Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management
In 2008, more than 750 million cell phones were produced in China. A significant portion (20 percent, or about 150 million units) of these phones were produced by Shanzhai companies. These companies had rapidly taken a significant share (about 10 percent) of the worldwide market. This phenomenal growth was primarily due to nonconventional approaches to the global market in market positioning, rapid product development, and tightly coupled, responsive and efficient supply chain management. Though Shanzhai often has been perceived as a term for counterfeiting, in reality it is more than just copying. Modern cell phones contain sophisticated hardware, software and systems technology, yet Shanzhai companies of only 10 people could leverage a sophisticated (though informal) network of product designers, manufacturers, and distributors to make a successful business. This case describes the Shanzhai phenomenon, and how these companies operate. It also provides an example of one company that successfully transitioned from a Shanzhai culture to become a major mainstream force in the Chinese mobile phone industry. The case also discusses forces that challenge the future of the Shanzhai model.
Authors :: Hau Lee, Mitchell M. Tseng, Power Siu, David W. Hoyt
Swot Analysis of "Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management" written by Hau Lee, Mitchell M. Tseng, Power Siu, David W. Hoyt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Shanzhai Phones facing as an external strategic factors. Some of the topics covered in Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management case study are - Strategic Management Strategies, Intellectual property, Manufacturing and Global Business.
Some of the macro environment factors that can be used to understand the Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management casestudy better are - – digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs,
cloud computing is disrupting traditional business models, wage bills are increasing, etc
Introduction to SWOT Analysis of Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shanzhai Phones, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shanzhai Phones 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management can be done for the following purposes –
1. Strategic planning using facts provided in Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management case study
2. Improving business portfolio management of Shanzhai Phones
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 Shanzhai Phones
Strengths Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shanzhai Phones in Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management Harvard Business Review case study are -
High switching costs
– The high switching costs that Shanzhai Phones 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.
Analytics focus
– Shanzhai Phones 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 Hau Lee, Mitchell M. Tseng, Power Siu, David W. Hoyt 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.
Diverse revenue streams
– Shanzhai Phones is present in almost all the verticals within the industry. This has provided firm in Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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.
Superior customer experience
– The customer experience strategy of Shanzhai Phones in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Global Business field
– Shanzhai Phones 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 Shanzhai Phones in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Shanzhai Phones 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Shanzhai Phones 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.
Organizational Resilience of Shanzhai Phones
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Shanzhai Phones does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Shanzhai Phones is one of the leading recruiters in the industry. Managers in the Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Shanzhai Phones has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shanzhai Phones to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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.
Successful track record of launching new products
– Shanzhai Phones has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shanzhai Phones has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management are -
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 Shanzhai Phones supply chain. Even after few cautionary changes mentioned in the HBR case study - Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shanzhai Phones vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Shanzhai Phones 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Shanzhai Phones is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management HBR case study mentions - Shanzhai Phones 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.
Slow decision making process
– As mentioned earlier in the report, Shanzhai Phones 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. Shanzhai Phones 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.
Low market penetration in new markets
– Outside its home market of Shanzhai Phones, firm in the HBR case study Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Shanzhai Phones products
– To increase the profitability and margins on the products, Shanzhai Phones needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Need for greater diversity
– Shanzhai Phones 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management, in the dynamic environment Shanzhai Phones has struggled to respond to the nimble upstart competition. Shanzhai Phones has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Shanzhai Phones 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.
Opportunities Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management | 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Shanzhai Phones 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, Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Shanzhai Phones can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shanzhai Phones 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.
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. Shanzhai Phones can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Shanzhai Phones to increase its market reach. Shanzhai Phones 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.
Buying journey improvements
– Shanzhai Phones can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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.
Using analytics as competitive advantage
– Shanzhai Phones 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Shanzhai Phones to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Shanzhai Phones 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.
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. Shanzhai Phones 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. Shanzhai Phones 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.
Manufacturing automation
– Shanzhai Phones 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.
Building a culture of innovation
– managers at Shanzhai Phones 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Shanzhai Phones is facing challenges because of the dominance of functional experts in the organization. Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Shanzhai Phones can use these opportunities to build new business models that can help the communities that Shanzhai Phones operates in. Secondly it can use opportunities from government spending in Global Business sector.
Threats Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management are -
Stagnating economy with rate increase
– Shanzhai Phones 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management, Shanzhai Phones 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 .
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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Shanzhai Phones can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Shanzhai Phones in the Global Business sector and impact the bottomline of the organization.
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 Shanzhai Phones.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Shanzhai Phones 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Shanzhai Phones with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Shanzhai Phones needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Shanzhai Phones 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.
Technology acceleration in Forth Industrial Revolution
– Shanzhai Phones has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Shanzhai Phones 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.
Shortening product life cycle
– it is one of the major threat that Shanzhai Phones is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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 Shanzhai ("Bandit") Mobile Phone Companies: The Guerrilla Warfare of Product Development and Supply Chain Management 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 Shanzhai Phones needs to make to build a sustainable competitive advantage.
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