Huazhu (HTHT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Huazhu (United States)

Based on various researches at Oak Spring University , Huazhu is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of Huazhu

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Huazhu can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Huazhu, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Huazhu 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 Huazhu can be done for the following purposes –
1. Strategic planning of Huazhu
2. Improving business portfolio management of Huazhu
3. Assessing feasibility of the new initiative in United States
4. Making a Hotels & Motels sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Huazhu

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

The strengths of Huazhu are -

Low bargaining power of suppliers

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

High brand equity

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

Ability to lead change in Hotels & Motels

– Huazhu is one of the leading players in the Hotels & Motels industry in United States. Over the years it has not only transformed the business landscape in the Hotels & Motels industry in United States but also across the existing markets. The ability to lead change has enabled Huazhu in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Operational resilience

– The operational resilience strategy of Huazhu comprises – understanding the underlying the factors in the Hotels & Motels 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.

Digital Transformation in Hotels & Motels industry

- digital transformation varies from industry to industry. For Huazhu digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Huazhu 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.

Diverse revenue streams

– Huazhu is present in almost all the verticals within the Hotels & Motels industry. This has provided Huazhu 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.

Learning organization

- Huazhu 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 Huazhu is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Huazhu emphasize – knowledge, initiative, and innovation.

Innovation driven organization

– Huazhu is one of the most innovative firm in Hotels & Motels sector.

High switching costs

– The high switching costs that Huazhu 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.

Cross disciplinary teams

– Horizontal connected teams at the Huazhu 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.

Superior customer experience

– The customer experience strategy of Huazhu in Hotels & Motels industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Highly skilled collaborators

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

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

The weaknesses of Huazhu are -

Increasing silos among functional specialists

– The organizational structure of Huazhu is dominated by functional specialists. It is not different from other players in the Hotels & Motels industry, but Huazhu needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Huazhu to focus more on services in the Hotels & Motels industry rather than just following the product oriented approach.

High dependence on Huazhu ‘s star products

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

Lack of clear differentiation of Huazhu products

– To increase the profitability and margins on the products, Huazhu needs to provide more differentiated products than what it is currently offering in the marketplace.

No frontier risks strategy

– From the 10K / annual statement of Huazhu, it seems that company is thinking out the frontier risks that can impact Hotels & Motels 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.

Slow to strategic competitive environment developments

– As Huazhu is one of the leading players in the Hotels & Motels industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Hotels & Motels industry in last five years.

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 Huazhu supply chain. Even after few cautionary changes, Huazhu is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Huazhu vulnerable to further global disruptions in South East Asia.

Ability to respond to the competition

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

High bargaining power of channel partners in Hotels & Motels industry

– because of the regulatory requirements in United States, Huazhu 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 Hotels & Motels industry.

High operating costs

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

High cash cycle compare to competitors

Huazhu has a high cash cycle compare to other players in the Hotels & Motels industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow decision making process

– As mentioned earlier in the report, Huazhu has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Hotels & Motels industry over the last five years. Huazhu 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.

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

The opportunities of Huazhu are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Huazhu 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 Huazhu to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Hotels & Motels industry, but it has also influenced the consumer preferences. Huazhu 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

– Huazhu can use the latest technology developments to improve its manufacturing and designing process in Hotels & Motels 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.

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 Huazhu 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Huazhu can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Learning at scale

– Online learning technologies has now opened space for Huazhu 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 Huazhu 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 Hotels & Motels industry.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Hotels & Motels industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Huazhu 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. Huazhu 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.

Developing new processes and practices

– Huazhu can develop new processes and procedures in Hotels & Motels 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.

Creating value in data economy

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

Lowering marketing communication costs

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Huazhu can use these opportunities to build new business models that can help the communities that Huazhu operates in. Secondly it can use opportunities from government spending in Hotels & Motels sector.

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. Huazhu can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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

The threats of Huazhu are -

Increasing wage structure of Huazhu

– 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 Huazhu.

Environmental challenges

– Huazhu 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. Huazhu can take advantage of this fund but it will also bring new competitors in the Hotels & Motels industry.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Huazhu in the Hotels & Motels sector and impact the bottomline of the organization.

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

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.

High dependence on third party suppliers

– Huazhu 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.

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. Huazhu needs to understand the core reasons impacting the Hotels & Motels industry. This will help it in building a better workplace.

Regulatory challenges

– Huazhu 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 Hotels & Motels industry regulations.

Stagnating economy with rate increase

– Huazhu 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 Hotels & Motels industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Huazhu in Hotels & Motels industry. The Hotels & Motels 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Huazhu may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Hotels & Motels sector.

Barriers of entry lowering

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

Increasing international competition and downward pressure on margins

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

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Weighted SWOT Analysis of Huazhu Template, Example

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

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