Hindustan Construction (HCNS) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Hindustan Construction (India)

Based on various researches at Oak Spring University , Hindustan Construction is operating in a macro-environment that has been destablized by – technology disruption, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing commodity prices, increasing transportation and logistics costs, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, etc

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Introduction to SWOT Analysis of Hindustan Construction

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hindustan Construction can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hindustan Construction, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hindustan Construction 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Hindustan Construction can be done for the following purposes –
1. Strategic planning of Hindustan Construction
2. Improving business portfolio management of Hindustan Construction
3. Assessing feasibility of the new initiative in India
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hindustan Construction

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Strengths of Hindustan Construction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Hindustan Construction are -

Ability to recruit top talent

– Hindustan Construction is one of the leading players in the Construction Services industry in India. It is in a position to attract the best talent available in India. The firm has a robust talent identification program that helps in identifying the brightest.

Organizational Resilience of Hindustan Construction

– The covid-19 pandemic has put organizational resilience at the centre of everthing Hindustan Construction does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Training and development

– Hindustan Construction has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – 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 Hindustan Construction in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Analytics focus

– Hindustan Construction 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 Construction Services industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Successful track record of launching new products

– Hindustan Construction has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hindustan Construction 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.

Highly skilled collaborators

– Hindustan Construction has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Hindustan Construction have helped the firm to develop new products and bring them quickly to the marketplace.

Ability to lead change in Construction Services

– Hindustan Construction is one of the leading players in the Construction Services industry in India. Over the years it has not only transformed the business landscape in the Construction Services industry in India but also across the existing markets. The ability to lead change has enabled Hindustan Construction 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 Hindustan Construction 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.

High brand equity

– Hindustan Construction has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hindustan Construction to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Low bargaining power of suppliers

– Suppliers of Hindustan Construction in the Capital Goods sector have low bargaining power. Hindustan Construction has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hindustan Construction to manage not only supply disruptions but also source products at highly competitive prices.

Effective Research and Development (R&D)

– Hindustan Construction has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hindustan Construction staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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Weaknesses of Hindustan Construction | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Hindustan Construction are -

Need for greater diversity

– Hindustan Construction 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.

Low market penetration in new markets

– Outside its home market of India, Hindustan Construction needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High dependence on Hindustan Construction ‘s star products

– The top 2 products and services of Hindustan Construction still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Hindustan Construction has relatively successful track record of launching new products.

Compensation and incentives

– The revenue per employee of Hindustan Construction is just above the Construction Services industry average. It 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.

Aligning sales with marketing

– From the outside it seems that Hindustan Construction needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction Services industry have deep experience in developing customer relationships. Marketing department at Hindustan Construction can leverage the sales team experience to cultivate customer relationships as Hindustan Construction is planning to shift buying processes online.

No frontier risks strategy

– From the 10K / annual statement of Hindustan Construction, it seems that company is thinking out the frontier risks that can impact Construction Services industry. 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 Construction Services industry, Hindustan Construction 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.

High operating costs

– Compare to the competitors, Hindustan Construction has high operating costs in the Construction Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hindustan Construction lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, Hindustan Construction 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 Construction Services industry using digital technology.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Hindustan Construction 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.

Ability to respond to the competition

– As the decision making is very deliberative at Hindustan Construction, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Hindustan Construction has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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Hindustan Construction Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Hindustan Construction are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for Hindustan Construction in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.

Better consumer reach

– The expansion of the 5G network will help Hindustan Construction to increase its market reach. Hindustan Construction 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Hindustan Construction 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Hindustan Construction is facing challenges because of the dominance of functional experts in the organization. Hindustan Construction can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hindustan Construction 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 Hindustan Construction to hire the very best people irrespective of their geographical location.

Buying journey improvements

– Hindustan Construction can improve the customer journey of consumers in the Construction Services industry by using analytics and artificial intelligence. It 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 Hindustan Construction 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.

Learning at scale

– Online learning technologies has now opened space for Hindustan Construction 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.

Loyalty marketing

– Hindustan Construction 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.

Manufacturing automation

– Hindustan Construction can use the latest technology developments to improve its manufacturing and designing process in Construction Services sector. 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.

Creating value in data economy

– The success of analytics program of Hindustan Construction has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Hindustan Construction to build a more holistic ecosystem for Hindustan Construction products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– Hindustan Construction has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Hindustan Construction to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hindustan Construction to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hindustan Construction 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. Hindustan Construction 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.

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Threats Hindustan Construction External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Hindustan Construction are -

Environmental challenges

– Hindustan Construction 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. Hindustan Construction can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

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.

Increasing wage structure of Hindustan Construction

– 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 Hindustan Construction.

Technology acceleration in Forth Industrial Revolution

– Hindustan Construction has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Hindustan Construction needs to keep up with the evolution of technology in the Construction Services 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.

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 Hindustan Construction business can come under increasing regulations regarding data privacy, data security, etc.

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 Hindustan Construction.

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. Hindustan Construction 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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Hindustan Construction with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.

Stagnating economy with rate increase

– Hindustan Construction 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 Construction Services industry.

High dependence on third party suppliers

– Hindustan Construction 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.

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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Hindustan Construction 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 Hindustan Construction prominent markets.

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. Hindustan Construction needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of Hindustan Construction Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hindustan Construction 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 Hindustan Construction 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 Hindustan Construction 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 Hindustan Construction 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 Hindustan Construction needs to make to build a sustainable competitive advantage.

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