) 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.
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. Hang Lung can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Hang Lung 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.
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 Hang Lung 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.
Better consumer reach
– The expansion of the 5G network will help Hang Lung to increase its market reach. Hang Lung 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hang Lung is facing challenges because of the dominance of functional experts in the organization. Hang Lung Properties and the Chengdu Decision (A) 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.
Leveraging digital technologies
– Hang Lung 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.
Manufacturing automation
– Hang Lung 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.
Loyalty marketing
– Hang Lung 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.
Learning at scale
– Online learning technologies has now opened space for Hang Lung 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hang Lung 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, Hang Lung Properties and the Chengdu Decision (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hang Lung can use these opportunities to build new business models that can help the communities that Hang Lung operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats Hang Lung Properties and the Chengdu Decision (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hang Lung Properties and the Chengdu Decision (A) are -
Technology acceleration in Forth Industrial Revolution
– Hang Lung has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Hang Lung 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.
Shortening product life cycle
– it is one of the major threat that Hang Lung is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Hang Lung Properties and the Chengdu Decision (A), Hang Lung 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 Hang Lung.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hang Lung with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Hang Lung 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.
Environmental challenges
– Hang Lung 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. Hang Lung can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Regulatory challenges
– Hang Lung 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.
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.
Increasing wage structure of Hang Lung
– 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 Hang Lung.
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. Hang Lung 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, Hang Lung 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 Hang Lung Properties and the Chengdu Decision (A) .
Consumer confidence and its impact on Hang Lung 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.
Weighted SWOT Analysis of Hang Lung Properties and the Chengdu Decision (A) 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 Hang Lung Properties and the Chengdu Decision (A) 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 Hang Lung Properties and the Chengdu Decision (A) 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 Hang Lung Properties and the Chengdu Decision (A) 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 Hang Lung Properties and the Chengdu Decision (A) 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 Hang Lung needs to make to build a sustainable competitive advantage.