Case Study Description of Changhong: Journey to Shared Services
Founded in 1958 and headquartered in Mianyang - an emerging inland science and technology city in Sichuan Province, Changhong Electric Co., Ltd., started from the military industry. It then entered the color TV industry and subsequently expanded to a wide range of sectors including black electronics, white electronics, IT/communication, services and parts. It is now an integrated multinational corporation (combining R&D and manufacturing for the military industry, consumer electronics, electronic components, etc.) This case shows how a large TV manufacturer has transformed its internal controls to deal with both fiscal austerity and emerging global practice. It demonstrates the new financial control environment in China in 2014 for leading companies and the immense challenges involved in implementing new controls.
Authors :: F. Warren McFarlan, Haiyan Zhang, Guo Jia
Swot Analysis of "Changhong: Journey to Shared Services" written by F. Warren McFarlan, Haiyan Zhang, Guo Jia includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Changhong Electronics facing as an external strategic factors. Some of the topics covered in Changhong: Journey to Shared Services case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Changhong: Journey to Shared Services casestudy better are - – increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, technology disruption,
central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Changhong: Journey to Shared Services
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Changhong: Journey to Shared Services case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Changhong Electronics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Changhong Electronics 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 Changhong: Journey to Shared Services can be done for the following purposes –
1. Strategic planning using facts provided in Changhong: Journey to Shared Services case study
2. Improving business portfolio management of Changhong Electronics
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Changhong Electronics
Strengths Changhong: Journey to Shared Services | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Changhong Electronics in Changhong: Journey to Shared Services Harvard Business Review case study are -
Strong track record of project management
– Changhong Electronics is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Finance & Accounting industry
– Changhong: Journey to Shared Services firm has clearly differentiated products in the market place. This has enabled Changhong Electronics to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Changhong Electronics to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Changhong Electronics 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 Changhong: Journey to Shared Services - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Changhong Electronics
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Changhong Electronics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Changhong Electronics has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Changhong: Journey to Shared Services 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.
Superior customer experience
– The customer experience strategy of Changhong Electronics in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Changhong Electronics is one of the most innovative firm in sector. Manager in Changhong: Journey to Shared Services Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Changhong Electronics 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.
Diverse revenue streams
– Changhong Electronics is present in almost all the verticals within the industry. This has provided firm in Changhong: Journey to Shared Services 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.
Ability to recruit top talent
– Changhong Electronics is one of the leading recruiters in the industry. Managers in the Changhong: Journey to Shared Services 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
– Changhong Electronics has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Changhong Electronics 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.
Learning organization
- Changhong Electronics 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 Changhong Electronics is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Changhong: Journey to Shared Services Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Changhong: Journey to Shared Services | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Changhong: Journey to Shared Services are -
No frontier risks strategy
– After analyzing the HBR case study Changhong: Journey to Shared Services, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Low market penetration in new markets
– Outside its home market of Changhong Electronics, firm in the HBR case study Changhong: Journey to Shared Services needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Changhong Electronics 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.
Products dominated business model
– Even though Changhong Electronics 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 - Changhong: Journey to Shared Services should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, F. Warren McFarlan, Haiyan Zhang, Guo Jia suggests that, Changhong Electronics 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.
Increasing silos among functional specialists
– The organizational structure of Changhong Electronics is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Changhong Electronics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Changhong Electronics to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Changhong: Journey to Shared Services 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 Changhong Electronics 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Changhong: Journey to Shared Services, it seems that the employees of Changhong Electronics 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 Changhong Electronics supply chain. Even after few cautionary changes mentioned in the HBR case study - Changhong: Journey to Shared Services, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Changhong Electronics vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Changhong Electronics 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. Changhong Electronics 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.
Skills based hiring
– The stress on hiring functional specialists at Changhong Electronics 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.
Opportunities Changhong: Journey to Shared Services | 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 Changhong: Journey to Shared Services are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Changhong Electronics can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Changhong Electronics to increase its market reach. Changhong Electronics 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Changhong Electronics 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. Changhong Electronics 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Changhong Electronics in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Changhong Electronics has opened avenues for new revenue streams for the organization in the industry. This can help Changhong Electronics to build a more holistic ecosystem as suggested in the Changhong: Journey to Shared Services case study. Changhong Electronics can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Changhong Electronics 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.
Buying journey improvements
– Changhong Electronics can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Changhong: Journey to Shared Services 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.
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 Changhong Electronics 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.
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 Changhong Electronics in the consumer business. Now Changhong Electronics can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Changhong Electronics 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Changhong Electronics 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, Changhong: Journey to Shared Services, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Changhong Electronics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Changhong Electronics can develop new processes and procedures in Finance & Accounting 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.
Threats Changhong: Journey to Shared Services External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Changhong: Journey to Shared Services are -
Consumer confidence and its impact on Changhong Electronics 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.
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 Changhong Electronics business can come under increasing regulations regarding data privacy, data security, 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.
Technology acceleration in Forth Industrial Revolution
– Changhong Electronics has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Changhong Electronics needs to keep up with the evolution of technology in the Finance & Accounting 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.
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. Changhong Electronics needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing wage structure of Changhong Electronics
– 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 Changhong Electronics.
Stagnating economy with rate increase
– Changhong Electronics 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 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Changhong Electronics 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 Changhong: Journey to Shared Services .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Changhong: Journey to Shared Services, Changhong Electronics may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Changhong Electronics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Changhong Electronics 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. Changhong Electronics can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Changhong Electronics is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Changhong: Journey to Shared Services 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 Changhong: Journey to Shared Services 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 Changhong: Journey to Shared Services 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 Changhong: Journey to Shared Services 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 Changhong: Journey to Shared Services 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 Changhong Electronics needs to make to build a sustainable competitive advantage.
