The "Chongqing Model" and the Future of China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The "Chongqing Model" and the Future of China
Since opening to the global economy in 1979, but especially since entering the WTO in 2001, China's economy grew at rates around 10% annually by attracting FDI and promoting exports. After the financial crisis that began in 2008 and depressed demand in the United States and Europe, China's growth began to slow, and vulnerabilities in its economy came to light. It became clear to many in China that the growth strategy that got China from 1978 to the present was unsustainable and that the country needed a new strategy to resolve the country's regional inequalities, stimulate domestic consumption, and create growth less vulnerable to global contractions in demand. At exactly this time, between 2007 and 2012, the provincial municipality of Chongqing in China's mountainous southwest became the fastest growing city in China with GDP growth averaging over 15%. Chongqing's growth was the result of a suite of economic and social policies that had been dubbed the "Chongqing Model," a controversial bundle of reforms that promised public and private sector growth with benefits more equitably shared by all citizens. Yet critics found the model politically suspect and over reliant on state-owned enterprises and debt-driven investment. When the city's preeminent leader was publicly fired following a sensational murder scandal, the region's new leaders-and indeed China's new leaders-had to weigh in on the "Chongqing Model." Would it signal a new path to prosperity for post-WTO China?
Swot Analysis of "The "Chongqing Model" and the Future of China" written by Meg Rithmire includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Chongqing China's facing as an external strategic factors. Some of the topics covered in The "Chongqing Model" and the Future of China case study are - Strategic Management Strategies, Economy, Emerging markets, Government, Marketing and Global Business.
Some of the macro environment factors that can be used to understand the The "Chongqing Model" and the Future of China casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, there is backlash against globalization, increasing energy prices, increasing commodity prices, there is increasing trade war between United States & China,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of The "Chongqing Model" and the Future of China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The "Chongqing Model" and the Future of China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chongqing China's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chongqing China's 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 The "Chongqing Model" and the Future of China can be done for the following purposes –
1. Strategic planning using facts provided in The "Chongqing Model" and the Future of China case study
2. Improving business portfolio management of Chongqing China's
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 Chongqing China's
Strengths The "Chongqing Model" and the Future of China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chongqing China's in The "Chongqing Model" and the Future of China Harvard Business Review case study are -
Sustainable margins compare to other players in Global Business industry
– The "Chongqing Model" and the Future of China firm has clearly differentiated products in the market place. This has enabled Chongqing China's to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Chongqing China's to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Chongqing China's 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 The "Chongqing Model" and the Future of China HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Chongqing China's 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.
Training and development
– Chongqing China's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The "Chongqing Model" and the Future of China 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.
Cross disciplinary teams
– Horizontal connected teams at the Chongqing China's 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.
Strong track record of project management
– Chongqing China's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Chongqing China's 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 The "Chongqing Model" and the Future of China - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Chongqing China's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chongqing China's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Chongqing China's in the sector have low bargaining power. The "Chongqing Model" and the Future of China has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Chongqing China's to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Chongqing China's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Chongqing China's 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.
Ability to recruit top talent
– Chongqing China's is one of the leading recruiters in the industry. Managers in the The "Chongqing Model" and the Future of China are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Chongqing China's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Meg Rithmire can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses The "Chongqing Model" and the Future of China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The "Chongqing Model" and the Future of China are -
Lack of clear differentiation of Chongqing China's products
– To increase the profitability and margins on the products, Chongqing China's needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Chongqing China's 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.
Need for greater diversity
– Chongqing China's 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.
Slow to strategic competitive environment developments
– As The "Chongqing Model" and the Future of China HBR case study mentions - Chongqing China's 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The "Chongqing Model" and the Future of China, it seems that the employees of Chongqing China's 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.
Increasing silos among functional specialists
– The organizational structure of Chongqing China's is dominated by functional specialists. It is not different from other players in the Global Business segment. Chongqing China's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Chongqing China's to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Chongqing China's 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 - The "Chongqing Model" and the Future of China should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Chongqing China's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The "Chongqing Model" and the Future of China, is just above the industry average. Chongqing China's 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Meg Rithmire suggests that, Chongqing China's 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.
Capital Spending Reduction
– Even during the low interest decade, Chongqing China's 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.
Opportunities The "Chongqing Model" and the Future of China | 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 The "Chongqing Model" and the Future of China are -
Better consumer reach
– The expansion of the 5G network will help Chongqing China's to increase its market reach. Chongqing China's 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chongqing China's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chongqing China's 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 Chongqing China's to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Chongqing China's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Chongqing China's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chongqing China's can use these opportunities to build new business models that can help the communities that Chongqing China's operates in. Secondly it can use opportunities from government spending in Global Business sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chongqing China's 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.
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. Chongqing China's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Chongqing China's 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.
Buying journey improvements
– Chongqing China's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The "Chongqing Model" and the Future of China 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chongqing China's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Chongqing China's 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. Chongqing China's 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.
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 Chongqing China's 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.
Threats The "Chongqing Model" and the Future of China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The "Chongqing Model" and the Future of China are -
Shortening product life cycle
– it is one of the major threat that Chongqing China's is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Chongqing China's needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Chongqing China's.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chongqing China's 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 The "Chongqing Model" and the Future of China .
Technology acceleration in Forth Industrial Revolution
– Chongqing China's has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Chongqing China's 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.
Consumer confidence and its impact on Chongqing China's 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 The "Chongqing Model" and the Future of China, Chongqing China's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Increasing wage structure of Chongqing China's
– 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 Chongqing China's.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Chongqing China's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Chongqing China's 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
– Chongqing China's 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.
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 Chongqing China's 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.
Weighted SWOT Analysis of The "Chongqing Model" and the Future of China 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 The "Chongqing Model" and the Future of China 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 The "Chongqing Model" and the Future of China 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 The "Chongqing Model" and the Future of China 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 The "Chongqing Model" and the Future of China 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 Chongqing China's needs to make to build a sustainable competitive advantage.