Case Study Description of Midea Refrigerator: The "Go Global" Odyssey
By 2016, Midea Refrigerator was one of the leading Chinese manufacturers and exporters of refrigerators. Yet despite its broad global product market, the company's development was stagnant. The high cost of exports had become a disadvantage. Fierce global competition was driving Midea Refrigerator to choose foreign direct investment (FDI) as its next strategic step, and China's "One Belt, One Road" initiative presented an opportunity for international expansion. The manager of Midea Refrigerator had to determine which of Russia or India (two countries linked to China by the new initiative) represented the best choice to start the company's FDI. He also needed to decide which FDI model-greenfield investment, acquisition, or joint venture-was the best option for the chosen destination. The authors Zhiying Liu and Mengxia Zhang are affiliated with University of Science and Technology of China.
Swot Analysis of "Midea Refrigerator: The "Go Global" Odyssey" written by Zhiying Liu, Mengxia Zhang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Midea Refrigerator facing as an external strategic factors. Some of the topics covered in Midea Refrigerator: The "Go Global" Odyssey case study are - Strategic Management Strategies, Manufacturing and Global Business.
Some of the macro environment factors that can be used to understand the Midea Refrigerator: The "Go Global" Odyssey casestudy better are - – there is increasing trade war between United States & China, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google,
increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Midea Refrigerator: The "Go Global" Odyssey
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Midea Refrigerator: The "Go Global" Odyssey case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Midea Refrigerator, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Midea Refrigerator 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 Midea Refrigerator: The "Go Global" Odyssey can be done for the following purposes –
1. Strategic planning using facts provided in Midea Refrigerator: The "Go Global" Odyssey case study
2. Improving business portfolio management of Midea Refrigerator
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Midea Refrigerator
Strengths Midea Refrigerator: The "Go Global" Odyssey | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Midea Refrigerator in Midea Refrigerator: The "Go Global" Odyssey Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Midea Refrigerator in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Midea Refrigerator in the sector have low bargaining power. Midea Refrigerator: The "Go Global" Odyssey has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Midea Refrigerator to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Midea Refrigerator 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 Midea Refrigerator is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Midea Refrigerator: The "Go Global" Odyssey Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Midea Refrigerator 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.
Successful track record of launching new products
– Midea Refrigerator has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Midea Refrigerator 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
– Midea Refrigerator has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Midea Refrigerator to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Midea Refrigerator
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Midea Refrigerator does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Midea Refrigerator is one of the leading recruiters in the industry. Managers in the Midea Refrigerator: The "Go Global" Odyssey are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Midea Refrigerator is present in almost all the verticals within the industry. This has provided firm in Midea Refrigerator: The "Go Global" Odyssey 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.
Effective Research and Development (R&D)
– Midea Refrigerator 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 Midea Refrigerator: The "Go Global" Odyssey - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Midea Refrigerator is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Midea Refrigerator has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Midea Refrigerator: The "Go Global" Odyssey 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.
Weaknesses Midea Refrigerator: The "Go Global" Odyssey | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Midea Refrigerator: The "Go Global" Odyssey are -
Slow decision making process
– As mentioned earlier in the report, Midea Refrigerator 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. Midea Refrigerator 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.
Interest costs
– Compare to the competition, Midea Refrigerator 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Midea Refrigerator: The "Go Global" Odyssey, is just above the industry average. Midea Refrigerator 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.
Lack of clear differentiation of Midea Refrigerator products
– To increase the profitability and margins on the products, Midea Refrigerator needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Midea Refrigerator 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Midea Refrigerator 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
– Midea Refrigerator 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.
Low market penetration in new markets
– Outside its home market of Midea Refrigerator, firm in the HBR case study Midea Refrigerator: The "Go Global" Odyssey needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Midea Refrigerator: The "Go Global" Odyssey 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 Midea Refrigerator: The "Go Global" Odyssey can leverage the sales team experience to cultivate customer relationships as Midea Refrigerator is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Midea Refrigerator: The "Go Global" Odyssey, it seems that the employees of Midea Refrigerator 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.
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 Midea Refrigerator supply chain. Even after few cautionary changes mentioned in the HBR case study - Midea Refrigerator: The "Go Global" Odyssey, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Midea Refrigerator vulnerable to further global disruptions in South East Asia.
Opportunities Midea Refrigerator: The "Go Global" Odyssey | 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 Midea Refrigerator: The "Go Global" Odyssey are -
Developing new processes and practices
– Midea Refrigerator can develop new processes and procedures in Global Business 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.
Building a culture of innovation
– managers at Midea Refrigerator 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 Global Business segment.
Creating value in data economy
– The success of analytics program of Midea Refrigerator has opened avenues for new revenue streams for the organization in the industry. This can help Midea Refrigerator to build a more holistic ecosystem as suggested in the Midea Refrigerator: The "Go Global" Odyssey case study. Midea Refrigerator can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Midea Refrigerator 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 Midea Refrigerator: The "Go Global" Odyssey - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Midea Refrigerator to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Midea Refrigerator can use these opportunities to build new business models that can help the communities that Midea Refrigerator operates in. Secondly it can use opportunities from government spending in Global Business sector.
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. Midea Refrigerator can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Midea Refrigerator can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Midea Refrigerator: The "Go Global" Odyssey 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.
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 Midea Refrigerator in the consumer business. Now Midea Refrigerator can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Midea Refrigerator is facing challenges because of the dominance of functional experts in the organization. Midea Refrigerator: The "Go Global" Odyssey 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.
Manufacturing automation
– Midea Refrigerator can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Midea Refrigerator can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Midea Refrigerator: The "Go Global" Odyssey, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Midea Refrigerator 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. Midea Refrigerator 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.
Leveraging digital technologies
– Midea Refrigerator 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.
Threats Midea Refrigerator: The "Go Global" Odyssey External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Midea Refrigerator: The "Go Global" Odyssey are -
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 Midea Refrigerator 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.
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. Midea Refrigerator needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Midea Refrigerator has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Midea Refrigerator needs to keep up with the evolution of technology in the Global Business 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Midea Refrigerator in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Midea Refrigerator in the Global Business sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Midea Refrigerator 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 Midea Refrigerator: The "Go Global" Odyssey .
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. Midea Refrigerator 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.
Increasing wage structure of Midea Refrigerator
– 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 Midea Refrigerator.
High dependence on third party suppliers
– Midea Refrigerator 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.
Regulatory challenges
– Midea Refrigerator 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 Global Business industry regulations.
Shortening product life cycle
– it is one of the major threat that Midea Refrigerator is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Weighted SWOT Analysis of Midea Refrigerator: The "Go Global" Odyssey 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 Midea Refrigerator: The "Go Global" Odyssey 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 Midea Refrigerator: The "Go Global" Odyssey 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 Midea Refrigerator: The "Go Global" Odyssey 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 Midea Refrigerator: The "Go Global" Odyssey 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 Midea Refrigerator needs to make to build a sustainable competitive advantage.
