China Automotive Finance: Service Operations Re-design SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of China Automotive Finance: Service Operations Re-design
In the mid-2000s, an American automaker opened an auto financing company in China, Shanghai-based C Automotive Finance Company (China) Ltd ("CAF"). CAF grew rapidly and broke even in three years. Nonetheless, the long cycle time of its application process led to rampant dissatisfaction among dealers and also lowered the number of car purchases financed by CAF as a percentage of total cars sold. The auto financing industry in China held great potential but was also becoming increasingly competitive as more and more foreign companies entered the market. In order stay on top of the game, CAF must improve the efficiency of its financing application process. What actions could CAF undertake to achieve this objective?
Swot Analysis of "China Automotive Finance: Service Operations Re-design" written by Neale O'Connor, Grace Loo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Caf China facing as an external strategic factors. Some of the topics covered in China Automotive Finance: Service Operations Re-design case study are - Strategic Management Strategies, Business processes, Financial management, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the China Automotive Finance: Service Operations Re-design casestudy better are - – wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, increasing household debt because of falling income levels, geopolitical disruptions, there is backlash against globalization, increasing transportation and logistics costs,
competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of China Automotive Finance: Service Operations Re-design
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in China Automotive Finance: Service Operations Re-design case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Caf China, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Caf China 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 Automotive Finance: Service Operations Re-design can be done for the following purposes –
1. Strategic planning using facts provided in China Automotive Finance: Service Operations Re-design case study
2. Improving business portfolio management of Caf China
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 Caf China
Strengths China Automotive Finance: Service Operations Re-design | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Caf China in China Automotive Finance: Service Operations Re-design Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Caf China in the sector have low bargaining power. China Automotive Finance: Service Operations Re-design has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Caf China to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Caf China is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Neale O'Connor, Grace Loo can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Caf China 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.
High brand equity
– Caf China has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Caf China to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Caf China 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.
Organizational Resilience of Caf China
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Caf China does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Caf China 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 Automotive Finance: Service Operations Re-design - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Caf China is one of the leading recruiters in the industry. Managers in the China Automotive Finance: Service Operations Re-design are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the China Automotive Finance: Service Operations Re-design 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.
Highly skilled collaborators
– Caf China 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 China Automotive Finance: Service Operations Re-design HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Caf China has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in China Automotive Finance: Service Operations Re-design 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.
Strong track record of project management
– Caf China 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 China Automotive Finance: Service Operations Re-design | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Automotive Finance: Service Operations Re-design are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Caf China is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study China Automotive Finance: Service Operations Re-design 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 operating costs
– Compare to the competitors, firm in the HBR case study China Automotive Finance: Service Operations Re-design 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 Caf China 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Caf China 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.
Aligning sales with marketing
– It come across in the case study China Automotive Finance: Service Operations Re-design 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 China Automotive Finance: Service Operations Re-design can leverage the sales team experience to cultivate customer relationships as Caf China is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study China Automotive Finance: Service Operations Re-design, is just above the industry average. Caf China 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.
Products dominated business model
– Even though Caf China 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 - China Automotive Finance: Service Operations Re-design should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the China Automotive Finance: Service Operations Re-design 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 Caf China has relatively successful track record of launching new products.
Need for greater diversity
– Caf China 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.
Interest costs
– Compare to the competition, Caf China 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.
Slow decision making process
– As mentioned earlier in the report, Caf China 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. Caf China 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study China Automotive Finance: Service Operations Re-design, in the dynamic environment Caf China has struggled to respond to the nimble upstart competition. Caf China has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities China Automotive Finance: Service Operations Re-design | 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 Automotive Finance: Service Operations Re-design are -
Creating value in data economy
– The success of analytics program of Caf China has opened avenues for new revenue streams for the organization in the industry. This can help Caf China to build a more holistic ecosystem as suggested in the China Automotive Finance: Service Operations Re-design case study. Caf China can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Caf China 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.
Developing new processes and practices
– Caf China 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Caf China can use these opportunities to build new business models that can help the communities that Caf China operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Caf China can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Caf China 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
– Caf China 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 Automotive Finance: Service Operations Re-design - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Caf China to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Caf China to increase its market reach. Caf China 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Caf China 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 Automotive Finance: Service Operations Re-design, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Caf China 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 Caf China 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Caf China 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.
Manufacturing automation
– Caf China 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.
Threats China Automotive Finance: Service Operations Re-design External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study China Automotive Finance: Service Operations Re-design are -
High dependence on third party suppliers
– Caf China 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Caf China with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Caf China
– 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 Caf China.
Environmental challenges
– Caf China 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. Caf China can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Stagnating economy with rate increase
– Caf China 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Caf China in the Strategy & Execution industry. The Strategy & Execution 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.
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.
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 Automotive Finance: Service Operations Re-design, Caf China 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 .
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. Caf China 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.
Shortening product life cycle
– it is one of the major threat that Caf China is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Caf China has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Caf China 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.
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 Caf China.
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 Caf China in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of China Automotive Finance: Service Operations Re-design 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 Automotive Finance: Service Operations Re-design 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 Automotive Finance: Service Operations Re-design 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 Automotive Finance: Service Operations Re-design 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 Automotive Finance: Service Operations Re-design 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 Caf China needs to make to build a sustainable competitive advantage.