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 - – technology disruption, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, 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 -
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.
Superior customer experience
– The customer experience strategy of Caf China in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Strategy & Execution field
– Caf China 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 Caf China in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Diverse revenue streams
– Caf China is present in almost all the verticals within the industry. This has provided firm in China Automotive Finance: Service Operations Re-design 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
– Caf China has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Caf China 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
– Caf China is one of the most innovative firm in sector. Manager in China Automotive Finance: Service Operations Re-design Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Caf China digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Caf China 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.
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.
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.
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 -
High cash cycle compare to competitors
Caf China 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 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.
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.
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.
Slow to strategic competitive environment developments
– As China Automotive Finance: Service Operations Re-design HBR case study mentions - Caf China 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.
No frontier risks strategy
– After analyzing the HBR case study China Automotive Finance: Service Operations Re-design, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Caf China products
– To increase the profitability and margins on the products, Caf China needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Low market penetration in new markets
– Outside its home market of Caf China, firm in the HBR case study China Automotive Finance: Service Operations Re-design needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Caf China supply chain. Even after few cautionary changes mentioned in the HBR case study - China Automotive Finance: Service Operations Re-design, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Caf China vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Caf China is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Caf China needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Caf China to focus more on services rather than just following the product oriented approach.
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 -
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Caf China to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Caf China to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
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. Caf China can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Caf China in the consumer business. Now Caf China can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Buying journey improvements
– Caf China can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. China Automotive Finance: Service Operations Re-design 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.
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.
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 -
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.
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.
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.
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. Caf China needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Caf China 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 Automotive Finance: Service Operations Re-design .
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.
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 .
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.
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.
Regulatory challenges
– Caf China 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.
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.
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.