This case focuses on the competitive strategy of the number two management software company in China, Kingdee, as it competes with UFIDA and major international firms SAP and Oracle for position in the Chinese market. A particular focus is on its internal culture as it tries to grow rapidly with a very young non-Hokou-bearing staff in Shenzhen.
Authors :: F. Warren McFarlan, Jin Zhang, Ziqian Zhao
Swot Analysis of "Kingdee" written by F. Warren McFarlan, Jin Zhang, Ziqian Zhao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kingdee Hokou facing as an external strategic factors. Some of the topics covered in Kingdee case study are - Strategic Management Strategies, Emerging markets, Ethics, Venture capital and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Kingdee casestudy better are - – supply chains are disrupted by pandemic , wage bills are increasing, increasing transportation and logistics costs, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Kingdee case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kingdee Hokou, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kingdee Hokou 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 Kingdee can be done for the following purposes –
1. Strategic planning using facts provided in Kingdee case study
2. Improving business portfolio management of Kingdee Hokou
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 Kingdee Hokou
Strengths Kingdee | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kingdee Hokou in Kingdee Harvard Business Review case study are -
Successful track record of launching new products
– Kingdee Hokou has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kingdee Hokou 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.
High brand equity
– Kingdee Hokou has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kingdee Hokou to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Kingdee Hokou in the sector have low bargaining power. Kingdee has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kingdee Hokou to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Kingdee Hokou 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 Kingdee Hokou is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Kingdee Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Strategy & Execution industry
– Kingdee firm has clearly differentiated products in the market place. This has enabled Kingdee Hokou to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Kingdee Hokou to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Kingdee Hokou 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.
Innovation driven organization
– Kingdee Hokou is one of the most innovative firm in sector. Manager in Kingdee Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Kingdee Hokou is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Kingdee Hokou 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 F. Warren McFarlan, Jin Zhang, Ziqian Zhao 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.
Organizational Resilience of Kingdee Hokou
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kingdee Hokou does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Kingdee Hokou 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.
Ability to lead change in Strategy & Execution field
– Kingdee Hokou 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 Kingdee Hokou in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Kingdee | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kingdee are -
Workers concerns about automation
– As automation is fast increasing in the segment, Kingdee Hokou 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.
Need for greater diversity
– Kingdee Hokou 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.
Products dominated business model
– Even though Kingdee Hokou 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 - Kingdee should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Kingdee Hokou is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Kingdee Hokou needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kingdee Hokou to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Kingdee 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 Kingdee can leverage the sales team experience to cultivate customer relationships as Kingdee Hokou 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 Kingdee, in the dynamic environment Kingdee Hokou has struggled to respond to the nimble upstart competition. Kingdee Hokou has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Kingdee Hokou 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 Kingdee 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 Kingdee Hokou has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Kingdee Hokou 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. Kingdee Hokou 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.
No frontier risks strategy
– After analyzing the HBR case study Kingdee, 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.
Capital Spending Reduction
– Even during the low interest decade, Kingdee Hokou 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.
Opportunities Kingdee | 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 Kingdee are -
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 Kingdee Hokou 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.
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. Kingdee Hokou can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Kingdee Hokou 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.
Leveraging digital technologies
– Kingdee Hokou 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.
Loyalty marketing
– Kingdee Hokou 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.
Better consumer reach
– The expansion of the 5G network will help Kingdee Hokou to increase its market reach. Kingdee Hokou 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.
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. Kingdee Hokou 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 Kingdee Hokou 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 Kingdee Hokou to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Kingdee Hokou 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 Kingdee - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kingdee Hokou to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kingdee Hokou is facing challenges because of the dominance of functional experts in the organization. Kingdee 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kingdee Hokou 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.
Learning at scale
– Online learning technologies has now opened space for Kingdee Hokou 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.
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 Kingdee Hokou in the consumer business. Now Kingdee Hokou can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Kingdee External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Kingdee are -
Stagnating economy with rate increase
– Kingdee Hokou 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Kingdee Hokou business can come under increasing regulations regarding data privacy, data security, 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. Kingdee Hokou 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.
Consumer confidence and its impact on Kingdee Hokou 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kingdee Hokou 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 Kingdee .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Kingdee Hokou with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Kingdee Hokou is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Kingdee Hokou 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kingdee Hokou 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.
Increasing wage structure of Kingdee Hokou
– 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 Kingdee Hokou.
Technology acceleration in Forth Industrial Revolution
– Kingdee Hokou has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Kingdee Hokou 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.
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. Kingdee Hokou can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Kingdee 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 Kingdee 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 Kingdee 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 Kingdee 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 Kingdee 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 Kingdee Hokou needs to make to build a sustainable competitive advantage.