Hongxing Auto Sales and Service Co. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Hongxing Auto Sales and Service Co.
The Li family, the sole owners of Hongxing Auto Sales and Service, are ready to sell the company. They must determine how much the business is worth and the best method of negotiating the sale of the business. This case deals with the valuation of a small, privately-owned business, and will develop students' skills in sizing up a business and placing a value on a business using a variety of methods, including liquidation value, discounted cash flow and price-earnings multiples.
Swot Analysis of "Hongxing Auto Sales and Service Co." written by James E. Hatch, Yuan Shi, Wei Sun includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hongxing Auto facing as an external strategic factors. Some of the topics covered in Hongxing Auto Sales and Service Co. case study are - Strategic Management Strategies, Financial analysis, Financial management, International business and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Hongxing Auto Sales and Service Co. casestudy better are - – increasing energy prices, technology disruption, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, increasing commodity prices, talent flight as more people leaving formal jobs,
increasing household debt because of falling income levels, there is backlash against globalization, etc
Introduction to SWOT Analysis of Hongxing Auto Sales and Service Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hongxing Auto Sales and Service Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hongxing Auto, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hongxing Auto 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 Hongxing Auto Sales and Service Co. can be done for the following purposes –
1. Strategic planning using facts provided in Hongxing Auto Sales and Service Co. case study
2. Improving business portfolio management of Hongxing Auto
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hongxing Auto
Strengths Hongxing Auto Sales and Service Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hongxing Auto in Hongxing Auto Sales and Service Co. Harvard Business Review case study are -
Organizational Resilience of Hongxing Auto
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hongxing Auto does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Hongxing Auto 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.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Hongxing Auto digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hongxing Auto 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 lead change in Innovation & Entrepreneurship field
– Hongxing Auto 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 Hongxing Auto in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Hongxing Auto is present in almost all the verticals within the industry. This has provided firm in Hongxing Auto Sales and Service Co. 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)
– Hongxing Auto 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 Hongxing Auto Sales and Service Co. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Hongxing Auto has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hongxing Auto 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
- Hongxing Auto 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 Hongxing Auto is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hongxing Auto Sales and Service Co. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Hongxing Auto is one of the most innovative firm in sector. Manager in Hongxing Auto Sales and Service Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Hongxing Auto has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hongxing Auto to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Hongxing Auto has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hongxing Auto Sales and Service Co. 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 Hongxing Auto in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Hongxing Auto Sales and Service Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hongxing Auto Sales and Service Co. are -
Aligning sales with marketing
– It come across in the case study Hongxing Auto Sales and Service Co. 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 Hongxing Auto Sales and Service Co. can leverage the sales team experience to cultivate customer relationships as Hongxing Auto is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study Hongxing Auto Sales and Service Co., it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As Hongxing Auto Sales and Service Co. HBR case study mentions - Hongxing Auto 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.
High cash cycle compare to competitors
Hongxing Auto 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.
Slow decision making process
– As mentioned earlier in the report, Hongxing Auto 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. Hongxing Auto 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.
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 Hongxing Auto supply chain. Even after few cautionary changes mentioned in the HBR case study - Hongxing Auto Sales and Service Co., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hongxing Auto vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hongxing Auto Sales and Service Co., is just above the industry average. Hongxing Auto 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 operating costs
– Compare to the competitors, firm in the HBR case study Hongxing Auto Sales and Service Co. 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 Hongxing Auto 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Hongxing Auto is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Hongxing Auto needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hongxing Auto to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, James E. Hatch, Yuan Shi, Wei Sun suggests that, Hongxing Auto 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Hongxing Auto Sales and Service Co., in the dynamic environment Hongxing Auto has struggled to respond to the nimble upstart competition. Hongxing Auto has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Hongxing Auto Sales and Service Co. | 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 Hongxing Auto Sales and Service Co. are -
Better consumer reach
– The expansion of the 5G network will help Hongxing Auto to increase its market reach. Hongxing Auto 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hongxing Auto can use these opportunities to build new business models that can help the communities that Hongxing Auto operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Leveraging digital technologies
– Hongxing Auto 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 Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hongxing Auto 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. Hongxing Auto 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.
Creating value in data economy
– The success of analytics program of Hongxing Auto has opened avenues for new revenue streams for the organization in the industry. This can help Hongxing Auto to build a more holistic ecosystem as suggested in the Hongxing Auto Sales and Service Co. case study. Hongxing Auto can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hongxing Auto 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, Hongxing Auto Sales and Service Co., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hongxing Auto 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 Hongxing Auto 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 Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Hongxing Auto can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Hongxing Auto 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.
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 Hongxing Auto in the consumer business. Now Hongxing Auto can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Hongxing Auto can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hongxing Auto in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
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. Hongxing Auto can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Hongxing Auto Sales and Service Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hongxing Auto Sales and Service Co. are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hongxing Auto 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 Hongxing Auto Sales and Service Co. .
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.
Consumer confidence and its impact on Hongxing Auto 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.
Stagnating economy with rate increase
– Hongxing Auto can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Hongxing Auto has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Hongxing Auto needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
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. Hongxing Auto 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 Hongxing Auto
– 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 Hongxing Auto.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hongxing Auto can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hongxing Auto in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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 Hongxing Auto in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Hongxing Auto is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Hongxing Auto 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. Hongxing Auto can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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. Hongxing Auto needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Hongxing Auto Sales and Service Co. 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 Hongxing Auto Sales and Service Co. 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 Hongxing Auto Sales and Service Co. 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 Hongxing Auto Sales and Service Co. 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 Hongxing Auto Sales and Service Co. 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 Hongxing Auto needs to make to build a sustainable competitive advantage.