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 - – supply chains are disrupted by pandemic , there is increasing trade war between United States & China, there is backlash against globalization, technology disruption, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy,
cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, 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 -
Ability to recruit top talent
– Tengzhong Hummer is one of the leading recruiters in the industry. Managers in the Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Diverse revenue streams
– Tengzhong Hummer is present in almost all the verticals within the industry. This has provided firm in Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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.
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.
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.
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.
Ability to lead change in Leadership & Managing People field
– Tengzhong Hummer 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 Tengzhong Hummer in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Strong track record of project management
– Tengzhong Hummer is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 -
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tengzhong Hummer is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas, it seems that the employees of Tengzhong Hummer 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Dean Xu, Penelope Chan suggests that, Tengzhong Hummer 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.
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.
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.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas 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 Tengzhong Hummer 's lucrative customers.
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 -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tengzhong Hummer 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 Tengzhong Hummer to hire the very best people irrespective of their geographical location.
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. Tengzhong Hummer can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tengzhong Hummer in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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.
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.
Leveraging digital technologies
– Tengzhong Hummer 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Tengzhong Hummer can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
Developing new processes and practices
– Tengzhong Hummer can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Loyalty marketing
– Tengzhong Hummer 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.
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 -
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.
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.
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.
Regulatory challenges
– Tengzhong Hummer needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
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.
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.
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.
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.
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. Tengzhong Hummer needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tengzhong Hummer 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 Acquisition of Hummer: M&A Challenges Faced by Chinese Companies Overseas .
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.
Shortening product life cycle
– it is one of the major threat that Tengzhong Hummer is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
