Hindustan Construction (HCNS) SWOT Analysis / TOWS Matrix / MBA Resources
Construction Services
Strategy / 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 – geopolitical disruptions, increasing commodity prices, there is backlash against globalization, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels,
cloud computing is disrupting traditional business models, increasing transportation and logistics costs, etc
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.
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
Strengths of Hindustan Construction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hindustan Construction are -
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.
Operational resilience
– The operational resilience strategy of Hindustan Construction comprises – understanding the underlying the factors in the Construction Services 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.
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.
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.
Learning organization
- Hindustan Construction is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Hindustan Construction is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hindustan Construction emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Sustainable margins compare to other players in Construction Services industry
– Hindustan Construction has clearly differentiated products in the market place. This has enabled Hindustan Construction to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Hindustan Construction to invest into research and development (R&D) and innovation.
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.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Hindustan Construction digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hindustan Construction has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to lead change in 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.
Weaknesses of Hindustan Construction | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hindustan Construction are -
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.
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.
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.
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.
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.
Products dominated business model
– Even though Hindustan Construction has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hindustan Construction 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 Hindustan Construction supply chain. Even after few cautionary changes, Hindustan Construction is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hindustan Construction vulnerable to further global disruptions in South East Asia.
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.
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.
High cash cycle compare to competitors
Hindustan Construction has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Hindustan Construction has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Hindustan Construction Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hindustan Construction are -
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.
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.
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. Hindustan Construction can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hindustan Construction in the Construction Services industry. Now Hindustan Construction can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hindustan Construction can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Hindustan Construction can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hindustan Construction can use these opportunities to build new business models that can help the communities that Hindustan Construction operates in. Secondly it can use opportunities from government spending in Construction Services sector.
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.
Developing new processes and practices
– Hindustan Construction can develop new processes and procedures in Construction Services 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hindustan Construction 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 Hindustan Construction to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Hindustan Construction External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hindustan Construction are -
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.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hindustan Construction in Construction Services industry. The Construction Services 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.
Shortening product life cycle
– it is one of the major threat that Hindustan Construction is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Hindustan Construction 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 Construction Services industry regulations.
Easy access to finance
– Easy access to finance in Construction Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hindustan Construction can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Consumer confidence and its impact on Hindustan Construction demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Construction Services industry and other sectors.
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.
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.