China Kelon Group (B): Integration After Merger SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of China Kelon Group (B): Integration After Merger
Deals with the issue of integrating two large business groups after the No. 6 air conditioner manufacturer, Kelon Group, acquired the No. 5 air conditioner producer, Huabao. Whereas Kelon Group is a nonstate-owned company, Huabao was spun off from a state-owned enterprise group. It was a landmark acquisition case in which a nonstate entrepreneurial firm took over a state enterprise that had a strong name brand and national reputation. The two companies have different resource bases, history, tradition, corporate culture, management style, product features, and reward systems. They were traditionally close rivals located in the same township. The combined capacity will make the new Kelon-Huabao the top air conditioner manufacturer in terms of market share, assuming a successful merger and integration.
Swot Analysis of "China Kelon Group (B): Integration After Merger" written by Justin Tan, Paul W. Beamish includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kelon Huabao facing as an external strategic factors. Some of the topics covered in China Kelon Group (B): Integration After Merger case study are - Strategic Management Strategies, Entrepreneurship, Manufacturing, Organizational structure, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the China Kelon Group (B): Integration After Merger casestudy better are - – increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, increasing transportation and logistics costs,
technology disruption, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of China Kelon Group (B): Integration After Merger
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in China Kelon Group (B): Integration After Merger case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kelon Huabao, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kelon Huabao 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 China Kelon Group (B): Integration After Merger can be done for the following purposes –
1. Strategic planning using facts provided in China Kelon Group (B): Integration After Merger case study
2. Improving business portfolio management of Kelon Huabao
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 Kelon Huabao
Strengths China Kelon Group (B): Integration After Merger | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kelon Huabao in China Kelon Group (B): Integration After Merger Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– China Kelon Group (B): Integration After Merger firm has clearly differentiated products in the market place. This has enabled Kelon Huabao to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Kelon Huabao to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Kelon Huabao 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 China Kelon Group (B): Integration After Merger - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Kelon Huabao 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 Kelon Huabao is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in China Kelon Group (B): Integration After Merger Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Kelon Huabao is present in almost all the verticals within the industry. This has provided firm in China Kelon Group (B): Integration After Merger 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.
Low bargaining power of suppliers
– Suppliers of Kelon Huabao in the sector have low bargaining power. China Kelon Group (B): Integration After Merger has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kelon Huabao to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Kelon Huabao is one of the leading recruiters in the industry. Managers in the China Kelon Group (B): Integration After Merger are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Kelon Huabao digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kelon Huabao 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.
High switching costs
– The high switching costs that Kelon Huabao 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.
Innovation driven organization
– Kelon Huabao is one of the most innovative firm in sector. Manager in China Kelon Group (B): Integration After Merger Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Kelon Huabao 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.
Ability to lead change in Strategy & Execution field
– Kelon Huabao 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 Kelon Huabao in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Kelon Huabao
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kelon Huabao does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses China Kelon Group (B): Integration After Merger | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Kelon Group (B): Integration After Merger 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 Kelon Huabao supply chain. Even after few cautionary changes mentioned in the HBR case study - China Kelon Group (B): Integration After Merger, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kelon Huabao vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Kelon Huabao 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.
Slow to strategic competitive environment developments
– As China Kelon Group (B): Integration After Merger HBR case study mentions - Kelon Huabao 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.
Low market penetration in new markets
– Outside its home market of Kelon Huabao, firm in the HBR case study China Kelon Group (B): Integration After Merger needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Kelon Huabao 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.
Capital Spending Reduction
– Even during the low interest decade, Kelon Huabao 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study China Kelon Group (B): Integration After Merger, is just above the industry average. Kelon Huabao 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kelon Huabao is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study China Kelon Group (B): Integration After Merger can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Justin Tan, Paul W. Beamish suggests that, Kelon Huabao 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study China Kelon Group (B): Integration After Merger, it seems that the employees of Kelon Huabao 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.
Need for greater diversity
– Kelon Huabao 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.
Opportunities China Kelon Group (B): Integration After Merger | 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 China Kelon Group (B): Integration After Merger are -
Learning at scale
– Online learning technologies has now opened space for Kelon Huabao 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.
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. Kelon Huabao can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kelon Huabao 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.
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 Kelon Huabao 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.
Buying journey improvements
– Kelon Huabao can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. China Kelon Group (B): Integration After Merger 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.
Loyalty marketing
– Kelon Huabao 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kelon Huabao can use these opportunities to build new business models that can help the communities that Kelon Huabao operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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. Kelon Huabao 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. Kelon Huabao 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.
Better consumer reach
– The expansion of the 5G network will help Kelon Huabao to increase its market reach. Kelon Huabao 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.
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. Kelon Huabao can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Kelon Huabao 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 China Kelon Group (B): Integration After Merger - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kelon Huabao to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Kelon Huabao in the consumer business. Now Kelon Huabao can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kelon Huabao 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, China Kelon Group (B): Integration After Merger, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats China Kelon Group (B): Integration After Merger External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study China Kelon Group (B): Integration After Merger are -
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. Kelon Huabao can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Consumer confidence and its impact on Kelon Huabao 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study China Kelon Group (B): Integration After Merger, Kelon Huabao 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 .
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 Kelon Huabao in the Strategy & Execution sector and impact the bottomline of the organization.
Environmental challenges
– Kelon Huabao 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. Kelon Huabao can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Shortening product life cycle
– it is one of the major threat that Kelon Huabao is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Kelon Huabao.
Regulatory challenges
– Kelon Huabao 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.
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. Kelon Huabao needs to understand the core reasons impacting the Strategy & Execution 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, Kelon Huabao 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 China Kelon Group (B): Integration After Merger .
Stagnating economy with rate increase
– Kelon Huabao 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Kelon Huabao with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of China Kelon Group (B): Integration After Merger 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 China Kelon Group (B): Integration After Merger 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 China Kelon Group (B): Integration After Merger 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 China Kelon Group (B): Integration After Merger 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 China Kelon Group (B): Integration After Merger 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 Kelon Huabao needs to make to build a sustainable competitive advantage.