SWOT Analysis / TOWS Matrix for Kweichow Moutai (China)
Based on various researches at Oak Spring University , Kweichow Moutai is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, geopolitical disruptions, wage bills are increasing, increasing commodity prices, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs,
competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kweichow Moutai can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kweichow Moutai, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kweichow Moutai 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 Kweichow Moutai can be done for the following purposes –
1. Strategic planning of Kweichow Moutai
2. Improving business portfolio management of Kweichow Moutai
3. Assessing feasibility of the new initiative in China
4. Making a Beverages (Alcoholic) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kweichow Moutai
Strengths of Kweichow Moutai | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kweichow Moutai are -
Low bargaining power of suppliers
– Suppliers of Kweichow Moutai in the Consumer/Non-Cyclical sector have low bargaining power. Kweichow Moutai has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kweichow Moutai to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Kweichow Moutai is present in almost all the verticals within the Beverages (Alcoholic) industry. This has provided Kweichow Moutai 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.
Superior customer experience
– The customer experience strategy of Kweichow Moutai in Beverages (Alcoholic) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Kweichow Moutai has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kweichow Moutai to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Kweichow Moutai
– The covid-19 pandemic has put organizational resilience at the centre of everthing Kweichow Moutai does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Beverages (Alcoholic)
– Kweichow Moutai is one of the leading players in the Beverages (Alcoholic) industry in China. Over the years it has not only transformed the business landscape in the Beverages (Alcoholic) industry in China but also across the existing markets. The ability to lead change has enabled Kweichow Moutai in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Kweichow Moutai 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 Kweichow Moutai 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.
Innovation driven organization
– Kweichow Moutai is one of the most innovative firm in Beverages (Alcoholic) sector.
Sustainable margins compare to other players in Beverages (Alcoholic) industry
– Kweichow Moutai has clearly differentiated products in the market place. This has enabled Kweichow Moutai to fetch slight price premium compare to the competitors in the Beverages (Alcoholic) industry. The sustainable margins have also helped Kweichow Moutai to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Kweichow Moutai has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kweichow Moutai 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.
Effective Research and Development (R&D)
– Kweichow Moutai has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kweichow Moutai staying ahead in the Beverages (Alcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Kweichow Moutai | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kweichow Moutai are -
Need for greater diversity
– Kweichow Moutai 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.
Skills based hiring in Beverages (Alcoholic) industry
– The stress on hiring functional specialists at Kweichow Moutai 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 Kweichow Moutai, in the dynamic environment of Beverages (Alcoholic) industry it has struggled to respond to the nimble upstart competition. Kweichow Moutai has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Kweichow Moutai 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.
No frontier risks strategy
– From the 10K / annual statement of Kweichow Moutai, it seems that company is thinking out the frontier risks that can impact Beverages (Alcoholic) 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.
Increasing silos among functional specialists
– The organizational structure of Kweichow Moutai is dominated by functional specialists. It is not different from other players in the Beverages (Alcoholic) industry, but Kweichow Moutai needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kweichow Moutai to focus more on services in the Beverages (Alcoholic) industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of China, Kweichow Moutai needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Kweichow Moutai has high operating costs in the Beverages (Alcoholic) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kweichow Moutai lucrative customers.
High dependence on Kweichow Moutai ‘s star products
– The top 2 products and services of Kweichow Moutai still accounts for major business revenue. This dependence on star products in Beverages (Alcoholic) industry has resulted into insufficient focus on developing new products, even though Kweichow Moutai has relatively successful track record of launching new products.
Products dominated business model
– Even though Kweichow Moutai has some of the most successful models in the Beverages (Alcoholic) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Kweichow Moutai should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Kweichow Moutai has a high cash cycle compare to other players in the Beverages (Alcoholic) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Kweichow Moutai Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kweichow Moutai are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kweichow Moutai is facing challenges because of the dominance of functional experts in the organization. Kweichow Moutai can utilize new technology in the field of Beverages (Alcoholic) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Beverages (Alcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kweichow Moutai 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. Kweichow Moutai 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.
Loyalty marketing
– Kweichow Moutai 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.
Use of Bitcoin and other crypto currencies for transactions in Beverages (Alcoholic) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Kweichow Moutai in the Beverages (Alcoholic) industry. Now Kweichow Moutai can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Kweichow Moutai can improve the customer journey of consumers in the Beverages (Alcoholic) 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kweichow Moutai can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kweichow Moutai can use these opportunities to build new business models that can help the communities that Kweichow Moutai operates in. Secondly it can use opportunities from government spending in Beverages (Alcoholic) sector.
Leveraging digital technologies
– Kweichow Moutai 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.
Developing new processes and practices
– Kweichow Moutai can develop new processes and procedures in Beverages (Alcoholic) 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.
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 Kweichow Moutai 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.
Better consumer reach
– The expansion of the 5G network will help Kweichow Moutai to increase its market reach. Kweichow Moutai 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Beverages (Alcoholic) industry, but it has also influenced the consumer preferences. Kweichow Moutai can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kweichow Moutai in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Beverages (Alcoholic) industry, and it will provide faster access to the consumers.
Threats Kweichow Moutai External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kweichow Moutai are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kweichow Moutai in Beverages (Alcoholic) industry. The Beverages (Alcoholic) 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.
Stagnating economy with rate increase
– Kweichow Moutai 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 Beverages (Alcoholic) industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Beverages (Alcoholic) industry are lowering. It can presents Kweichow Moutai with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Beverages (Alcoholic) sector.
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.
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. Kweichow Moutai 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.
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 Kweichow Moutai.
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.
Consumer confidence and its impact on Kweichow Moutai 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 Beverages (Alcoholic) industry and other sectors.
Environmental challenges
– Kweichow Moutai 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. Kweichow Moutai can take advantage of this fund but it will also bring new competitors in the Beverages (Alcoholic) industry.
High dependence on third party suppliers
– Kweichow Moutai 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 acceleration in Forth Industrial Revolution
– Kweichow Moutai has witnessed rapid integration of technology during Covid-19 in the Beverages (Alcoholic) industry. As one of the leading players in the industry, Kweichow Moutai needs to keep up with the evolution of technology in the Beverages (Alcoholic) 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.
Regulatory challenges
– Kweichow Moutai 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 Beverages (Alcoholic) industry regulations.
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 Kweichow Moutai in the Beverages (Alcoholic) sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Kweichow Moutai Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kweichow Moutai 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 Kweichow Moutai 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 Kweichow Moutai 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 Kweichow Moutai 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 Kweichow Moutai needs to make to build a sustainable competitive advantage.