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 - – central banks are concerned over increasing inflation, technology disruption, there is backlash against globalization, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
Strong track record of project management
– Hongxing Auto is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Hongxing Auto 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 James E. Hatch, Yuan Shi, Wei Sun 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.
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.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Hongxing Auto in the sector have low bargaining power. Hongxing Auto Sales and Service Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hongxing Auto to manage not only supply disruptions but also source products at highly competitive prices.
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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Hongxing Auto Sales and Service Co. firm has clearly differentiated products in the market place. This has enabled Hongxing Auto to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Hongxing Auto to invest into research and development (R&D) and innovation.
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.
Highly skilled collaborators
– Hongxing Auto 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 Hongxing Auto Sales and Service Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 -
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.
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.
Need for greater diversity
– Hongxing Auto 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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Hongxing Auto 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.
Skills based hiring
– The stress on hiring functional specialists at Hongxing Auto 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hongxing Auto Sales and Service Co. HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Hongxing Auto has relatively successful track record of launching new products.
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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hongxing Auto Sales and Service Co., it seems that the employees of Hongxing Auto 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.
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 -
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hongxing Auto can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Learning at scale
– Online learning technologies has now opened space for Hongxing Auto 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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hongxing Auto is facing challenges because of the dominance of functional experts in the organization. Hongxing Auto Sales and Service Co. 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.
Using analytics as competitive advantage
– Hongxing Auto 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 Hongxing Auto Sales and Service Co. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hongxing Auto to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Hongxing Auto 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 Innovation & Entrepreneurship segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hongxing Auto 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.
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.
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 Hongxing Auto 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 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 -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hongxing Auto with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
High dependence on third party suppliers
– Hongxing Auto 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.
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.
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.
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.
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 Hongxing Auto business can come under increasing regulations regarding data privacy, data security, etc.
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. .
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.
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.
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.
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 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.
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.