Case Study Description of Hongxin Entrepreneur Incubator: Expanding the Cloud
The Hongxin Entrepreneur Incubator, located in Xiamen, Fujian Province, China, has experienced tremendous growth between 2001 and 2013. Its founder and president has received widespread acclaim as he has helped to launch and turn around more than 100 local companies, both start-ups and more developed enterprises. He now plans to develop and grow the incubator by setting it up as an online platform that would connect and support an alliance of entrepreneurs on a scale never seen before in China. As he looks forward to taking it in this new direction, he wonders how he can ensure continued success and maintain his philosophy of caring for the community of entrepreneurs while maximizing profits.
Authors :: Xiaosong Lin, Christopher Williams, Zhirong Mu
Swot Analysis of "Hongxin Entrepreneur Incubator: Expanding the Cloud" written by Xiaosong Lin, Christopher Williams, Zhirong Mu includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Incubator Hongxin facing as an external strategic factors. Some of the topics covered in Hongxin Entrepreneur Incubator: Expanding the Cloud case study are - Strategic Management Strategies, Organizational structure and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Hongxin Entrepreneur Incubator: Expanding the Cloud casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google,
cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Hongxin Entrepreneur Incubator: Expanding the Cloud
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hongxin Entrepreneur Incubator: Expanding the Cloud case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Incubator Hongxin, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Incubator Hongxin 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 Hongxin Entrepreneur Incubator: Expanding the Cloud can be done for the following purposes –
1. Strategic planning using facts provided in Hongxin Entrepreneur Incubator: Expanding the Cloud case study
2. Improving business portfolio management of Incubator Hongxin
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 Incubator Hongxin
Strengths Hongxin Entrepreneur Incubator: Expanding the Cloud | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Incubator Hongxin in Hongxin Entrepreneur Incubator: Expanding the Cloud Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Incubator Hongxin in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Incubator Hongxin 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 Incubator Hongxin is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hongxin Entrepreneur Incubator: Expanding the Cloud Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Incubator Hongxin 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.
Low bargaining power of suppliers
– Suppliers of Incubator Hongxin in the sector have low bargaining power. Hongxin Entrepreneur Incubator: Expanding the Cloud has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Incubator Hongxin to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Incubator Hongxin is one of the leading recruiters in the industry. Managers in the Hongxin Entrepreneur Incubator: Expanding the Cloud are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Incubator Hongxin 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 Hongxin Entrepreneur Incubator: Expanding the Cloud HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Incubator Hongxin 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 Hongxin Entrepreneur Incubator: Expanding the Cloud - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Incubator Hongxin digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Incubator Hongxin 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.
Organizational Resilience of Incubator Hongxin
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Incubator Hongxin does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Strategy & Execution field
– Incubator Hongxin 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 Incubator Hongxin in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Strategy & Execution industry
– Hongxin Entrepreneur Incubator: Expanding the Cloud firm has clearly differentiated products in the market place. This has enabled Incubator Hongxin to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Incubator Hongxin to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Incubator Hongxin has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Incubator Hongxin 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.
Weaknesses Hongxin Entrepreneur Incubator: Expanding the Cloud | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hongxin Entrepreneur Incubator: Expanding the Cloud are -
Increasing silos among functional specialists
– The organizational structure of Incubator Hongxin is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Incubator Hongxin needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Incubator Hongxin to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Incubator Hongxin, firm in the HBR case study Hongxin Entrepreneur Incubator: Expanding the Cloud needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Incubator Hongxin 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Hongxin Entrepreneur Incubator: Expanding the Cloud, 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 Incubator Hongxin products
– To increase the profitability and margins on the products, Incubator Hongxin needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hongxin Entrepreneur Incubator: Expanding the Cloud, is just above the industry average. Incubator Hongxin 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 decision making process
– As mentioned earlier in the report, Incubator Hongxin 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. Incubator Hongxin 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.
Aligning sales with marketing
– It come across in the case study Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Hongxin Entrepreneur Incubator: Expanding the Cloud can leverage the sales team experience to cultivate customer relationships as Incubator Hongxin is planning to shift buying processes online.
Products dominated business model
– Even though Incubator Hongxin 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 - Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Incubator Hongxin has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Hongxin Entrepreneur Incubator: Expanding the Cloud HBR case study mentions - Incubator Hongxin 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.
Opportunities Hongxin Entrepreneur Incubator: Expanding the Cloud | 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 Hongxin Entrepreneur Incubator: Expanding the Cloud are -
Developing new processes and practices
– Incubator Hongxin 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, Incubator Hongxin can use these opportunities to build new business models that can help the communities that Incubator Hongxin operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Leveraging digital technologies
– Incubator Hongxin 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
– Incubator Hongxin 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Incubator Hongxin can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Incubator Hongxin 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.
Manufacturing automation
– Incubator Hongxin 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.
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. Incubator Hongxin can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Incubator Hongxin can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hongxin Entrepreneur Incubator: Expanding the Cloud 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, Incubator Hongxin 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.
Building a culture of innovation
– managers at Incubator Hongxin 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Incubator Hongxin 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Incubator Hongxin is facing challenges because of the dominance of functional experts in the organization. Hongxin Entrepreneur Incubator: Expanding the Cloud 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.
Threats Hongxin Entrepreneur Incubator: Expanding the Cloud External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hongxin Entrepreneur Incubator: Expanding the Cloud are -
Stagnating economy with rate increase
– Incubator Hongxin 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.
High dependence on third party suppliers
– Incubator Hongxin 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.
Shortening product life cycle
– it is one of the major threat that Incubator Hongxin is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Incubator Hongxin 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. Incubator Hongxin 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.
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 Incubator Hongxin
– 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 Incubator Hongxin.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hongxin Entrepreneur Incubator: Expanding the Cloud, Incubator Hongxin 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 .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Incubator Hongxin 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.
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. Incubator Hongxin can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Incubator Hongxin 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 Hongxin Entrepreneur Incubator: Expanding the Cloud .
Consumer confidence and its impact on Incubator Hongxin 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.
Weighted SWOT Analysis of Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Hongxin Entrepreneur Incubator: Expanding the Cloud 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 Incubator Hongxin needs to make to build a sustainable competitive advantage.
