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 - – wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, increasing commodity prices, increasing energy prices, 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,
central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, 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 -
Strong track record of project management
– Incubator Hongxin is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Cross disciplinary teams
– Horizontal connected teams at the Incubator Hongxin 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 Incubator Hongxin in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the Hongxin Entrepreneur Incubator: Expanding the Cloud Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
Diverse revenue streams
– Incubator Hongxin is present in almost all the verticals within the industry. This has provided firm in Hongxin Entrepreneur Incubator: Expanding the Cloud 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.
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 -
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hongxin Entrepreneur Incubator: Expanding the Cloud, in the dynamic environment Incubator Hongxin has struggled to respond to the nimble upstart competition. Incubator Hongxin has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Incubator Hongxin 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.
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 Incubator Hongxin supply chain. Even after few cautionary changes mentioned in the HBR case study - Hongxin Entrepreneur Incubator: Expanding the Cloud, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Incubator Hongxin vulnerable to further global disruptions in South East Asia.
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.
High cash cycle compare to competitors
Incubator Hongxin 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.
Skills based hiring
– The stress on hiring functional specialists at Incubator Hongxin has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
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 -
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.
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.
Using analytics as competitive advantage
– Incubator Hongxin 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 Hongxin Entrepreneur Incubator: Expanding the Cloud - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Incubator Hongxin to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Incubator Hongxin has opened avenues for new revenue streams for the organization in the industry. This can help Incubator Hongxin to build a more holistic ecosystem as suggested in the Hongxin Entrepreneur Incubator: Expanding the Cloud case study. Incubator Hongxin can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Incubator Hongxin to increase its market reach. Incubator Hongxin 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.
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.
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.
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.
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 Incubator Hongxin in the consumer business. Now Incubator Hongxin can target international markets with far fewer capital restrictions requirements than the existing system.
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. Incubator Hongxin can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Incubator Hongxin 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 Incubator Hongxin to hire the very best people irrespective of their geographical location.
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 -
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.
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.
Technology acceleration in Forth Industrial Revolution
– Incubator Hongxin has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Incubator Hongxin 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Incubator Hongxin with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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 .
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 .
Environmental challenges
– Incubator Hongxin 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. Incubator Hongxin can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
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.
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.