Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas
In June 2009, Sichuan Tengzhong Heavy Industrial Machinery Company Limited ("Tengzhong"), a little-known manufacturer of construction machinery and special-use vehicles in south-western China, took the global auto industry by surprise when it announced its plan to acquire the money-losing Hummer division of General Motors Corp. Hummer's premium sport-utility vehicles and sport-utility trucks had relatively low fuel efficiency of 9a??16 miles per gallon. Since 2006, Hummer's sales volume had declined sharply due to escalating oil prices, its negative image as a "gas-guzzler" and a shift in customer preferences towards smaller sedans. Tengzhong had no prior experience in the light vehicle industry or in managing a major auto brand. Because this was Tengzhong's first attempt at foreign direct investment, it was imperative for its management to figure out the major obstacles in managing its new Hummer subsidiary in the US. They also had to formulate a sound business plan to get the Chinese government's approval for this acquisition, and to make the investment a big success. (Note: This acquisition was called off in February 2010 because Tengzhong was not able to get the Chinese government's approval. The details are included in Appendix 1 of the teaching note for reference.)
Swot Analysis of "Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas" written by Dean Xu, Penelope Chan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tengzhong Hummer facing as an external strategic factors. Some of the topics covered in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas case study are - Strategic Management Strategies, Motivating people, Supply chain and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas casestudy better are - – there is backlash against globalization, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing energy prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, etc
Introduction to SWOT Analysis of Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tengzhong Hummer, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tengzhong Hummer 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas can be done for the following purposes –
1. Strategic planning using facts provided in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas case study
2. Improving business portfolio management of Tengzhong Hummer
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tengzhong Hummer
Strengths Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tengzhong Hummer in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas Harvard Business Review case study are -
Innovation driven organization
– Tengzhong Hummer is one of the most innovative firm in sector. Manager in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Tengzhong Hummer 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 Dean Xu, Penelope Chan 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.
Cross disciplinary teams
– Horizontal connected teams at the Tengzhong Hummer 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas firm has clearly differentiated products in the market place. This has enabled Tengzhong Hummer to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Tengzhong Hummer to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Tengzhong Hummer in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Tengzhong Hummer 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.
High brand equity
– Tengzhong Hummer has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tengzhong Hummer to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Tengzhong Hummer 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Tengzhong Hummer
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tengzhong Hummer does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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.
Training and development
– Tengzhong Hummer has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Tengzhong Hummer digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tengzhong Hummer 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.
Weaknesses Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas are -
No frontier risks strategy
– After analyzing the HBR case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Products dominated business model
– Even though Tengzhong Hummer 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 - Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Tengzhong Hummer, firm in the HBR case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Tengzhong Hummer is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Tengzhong Hummer needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tengzhong Hummer to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Tengzhong Hummer 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 decision making process
– As mentioned earlier in the report, Tengzhong Hummer 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. Tengzhong Hummer even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Tengzhong Hummer 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas, is just above the industry average. Tengzhong Hummer 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.
Capital Spending Reduction
– Even during the low interest decade, Tengzhong Hummer 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.
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 Tengzhong Hummer supply chain. Even after few cautionary changes mentioned in the HBR case study - Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tengzhong Hummer vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Tengzhong Hummer 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.
Opportunities Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas | 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tengzhong Hummer 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. Tengzhong Hummer 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tengzhong Hummer 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tengzhong Hummer 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, Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tengzhong Hummer is facing challenges because of the dominance of functional experts in the organization. Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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.
Buying journey improvements
– Tengzhong Hummer can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Tengzhong Hummer 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.
Using analytics as competitive advantage
– Tengzhong Hummer 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tengzhong Hummer to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Tengzhong Hummer to increase its market reach. Tengzhong Hummer 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.
Creating value in data economy
– The success of analytics program of Tengzhong Hummer has opened avenues for new revenue streams for the organization in the industry. This can help Tengzhong Hummer to build a more holistic ecosystem as suggested in the Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas case study. Tengzhong Hummer can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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, Tengzhong Hummer can use these opportunities to build new business models that can help the communities that Tengzhong Hummer operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Learning at scale
– Online learning technologies has now opened space for Tengzhong Hummer 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.
Building a culture of innovation
– managers at Tengzhong Hummer 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 Leadership & Managing People segment.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tengzhong Hummer can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas are -
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.
Environmental challenges
– Tengzhong Hummer 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. Tengzhong Hummer can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas, Tengzhong Hummer may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tengzhong Hummer in the Leadership & Managing People industry. The Leadership & Managing People 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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tengzhong Hummer can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Tengzhong Hummer 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.
High dependence on third party suppliers
– Tengzhong Hummer 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 Tengzhong Hummer 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tengzhong Hummer with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Tengzhong Hummer.
Stagnating economy with rate increase
– Tengzhong Hummer 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
– Tengzhong Hummer has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Tengzhong Hummer needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Weighted SWOT Analysis of Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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 Tengzhong Hummer needs to make to build a sustainable competitive advantage.