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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%,
increasing energy prices, supply chains are disrupted by pandemic , 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 -
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Kingdee Hokou in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Kingdee Hokou is one of the leading recruiters in the industry. Managers in the Kingdee 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 Kingdee Hokou digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kingdee Hokou 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.
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.
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.
Training and development
– Kingdee Hokou has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Kingdee 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.
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 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.
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.
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.
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.
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.
Lack of clear differentiation of Kingdee Hokou products
– To increase the profitability and margins on the products, Kingdee Hokou needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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 Kingdee Hokou supply chain. Even after few cautionary changes mentioned in the HBR case study - Kingdee, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kingdee Hokou vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, F. Warren McFarlan, Jin Zhang, Ziqian Zhao suggests that, Kingdee Hokou 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 Kingdee, it seems that the employees of Kingdee Hokou 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kingdee Hokou is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Kingdee can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
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.
Developing new processes and practices
– Kingdee Hokou 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, Kingdee Hokou can use these opportunities to build new business models that can help the communities that Kingdee Hokou operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Kingdee Hokou 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.
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.
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.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Kingdee Hokou has opened avenues for new revenue streams for the organization in the industry. This can help Kingdee Hokou to build a more holistic ecosystem as suggested in the Kingdee case study. Kingdee Hokou can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Kingdee Hokou 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. Kingdee Hokou 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.
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 -
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 .
Regulatory challenges
– Kingdee Hokou 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Kingdee, Kingdee Hokou 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 Kingdee Hokou in the Strategy & Execution sector and impact the bottomline of the organization.
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.
Environmental challenges
– Kingdee Hokou 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. Kingdee Hokou can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
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.
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.
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 Kingdee Hokou.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of 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.
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.
